After touching $130 briefly, the Brent Crude oil is showing signs of heading to all time high, buoyed by Russia-Ukraine war that has stoked the prices of other commodities along as it escalates. It would have been a fortune for an oil economy like Nigeria, if not that the African largest economy is trapped by petroleum subsidies.

In January, the Nigerian National Petroleum Corporation (NNPC), presented a bill of N3 trillion to the federal executive council (FEC), as payment for petrol subsidy in 2022, backing down from the federal government’s earlier plan to totally remove the subsidy by June. The move was forced by opposition by organized labour who said amidst rise in crude oil price, removal of subsidy will exacerbate Nigeria’s economic hardship.

Nigeria’s budget oil benchmark was adjusted from $57 per barrel to $62 late last year to accommodate the likelihood of an increase in oil price in 2022. But it was not enough.

In her remark while presenting the supplementary budget in January, the minister of finance Zainab Ahmed noted that both the budget and the Petroleum Industry Act (PIA), had to be amended once again in view of the new subsidy regime.

“The PIA had required that all petroleum products should be deregulated within six months of signing the PIB into law. And the six months would have meant from August to February. But when we were doing the budget we stretched that to June. So it means technically that from September, there will be a new fuel subsidy.

“But having to step back and take into account the realities of today, what it means is we have to go back and amend the PIA, so the ministry of petroleum resources will be leading on that. They had indicated that they will be asking for an amendment to extend it to 18 months from six months. And then it means we can now also amend the budget. So the two processes will go side by side,” she said.

Oil price was at $80 then, but created a huge budget deficit of N2.557 trillion. The original appropriation had made provision of N443 billion for a subsidy for January to June.

At $130 and counting, Nigeria has a fresh problem with its 2022 Appropriation Act and the PIA. Acknowledging the situation, the Minister of State for Petroleum Resources, Timipre Sylva, said last month that Nigeria’s economy can only be sustainable with oil price around $70 to $80.

“I’m hopeful the prices will move around, maybe $80, maybe $70. We are hoping that it will come down to somewhere around $70 or $80, which will be sustainable for us at the end of the year … I mean, with the kind of prices we are seeing, we are obviously not happy about it,” he said.

The Minister touted an increase in output as a possible remedy to the challenge, but admitted that “we are really not able to meet our quota for now.”

The US, UK and EU are considering sanctioning Russia’s energy, which will mean further spike in oil prices and higher output for other OPEC members, including Nigeria. But it will only compound the situation due to Nigeria’s constrained production output and the subsidy.

A permanent solution is said to be tied to a working refinery, which is far from reality. Dangote Refinery, which is expected to be launched in July, has become the beacon of hope as NNPC keeps faltering in its attempt to rehabilitate government-owned refineries. A report released by the NNPC in February shows that three national refineries in Warri, Port Harcourt and Kaduna, recorded a combined loss of N11.77 billion in the months of June, July and August 2021.

With no hope yet that the refineries will be rehabilitated soon, NNPC will keep importing petroleum products even as the prices go higher. This means also that the Federation Accounts Allocation Committee (FAAC) revenue will keep diminishing as most of the revenue derived from crude oil sales is used for subsidy and debt servicing. NNPC’s January report to FAAC shows that gross revenue from oil and gas sales was N438.42 billion but only N49.75 billion was remitted to the FAAC account due to deductions for petrol subsidy.

With no solution in sight for the Russia-Ukraine crisis, Nigeria may be spending far more than its annual budget on subsidies unless it is removed or petroleum pump price is further reviewed upward. Bank of America analysts noted that if Russia’s oil is cut off, the market could face a 5 million barrel shortfall which could push oil prices to $200 per barrel.

“A Federal High Court in Abuja has ordered the Ebonyi State Governor, Dave Umahi and his deputy, Eric Igwe, to vacate their seats as the sitting governor and deputy respectively, on grounds that the Peoples Democratic Party (PDP) won the election in March 2019 and not its candidate”, Channels reports.

In Nigeria, you do not vote for people; you vote for parties since you need a party to contest an election (before any amendment).  Of course, this does not hold water since from ward level to the Speaker of the House level, politicians have moved parties, and kept their jobs.

I think this is part of presidential politics. In Zamfara state, the governor changed parties. In Imo State, the same happened in the last regime. I mean moving from one party to the other is part of Nigerian political culture. But for this to be seen this way, Engr Umahi will understand why presidential politics in Nigeria is won with federal judges and justices!

Yet, he will appeal and this will be normalized. If the Supreme Court allows this to hold, many parliamentarians in state houses like Zamfara and Imo states will go home.  Recall that Aminu Tambuwal, the current governor of Sokoto, decamped from PDP to APC as House Speaker and kept his job. PDP filed papers but nothing came out of it. So, this new ruling seems to be out of order, looking at how the court has ruled in the past.

Having defected to the All Progressives Congress (APC), Governor Umahi and his deputy cannot transfer the mandate of the PDP to the APC.

Citing section 221 of the constitution, Justice Inyang Ekwo ordered the PDP immediately send names of replacements to INEC so that fresh elections can be conducted.

Justice Ekwo also ordered the Independent National Electoral Commission (INEC) to cease from recognising Umahi and Igwe as the governor and deputy governor of the Ebonyi State.

The Nigerian court continues to offer surprises!

Zamfara State Governor

The same Nigerian court ruled that the governor of Zamfara state did not violate any constitutional provision when he decamped from PDP to APC: “Federal High Court says Governor Bello Matawalle violated no aspect of the constitutions of Nigeria or of the PDP and APC by his defection”. Note that the Zamfara State case was even unique as the political positions were handed over to PDP when  APC was ruled to not have done any primaries. 

Yes, PDP lost in the general election but ended up picking the positions when APC was disqualified. Yet, the governor who inherited that position later left PDP to APC. A Nigerian court ruled that it was in order. But in Ebonyi state, the court ruled otherwise.

The Federal High Court in Gusau, Zamfara State capital, on Monday, struck out a suit filed by some members of the Peoples Democratic Party (PDP) in the state against Governor Bello Matawalle over his defection last year from the party to the All Progressives Congress (APC).

The court said although it has no jurisdiction to hear the case, since it is neither a pre-election nor post-election case, the 1999 Constitution of the Federal Republic of Nigeria does not prohibit a governor from defecting from a party.

The judge, Bappa Aliyu, said the constitutions of the APC and PDP also do not make it unlawful for a governor to decide and defect to any other constitutionally recognised political party operating within Nigeria.

Mr Aliyu said if it were a pre-election case, it should have been filed before an election petitions tribunal, as the Federal High Court lacks jurisdiction to handle it.

Time for CJN to Lead

The Chief Justice of Nigeria (CJN), Tanko Muhammad, has a big job to do as his courts are evidently lost. If CJN does not deal with these judges, they will destroy this nation called Nigeria

Comment on LinkedIn Feed

Comment: Sir, if you read the reason behind the judgement, you may change your mind. The basis for his conclusion seems to have credible substance especially when you follow the judgement of kogi state wherein Bello who did not contest the general election was credited with the votes of the dead man because it was seen as votes belonging to APC and not the departed contestant

My Response: I am not arguing. What we are asking is consistency. If Federal Court ruled that Zamfara defection is fine, you cannot argue that Ebony is not fine. At least in Ebony, the man won the election in PDP and moved to APC. But in Zamfara, the governor did not even win any election but was handed the power as being the PDP rep. But the court ruled that defection does not violate any law, only for it to rule in 3 weeks that it does.

Your point on Bello is what we have all accepted; it began with Amaechi in Rivers: you vote for PARTY, not person. But in Zamfara, it was paused only to be reinstated in Ebonyi; that is the issue.

Comment 2: Both courts (“judges”) are of co-ordinate (“equal”) jurisdiction. They have no supervisory or binding authority over the other. In the absence of a Court of Appeal or Suprene Court decision on the point, they may decide as they understand the law. Let the waters of the law be stirred and let the law be developed.

My Response: Your point would have been strong if not that in Kogi, Rivers, etc states, it has been settled that Nigeria votes for PARTY, not person. So, under that precedent, the Federal Courts (Ebonyi and Zamfara) would not have arrived at different conclusions as the Supreme Court has ruled on those. PDP lost when the former House Speaker (now Sokoto) changed party and kept his job. Those are constants which would have made it impossible for Federal Courts to arrive at different conclusions. My post is to tell CJN that no one cares about what the Supreme Court has set as settled law in Nigeria. And he needs to fix that

On Saturday at Tekedia Live, we looked at the economic implications of the Russia-Ukraine war. We already know that one giant West African food company is laying people off because it cannot get enough wheat to run the factory. So, expect the prices of bread, biscuits, etc to surge in the next coming weeks.

In London this morning, the trading of nickel has been suspended. Price has gone from $20,000 to $100,000 in the last two weeks; it doubled overnight.

Some of us who studied geography in secondary school and read Goh Cheng Leon’s Physical And Human Geography, we saw that plot on the distribution of special metals. Russia has a big representation for nickel. Nickel is used in making batteries and stainless steel (to reduce corrosion). So, if it becomes scarce, prices of electronics will ramp up. It is fear everywhere.

• Three-month nickel on the London Metal Exchange briefly jumped to a record high above $100,000 a metric ton, before paring gains.
• “It is a very dangerous market right now because this is a market that is not driven by supply and demand, it is driven by fear,” Saxo Bank’s Ole Hansen said Tuesday.

But the biggest moment will come when US bans Russia’s oil and gas. I expect that to happen this week. According to CNN, President Joe Biden “is expected to today ban Russian oil, natural gas and coal imports to the US, according to three sources familiar with the decision. The US will make the move unilaterally, without its European allies, due to disagreement among European nations about whether to ban Russian energy. EU countries have significantly more exposure to Russian energy than the US”.

The US can do the ban since it does not depend much on Russian oil and gas (about 3%; Europe depends on Russian energy up to 39% for natural gas. So, Europe cannot do this ban anyhow because of the economic risk.

Oil prices jumped to their highs of the session on a report that the U.S. would ban Russian oil imports.

WTI crude oil jumped about 4% to near $124 a barrel.

The U.S. was set to ban Russian oil, liquefied natural gas and coal without European participation as soon as Tuesday, according to the Bloomberg News report.

Americans are now paying the most at the pump on record as energy prices surge, contributing to rampant inflation that’s hitting all areas of the economy.

People, if you have a job, be extremely careful. If this war continues till April, expect global recession. High energy prices, high electronics prices, fear of supply chain and massive dislocations could be economically damaging as covid-19 in some economies.

Next week, we will release the startups we  will be investing in this Tekedia Capital investment cycle. One is so amazing that we had to give it money to file a US patent, out of Lagos. We have posted its demo in the Board for members to see what young Africans are building. These guys combined mathematics, artificial intelligence and computer vision, to create a clear category-king in their domain.

When you say mathematical prodigies going for alpha, you get the message. I invite you to join our syndicate and own a piece in Africa’s most amazing startups. On March 16, the cycle opens; now is the time to register here 

Tekedia Capital offers a specialty investment vehicle (or investment syndicate) which makes it possible for citizens, groups and organizations to co-invest in innovative startups and young companies in Africa and around the world. Capital from these investing entities are pooled together and then invested in a specific company or companies.

Dash, Ghana-based unified payments app has announced that it has raised $32.8 million in an oversubscribed seed round to facilitate interoperability for digital payments platforms in Africa.

The round was led by New York-based Insight Venture Partners. Other investors in the round include Global Founders Capital and 4DX Ventures, who participated alongside ASK Capital, Techstars, Guillaume Pousaz’s Zinal Growth Partners, Jitendra Gupta of Jupiter Money, Amrish Rau of Pine Labs, the founders of Moss, executives from ProcessOut and the founders of PennyLane.

The deal, which ranks among the largest in Africa, will help in building a Mastercard and Visa sort of intermediary services for mobile payment wallets across Africa. The startup said it will use the fund to expand to new markets such as Tanzania and South Africa, get the licenses needed to operate there, build out its team, invest in technology and launch new features.

Dash was founded by its CEO Prince Boakye Boampong in 2019, who was inspired by the boom of mobile wallets-based payments he witnessed in Kenya back in 2014. Boampong, who is also the founder of OMG Digital, a YC-backed Ghanaian media startup, saw lack of interoperability in the booming mobile wallet-based transactions across Africa as a huge friction that needs to be fixed.

“I was blown away by the ubiquity and convenience of mobile money in 2014 when I visited Kenya for the first time. However, there are over 200 mobile money wallets and 100 banks across the continent that [do] not work with each other,” the chief executive officer told TechCrunch.

As TechCrunch noted, while the mobile wallets like MTN MoMo and Safaricom’s M-Pesa, command millions of users in Ghana, Kenya and Nigeria; a Kenyan who uses M-Pesa and travels to Ghana finds it difficult to send money to a Ghanaian who uses MTN MoMo in Ghana, because both mobile money operators don’t permit transactions between each other. This means when they travel, they need to swap currencies or switch to the mobile money app working in their destination.

Dash’s idea is to create a network where mobile money and traditional banks can rapport and facilitate transactions for consumers and businesses. Just like Visa or Mastercard, Dash routs payments through banks and telcos regardless of who issued it. This means mobile wallet users in Ghana, Nigeria and Kenya, where Dash’s service is operational for now, can connect their bank or mobile money accounts to Dash, pay bills, and send and receive money to other users while the platform handles currency conversions.

“We’re building this interoperability so a Kenyan traveling to Ghana or Ghanaian travelling to Kenya would be able to pay for stuff without having to change currencies or setting up accounts when they touch ground,” Boampong said. “We’re taking a page from AliPay and PayTm by building features that will make the lives of our users easier without having to switch from different providers.”

Dash closed first closed its seed round in October. It was reopened as investors’ interest in the startup rocketed, with an $8 million seed fund and 200,000 users said to have executed transactions worth $250 million.

“The company makes revenue from processing fees, savings (interest earned when users save), FX fees when Dash is used cross-border, bill payments (commission earned when users pay bills on Dash) and subscription (for Dash+, its premium service).”

The revenue from these avenues paints a bright future for the startup as its volume of transactions increases. Dash said it processed over $300 million in TPV in January, up 300% monthly from Q4 2021. Boampong said in total, it has processed over $1 billion since its launch in 2020 from 1 million customers the company has acquired from Ghana, Kenya and Nigeria.