Olayemi Cardoso, the governor of the Central Bank of Nigeria (CBN), has attributed Nigeria’s economic challenges to a combination of macroeconomic factors, including the lingering impacts of the COVID-19 pandemic and the ongoing Russia-Ukraine war.

He made these remarks during the “Cowries to Cashless” lecture and launch event held in Abuja.

Represented by Mr. Mustapha Haruna, the Director of Banking Supervision, Dr. Cardoso highlighted the economic difficulties that the country is facing due to the combined effects of the pandemic and geopolitical tensions.

Dr. Cardoso also mentioned the significance of the book titled “Cowries to Cashless,” noting that it captures the evolutionary journey of the CBN, particularly focusing on the remarkable transformation of the Nigerian payment system over the last two or three decades.

He emphasized that this transformation has been further advanced through the implementation of the cashless policy.

Is the CBN still pushing blame?

Nigerians have expressed concern that the new central bank governor is towing the path of his predecessor, Godwin Emefiele, who had notoriety blaming people and events for Nigeria’s economic pitfalls tied to the CBN’s monetary policies.

Nigeria’s current economic woes are highly tied to the poor performance of the naira, the country’s currency, which has fallen miserably in the FX market – stoking inflation up to 26.72% as of September.

Experts say that the solution lies in increased FX liquidity, which has significantly tanked in the past eight years against the backdrop of poor oil revenue.

The Nigerian oil sector, which accounts for more than 90% of the country’s total revenue, has been grappling with oil theft and vandalism – resulting in low oil output.

In September 2023, Nigeria’s crude oil output rose to 1.35 million barrels per day, marking the highest production level for the year thus far. Data sourced from the Nigerian Upstream Petroleum Regulatory Commission in October revealed that this output was approximately 14% greater than the production recorded in August 2023.

Nonetheless, it is important to note that Nigeria’s output still falls significantly short of the OPEC-approved quota, which stands at approximately 1.8 million barrels per day for the country.

Against this backdrop, the federal government has taken to borrowing to boost FX inflow, in the hope of strengthening the naira. Finance Minister Wale Edun announced last month that Nigeria is anticipating $10 billion of inflows in “the coming weeks”, as part of an upfront cash loan against proceeds from a limited amount of future crude oil production. The strategy has been deployed recently by the federal government to secure loans.

Experts have urged the central bank governor to concentrate on clearing the backlog of some of its FX obligations. Last week, the news that the CBN is clearing its outstanding matured FX forwards with banks, stirred the naira to unprecedented performance.

Nigerians who want intra-state competitiveness should support Governor Umaru Bago of Niger State who is making a case that his state should be paid “a 13% derivation fund, similar to other oil-producing states in Nigeria”. He continuted, “We need 13 percent derivation for water supplied to the Delta. Our people are ravaged and displaced year in, year out because of the flow of water from the Niger to the Delta…The Federal Government will pay Niger State N1 trillion in the next three months for hydrocarbon exchange; they must. We have provided this country with hydropower for a long time; nobody is compensating us for it.”

That said, it should not end there. I am not a real fan of this 13% derivation payment; I want states to own and be in charge of their assets. Period. In other words, Bayelsa’s oil should belong to the state, and it can only pay taxes to the Federal Government.

Using the same logic, states should pay Niger State for electricity supplied, not because a dam was located in Niger State, but because there is electricity supplied by the state. For that to happen, Bayelsa, Niger and others have to source the investors and operators to turn their latent assets into opportunities.

Our challenge today is that the spirit of comparative advantages has faded because everyone is waiting for Abuja at the end of the month. So, let us support this message from the governor and demand absolute and complete fiscal federalism so that states can return to what they do best.

If Niger can produce affordable electricity, that is a strength. Pay to get it. If Anambra State can run the largest market in West Africa (the Onitsha Main Market), that is something it needs to build up. And with that, we can spread opportunities and advance the citizens.

Comment on Feed

Comment 1: Niger state Governor demanding 13% derivatives because of the environmental degradation they experience from Kanji Dam.
I do not really have any problems with demand. I hope all the states in Nigeria will also pay Ondo state $1billion each for using our Cocoa money to develop the oil in Nigerdelta and the Kanji dam itself.

We from Ondo state has been cheated from the days of Awolowo when our Cocoa was used to drive the economy of the Western region and Nigeria at large. Part of the revenue from Ondo was used by BP to develop the oil and gas sector.

This argument should kick start the discussion around Fiscal federalism. State controlling the resources within their territories. Ogun state should make Similar demands because its hosting the industrial hub of Nigeria and Environmental pollution from the industries affects people too.

Comment 2:

Nigerians who want intra-state competitiveness should support Governor Umaru Bago of Niger State who is making a case that his state should be paid “a 13% derivation fund, similar to other oil-producing states in Nigeria”: 'The Federal Government will pay Niger State N1 trillion… pic.twitter.com/WNE5FqYYvn

— Ndubuisi Ekekwe (@ndekekwe) November 8, 2023

Niger State Governor Demands 13% Derivation Fund for Hydrocarbon Exchange

Governor Umaru Bago of Niger State has taken a bold stand in demanding the payment of a 13% derivation fund, similar to other oil-producing states in Nigeria.

The governor made the demand during a meeting with the Federal Commissioner of the National Commission for Refugees, Migrants, and Internally Displaced Persons, Tijani Aliyu, in Minna on Monday.

Bago firmly believes that Niger State, despite not being traditionally classified as an oil-producing state, should receive compensation for the hydrocarbon exchange taking place within its borders. He emphasized that the state deserved to be paid approximately N1 trillion for the resources flowing from Niger State to the Delta region.

“We need 13 percent derivation for water supplied to the Delta. Our people are ravaged and displaced year in, year out because of the flow of water from the Niger to the Delta,” he stated, highlighting the environmental impact and hardships faced by Niger State’s residents.

Bago’s demands are not limited to financial compensation. He urged relevant entities, including the Federal Government, Abuja Electricity Distribution Company (AEDC), and the Nigerian National Petroleum Corporation (NNPC), to acknowledge the contributions of Niger State and pay their dues.

“The Federal Government will pay Niger State N1 trillion in the next three months for hydrocarbon exchange; they must. We have provided this country with hydropower for a long time; nobody is compensating us for it,” the governor asserted.

Bago’s resolve appears unwavering, as he warned that Niger State would take drastic measures to ensure its demands are met.

“We have woken up; we can never ever tolerate being neglected or abandoned again. The only way we can ensure that the federal government heeds to us is to shut down the hydro dams unless we are paid,” he threatened.

He continued, “We are serious about this, it is not a threat; it is a statement. Every dime that is due to us, we will take it, we will take every kobo that is for Niger State. We are not going to be marginalized again; our waters, our lands, our borders are strengths for us and not weaknesses.”

The governor emphasized that every resource originating from Niger State must be compensated, and the state will not tolerate being overlooked any longer. He announced, “We are going to the Supreme Court, and we will take the Federal Government to the Supreme Court unless the 13 percent derivation from our land, water, air, grass, and everything given to us is paid. We must be compensated. Our people have done enough for Nigeria.”

Governor Bago’s demands have once again brought to the fore the issue of fiscal federalism, which has been advocated for years. While Niger State’s determination to secure its rightful share of the hydrocarbon exchange brought attention to a broader conversation about fairness and recognition for all contributing regions in Nigeria, the demand for 13% derivation has raised eyebrows.

Many believe that Bago’s demand is unrealistic given that about 80% of Nigeria’s power generation comes from gas-fired power plants while hydro is about 20%.

It is raining Naira in some headquarters in Nigeria, over the last 9 months to Sept 2023. Pre-tax profits*:

• Zenith Bank: N505 billion
• UBA: N502.1 billion
• GTBank’s GTCO: N433.2 billion
• Dangote Cement: N404.9 billion
• Access Bank’s Access Holdings: N294.4 billion
• First Bank’s FBNH: N270.3 billion
• MTN Nigeria: N232.5 billion.

UBA remains the most geographical diversified banking institution in Nigeria and the results are showing the power of that playbook. Indeed, operating in about 20 African countries with shops in Dubai, New York, Paris and London, UBA has a good spot. Zenith Bank has used scale to become the leader. Of course, though it is no more the rainmaker, GTBank* continues to mint money.

For banks, 2023 is the best year yet. Do not expect these numbers in 2024; the FX gains will calibrate out by then. Of course, these numbers are relatively small, but considering the size of Nigeria’s economy, the banks are adequately capturing value – and that is why investors are cheering.

*Nairametrics data