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The National Labour Congress (NLC) must’ve taken the “no gree for anybody” theme of the year seriously with their minimum wage negotiations. They’ve still not settled, following meetings between the minimum wage committee and labour unions in Abuja on May 15 and 21, 2024.
The federal government proposed a wage increase from ₦35,000 to ₦48,000 per month at the first meeting. The organised private sector (OPS) settled for ₦54,000 while labour unions maintained their stance of ₦615,000 to cope with the high cost of living.
In the second meeting on May 21, 2024, the federal government and the OPS maintained ₦54,000 because the government is short of funds. After a 30-minute break, they proposed the sum of ₦57,000. The final proposal from labour was ₦497,000. The meeting was then adjourned till Tuesday, May 28, 2024.
The major concern of the NLC is that the newly proposed amount will do nothing to help workers survive the current economic conditions, considering the electricity tariff hike, housing rates and inflation. The labour unions have given the federal government until May 31, 2024, to conclude negotiations and announce a new national minimum wage, threatening industrial action if their demands aren’t met.
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The federal government has stated that although the Tripartite Committee on National Minimum Wage is yet to conclude negotiations, the new minimum wage, whatever the final amount may be, will be backtracked to May 1, 2024, regardless of when negotiations end.
You probably know what “419” means unless you’re not from Nigeria. It’s the section of the Criminal Code that deals with fraud and obtaining property under false pretences, also known as the “advance fee scam.” In today’s news, the Nigerian government may have pulled off a massive scam for the ages, which even Yahoo boys would applaud. The FG has proposed suspending the removal of the fuel subsidy.
What’s the gist?
In November 2022, the Minister of Finance, Budget, and National Planning, Zainab Ahmed, announced that Nigerians should prepare for the removal of fuel subsidies by June 2023.
[Zainab Ahmed / Businessday]
Fuel subsidies are a type of price control that makes fuel cheaper for consumers. The government pays the difference between the actual fuel supply cost and the consumer price, thus subsidising fuel.
This policy has generated a lot of controversy over the years. Businessday says fuel subsidies have consumed at least ₦7.3 trillion under President Buhari’s administration. What makes this funnier is that Buhari once claimed fuel subsidies were fraudulent, leading to the Occupy Nigeria protest in 2012. Ten more years of this expensive experiment led Buhari to see the light finally—or so we thought.
What happened next?
On April 6, 2023, Mrs Ahmed announced to Nigerians that we had secured an $800m grant from the World Bank. As we would later discover, this wasn’t a grant but another gbese.
But even more important was the reason for this loan. It was meant to be a palliative, distributed to 10 million households considered to be most vulnerable, to cushion the effect of the subsidy removal. So imagine the shock of Nigerians to learn that the National Economic Council (NEC) on April 27 proposed suspending the planned removal of subsidy by June because “it is not a favourable time for the action.” A rather convenient revelation to have after collecting $800 million.
They knew they were going to sustain the subsidy regime for a little while, yet they went ahead to obtain another loan of $800m from the world bank in the guise of wanting to cushion the effect of the removal, less than 10 days ago from making this decision.
It’s giving 419. We wonder how the World Bank is feeling after hearing this news.
What else should I know?
As Buhari’s government is winding down, we’re seeing cashouts at an unprecedented scale. We could point to the coming population census, which was initially budgeted for ₦198 billion but has now ballooned to ₦869 billion. There’s also the incredible tweet by the Minister of Aviation, Hadi Sirika, where he announced that he “commissioned” ten firefighting trucks at the cost of ₦12 billion.
We’re using this medium to beg Buhari to have some pity on Nigerians. Because at the rate his administration is going, 419 would become yesterday’s news, and we’d be forced to add a new number to the Criminal Code — the emergency number 911.
What comes to mind when you hear “Ponzi”? You’re probably thinking about the Mavrodi Mundial Moneybox, known as MMM. This infamous fraudulent scheme, which Sergei Mavrodi ran until he died in 2018, had a presence in over 100 countries, including Nigeria, before its inevitable crash in December 2016.
Many Nigerians lost their life savings in a scheme that promised quick and eye-popping returns on investment. Nigerians learned the hard way that there’s no free lunch. However, it seems the Nigerian government learned a different lesson from the whole affair and entered into a sovereign Ponzi finance scheme. What is this, and why does this spell serious trouble for Nigerians?
Ponzi schemes: An explainer
The name Ponzi comes from Charles Ponzi, an Italian con artist born in the 19th century. His scams were simple enough and were aptly described as “Robbing Peter to pay Paul”. He ran a scheme where he promised investors great returns on investment in a short time.
The scheme depends on getting as many people as possible to buy into it so that as new entrants come in, their contributions fund the payouts of older members. This is why Ponzi schemes are also described as pyramid schemes.
Pyramid schemes are mathematically doomed to failure because they eventually become unsustainable. There’d be way too many people waiting for new entrants to fund them, and when that doesn’t materialise, it becomes clear their investments are gone with the wind. This is when the scheme crashes.
The FG’s Ponzi financing scheme
So here’s what the Nigerian government did. Imagine a giant financial scam where the government tricks investors into buying bonds with promises of juicy returns on their investment. Sounds good, right? But here’s the catch: the government doesn’t use that money to invest in anything that could make a profit. Instead, they use it to cover everyday expenses like salaries and pensions.
When it’s time to pay back those investors, the government doesn’t have the money, so they issue new bonds to pay off the old ones. It’s like a never-ending cycle of debt that keeps getting bigger and bigger. Eventually, the government’s debt grows so large that it becomes impossible to pay back, leading to a catastrophic financial meltdown. That’s what’s called a sovereign Ponzi scheme, and it’s not pretty.
According to Proshare, Nigeria’s debt profile rose again after the Paris Club debt was cleared in 2005. However, debt up until 2014 was at least sustainable. In 2015, the national debt rose 22% to ₦19.4 trillion from ₦15.8 trillion in 2014. By 2020, the debt had spiked by 175% to ₦53.3 trillion.
Nigeria kept up the borrowing, and by the end of 2022, our debt had risen to ₦76 trillion. What makes matters worse is the borrowing didn’t translate to economic growth for us. The World Bank predicts slow growth for Nigeria and projects that 13 million more Nigerians will fall into poverty by 2025. As we said earlier, there’s no free lunch.
What’s the way out?
A few other countries have adopted the Ponzi financing model, leading to disastrous outcomes.
A cautionary example is Lebanon which, for many years, accumulated debt recklessly. Today, the country is fighting crippling inflation and has fallen into depression.
One way out, according to Proshare, involves approaching the International Monetary Fund (IMF) for a policy support instrument (PSI). In simpler terms, it refers to policy advice on issues like market reform, subsidy and the exchange rate. Regardless, it will involve some pain in the short term, but this is preferable to the looming crash ahead if we continue down this path.
Another option is debt restructuring. This is a process in which a borrower and a lender agree to modify the terms of a debt agreement. This is usually done when the borrower has trouble repaying the debt and needs to change the payment plan.
Improving efficiency in government spending is also necessary. No more white elephant projects and inflated budgets. The new administration must demonstrate to Nigerians its seriousness in reviving the economy and saving us from falling into a debt trap. Nigeria has a fighting chance of escaping the looming crash if it can implement these reforms.
On April 29 1998, the federal government of Nigeria awarded an Oil Prospecting Licence (OPL) 245 to Malabu Oil & Gas Ltd. for $20 million. The license covers a defined deep-water offshore area over 1,000 m below sea level and approximately 150 km off the Niger Delta.
As awards go, however, this has turned out to be a poisoned chalice. It’s been a constant source of litigation for successive governments due to allegations surrounding fraud and corruption in awarding the licence. The FG may have finally thrown in the towel based on the latest reports.
The Cable has reported that Abubakar Malami, the attorney-general of the federation (AGF) and minister of justice, has written a memo to President Muhammadu Buhari asking the federal government to end all cases relating to OPL-245 because it has little chance of winning.
The FG awards OPL 245 for $20 million to Malabu Oil and Gas. The company belonged to Dan Etete, an associate of the former head of state, Sani Abacha and a former petroleum minister who served between 1995 and 1998. Etete awarded the license to himself using false identities.
Nigeria is in its Fourth Republic under the administration of Olusegun Obasanjo. On behalf of Malabu, Etete pays $2.04 million for the OPL 245 licence out of the $20 million the company had agreed to pay.
March 2001
Shell signs an agreement to acquire a 40 per cent stake in OPL 245 from Malabu. The agreement was on the condition that Shell would pay the outstanding $18 million to the FG.
July 2001
The FG revokes Malabu’s OPL 245 licence. This sets off a series of litigations over its ownership.
May 2002
Shell informs Malabu that its contracts have been frustrated by the revocation of the licence. Shell is officially awarded 40 per cent of OPL 245. It starts exploration and appraisal work and later signed a production-sharing deal with the Nigerian National Petroleum Corporation (NNPC). Under the deal, Shell Nigeria Ultra Deep (SNUD) agrees to pay a $209 million signature bonus, placed in an escrow account until the Malabu dispute is resolved.
August 2002
Shell goes to the International Court of Arbitration (ICC) to file a case against Malabu based on terms of the March 2001 agreement.
May 2003
The House of Representatives (HOR) orders Shell to pay Malabu $550m for damages resulting from the revocation of the OPL 245 license. It also asks the FG to return the licence to Malabu. The FG refuses to comply.
November 2004
The ICC rules in favour of Shell.
November 2006
Malabu settles with the FG. It agrees to pay $218 million to the FG in return for the licence being fully reinstated to Malabu. Malabu, however, fails to pay.
April 2007
Shell (SNUD) commences Bilateral Investment Treaty arbitration against the FG for wrongful expropriation.
August 2007
The FGN promises Shell a new prospecting licence in other blocks, worth 50 per cent of OPL 245. Shell declines.
Mohammed Abacha, son of the former head of state, enters the ring. He launches a legal challenge arguing that Etete pushed him out of his partial ownership of Malabu.
2010
Eni proposes to Malabu and Shell to buy a stake in OPL 245. Malabu refuses.
April 29, 2011
Malabu, Shell, Eni, and the FG reach a resolution. Malabu agrees to hand OPL 245 back to the government for $1.092 billion. Shell and Eni agree to pay the FG $1.092 billion and a signature bonus of $208 million, bringing the total payment for OPL 245 to $1.3 billion.
[An oil rig / The Cable]
May 20, 2011
The $1.092 billion is placed in an escrow account opened by the FG with JP Morgan Bank. $875 million is transferred to Malabu bank accounts.
2011
A former Russian diplomat Ednan Agaev, claims Malabu owed him millions of dollars for arranging meetings with Shell and Eni.
2014
The HOR votes to cancel the OPL 245 deal.
December 2017
FG sues JP Morgan in London for its role in transferring the $875 million to Etete’s Malabu, alleging negligence.
May 2018
The main trial in Milan starts.
April 2019
A Nigerian judge issues arrest warrants for Dan Etete.
November 2020
A London judge rules that the Nigerian lawsuit against JP Morgan can go to a six-week trial.
March 17, 2021
A Milan court acquits all the defendants in the Italian trial.
What did Malami tell Buhari?
In the AGF’s memo to Buhari dated February 6, he listed a lengthy series of losses that the FG has faced over the OPL-245 matter. They included defeats in the UK, US and Italy, where the courts ruled in favour of Eni and dismissed any fraud cases against Eni and JP Morgan.
Malami asked Buhari to settle all civil and commercial cases between the FG and Eni and to convert the OPL to an Oil Mining License (OML), which, in Malami’s words, would help Nigeria take “advantage of the fast-disappearing opportunities in the oil exploration industry.”
What else should I know?
[Mohammed Abacha / Channels]
The case involving Mohammed Abacha hasn’t been resolved. The EFCC is recommending that Eni pays $500m to the Abacha family. A former AGF, Mohammed Adoke, in 2017 said that even if Abacha had a claim to the oil field, he had to forfeit them to the FG.
His words: “By Decree No 53, the (Abacha) family had forfeited all identified assets to the federal government. All undeclared assets were also forfeited.
“People should ask if, in a decent country, the children of Abacha could come out openly to say ‘we own OPL 245’ when their father awarded the oil block. Should they have been so confident to lay that kind of a claim?
“Why has the EFCC not gone after them to ask how they acquired an interest in OPL 245? If not that the political environment is conducive for them, they wouldn’t raise their head to be making such claims.”
It remains to be seen if Buhari will approve this $500m payment to Abacha or whether he’ll pass the ball to the new administration. Whatever the case, it’s a relief that Nigeria can have some closure over the controversial OPL-245.
There’s a saying that truth is stranger than fiction, and Nigeria — more than any other country — epitomises this.
This week, the Nigerian government will be on trial in London over a deal that has dragged on since 2010. If the court rules against us, we’d have to cough up an eye-popping $11 billion. That’s almost one-third of our foreign exchange (forex) reserves.
Nigeria’s already crumbling under a staggering ₦77 trillion debt. Another $11 billion (or over ₦5 trillion using a conservative exchange rate) would make a bad situation worse. What’s more annoying? The payment’s being enforced for doing literally nothing. Here’s the gist.
The gas flaring problem
According to Stears, Nigeria, up until 2008, flared its gas. That means we just burnt the gas that was given off during oil extraction. This practice made the Niger Delta an environmental mess.
[Environmental degradation from gas flaring. Source: Behind the Logos]
Eventually, someone asked, “why can’t we use this flared gas to power gas plants to provide electricity?” So that’s what the government tried to do. Unfortunately, not many high-profile oil companies were interested. One of the companies that agreed to take this up was an unknown company called Process and Industrial Development (P&ID). In 2010, Nigeria agreed with P&ID. This turned out to be a grave error.
The deal
Here’s what both parties agreed to. First, P&ID would refine — for free — the flared gas known as wet gas into lean gas, which is suitable for electricity production. Nigeria pledged to provide infrastructure to move the gas to P&ID’s gas processing facility (GPF). P&ID would then make their money from selling byproducts of the refining process while Nigeria gets electricity. This agreement was supposed to be binding for 20 years.
Here’s what happened. Nigeria didn’t lift a finger to build the infrastructure, and the P&ID guys didn’t do anything either because they couldn’t act until the FG did. As it turned out, P&ID was a shell company, and one of its founders, the late Michael Quinn, had a dubious history of running procurement scams.
So how have things played out?
Long and short, P&ID in 2012 took the FG to an arbitration panel in the UK on the grounds that it had invested $40 million for some groundwork and that the profit it would’ve expected from the deal hadn’t materialised.
The arbitration panel ordered the Nigerian government to pay $6.6 billion in damages. This was in January 2017. If you’re wondering how that number swelled to $11 billion, that’s because of interest which stands at 7 per cent. Nigeria claims the whole deal was a sham led by “vulture funds” that offered bribes before the contract was signed. The FG is looking forward to fighting this case in a UK court.
How does it affect you?
In 2019 when a court ruled that Nigeria must repay over $9 billion, the Minister of Finance, Zainab Ahmed said “This award is unreasonable, an assault on every Nigerian and unfair.”
Notice how she subtly dragged “every Nigerian” into it? When the deal was signed, nobody invited us to the table. Now that all the pipes have burst, they want us to join hands in cleaning the mess.
To be fair, the deal wasn’t signed during the Buhari administration. Yet, Buhari’s posture on the matter suggests he has no interest in paying such hefty fees, not when he’s at the tail end of his tenure. P&ID, too, have no interest in backing down as they smell a huge payday ahead. Meanwhile, the damages keep rising.
If Nigeria loses the case and continues to default, they could seize our assets overseas which would be another embarrassment. As a citizen, you should ask whoever you plan to vote for how they plan to resolve this wahala. Because, like it or not, this debt has to be cleared, and you may have to chip in to do so, one way or another.
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Students in Nigerian universities have stories to tell, but hardly anyone to tell them to. For our new weekly series, Aluta and Chill, we are putting the spotlight on these students and their various campus experiences.
For students at any of the government-owned universities across the country, ASUU and NASU strikes are a big part of their experiences. The staff unions are always in disagreements with the federal government, leading to strikes that sometimes go on for months. No one feels this avoidable break in academic activities more than the students who are directly affected, so I thought to speak to a couple of university students. They talk about the most memorable strike they’ve experienced and everything that came with it.
Ewoma, Female, University of Lagos
It was a Monday in 2018 and I was in 200 Level. Word was that NASU was going on strike, but nobody thought a NASU strike would spell disaster. I had a class at noon, which I went to, but the main entrance to the faculty was locked. I’ll admit that I was excited because it was the middle of the semester and I thought I could use a break from classes. My class held, but it was not the best experience. Even the lecturer decided that he’d seen enough and ended the class before the hour mark.
When it was 6 PM and they didn’t restore power to the hostels or anywhere else, we realised that we might be in trouble. No power meant no water, and that was usually the start of a big struggle. Also, we couldn’t stay in our rooms — the heat and mosquitoes were a deadly combination.
Many people in the hostel were forced to sleep outside. The situation took a turn for the worse the following morning. Water had stopped running in the hostels, so the toilets were unusable. Besides, the pungent smell of spoilt food made the air unbreathable.
The strike lasted for a week and it was one sad story or the other. We watched helplessly as our food supply went bad. Pretty much everyone had to spend more money on food. I felt a lot of things during the long week, but the strongest emotion was anger. I understood that NASU had a beef to settle with the federal government, but why did they have to do us dirty to make a point?
Praises, Female, University of Nigeria
It started with the rumours. But nobody thought it was going to happen — ASUU was always threatening to go on strike. Even when the rumours gained momentum, everyone I knew didn’t think there was something there.
We were wrong. I was in the middle of a lecture one day when three men walked into the class. They said: “We’re sorry to disturb you, but we’re embarking on a nationwide strike.” They were polite but firm. That was the end of the lecture and the beginning of my first experience with ASUU strikes. It was funny because they still managed to surprise us, even though there were tell-tale signs.
However, there were fears that the lecturers in my school wouldn’t obey the directive to suspend academic activities, so I didn’t go home immediately. I suspected that lecturers would continue classes and those were perfect situations for impromptu tests and whatnot. I spent two long weeks at school. Unfortunately, I was broke and I hardly had any food. I got sucked into a routine of waking up, eating cornflakes and going back to sleep.
In the middle of it, I thought a lot about my life choices and other options I could have taken — like why couldn’t I have gone to a school abroad? Why did I use the last ₦1000 I had to renew my data subscription? — you know stuff like that.
I was so frustrated about all of it. Not sure what the underlying reasons were, but I couldn’t shake it off. In the end, the coronavirus pandemic hit the country and the federal government directed the closure of schools across the country. There were no concerns about classes anymore, so I packed my stuff and went home.
Anana, Female, University of Uyo
School had just resumed and I was about to start my second year at the university when ASUU went on this strike — I don’t even remember what it was about anymore. The last place I wanted to go was my parent’s house. Not like I hated home, but I had lived at the estate since I was 7. Going to school was my first real chance at freedom, and it sucked to have it taken away from me.
To make things worse, my siblings were not at home, so it was just me. I picked up sewing to pass the time, but there was only so much it could do for me. My apartment at school had become my safe space and it felt like I had been robbed of it. I realised how tired I was of the entire thing when it got to a point where I would have given anything to be in a room filled with students and lecturers. At the peak, I felt my brain was dying from inactivity.
The only decent thing I got out of the experience was that I got closer to one of my sister’s friends. It was nice having someone close to talk to. But that was it. Everything else was a disaster. The strike lasted for about 3 months before they called it off.
Tochukuwu, Male, Nnamdi Azikiwe University
Earlier this year, my school declared a lecture-week free in preparations for the convocation ceremony, and I went home. I was preparing to return to school when I heard that the rift between the Federal Government and ASUU over the IPPIS payment system had gotten to a head. ASUU had kicked against the implementation of the system, but the FG went ahead with it. I guess it was fight-or-flight for ASUU because they went on a 2-week warning strike. It didn’t make sense to return to school, so I stayed back.
Before the warning strike ran its course, the pandemic hit, forcing everything to a standstill. It’s been about 6 months now and I’m not sure if ASUU is ready to go back to work even if the FG okays resumption of schools.
I don’t think I mind, though. I’ve been more productive since I’ve been at home. With school, there was always the urgency to keep up with academic stuff. But that’s not something I have to deal with now, and this has given me quite a bit of time to focus on other things I’m interested in.
Ayodele, Male, University of Ibadan
Since I started studying at the university, there have been at least two strikes every session. The incessant interruption of the school calendar has always been annoying. For reasons that I can’t control, my stay in school keeps getting longer.
A couple of months ago, at the end of the second semester of my third year, NASU went on strike in the middle of exams. However, the exams went on. They wanted to make their industrial action more effective, so NASU members crippled the school’s public transport system, forcing the cab drivers to stop working— there were no cabs and everybody in the school community had to walk to wherever they were going. This went on for a month before they called it off.
NASU had just called off their strike when ASUU went on theirs. And the strike is still on, even though schools across the country are currently closed. Now, I’m not sure if I’m still in 300 level or final year. This is frustrating as the plan was to finish university in 2020. That’s impossible now, and if this keeps happening, 2021 might be out too. I’ve felt a lot of things, but right now, I feel indifferent. I’m totally over it.
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Can’t get enough Aluta and Chill?Check back every Thursday at 9 AM for a new episode. Find other stories in the series here.
