Nigeria loses N7.6b to forex subsidy granted 2016 Hajj pilgrims

Nigeria lost not less than N7.6 billion to the concessionary foreign exchange government offered to Muslim pilgrims embarking on this year’s Hajj to Mecca.

This is in spite its spirited defense of the subsidised N197 to a dollar it conceded to Muslim pilgrims as against the interbank rate of N318 and the parallel market rate of N402 per dollar, a policy that market analysts have described as lopsided and inconsistent and therefore hurting rather than rebuilding the economy.

On the heels of the intense criticisms that trailed the discounted foreign exchange to the Muslim pilgrims, presidential spokesman, Mallam Garba Shehu denied any ulterior motive behind the subsidy, saying there was no discrimination against Christians.

Central Bank of Nigeria governor, Mr. Godwin Emefiele, also insisted, last week, that neither the apex bank nor the government subsidised foreign exchange for the 2016 Hajj pilgrims.

However, going beyond the rhetoric of government’s seeming religious soft spot for Muslims, since a similar discounted exchange rate was offered Christian pilgrims last October, SBM Intelligence, a financial and economic watchdog, said in a statement last week, that the policy was “counter-productive”, an indication that government was patronising to religion more than it cared about rebuilding the economy.

SBM Intelligence lamented that the dollar rate concession represents a huge “discount of well over 100% to the intending pilgrims” and coming in a period “when citizens, businesses and even the government (is struggling) to find dollars to meet legitimate personal and business needs” observing that the signal was clear; that “patronage of religion is more important to the Nigerian government than business and even the government itself functioning”.

The influential economic and financial Intelligence agency observed that the discounted exchange rate offered the Muslim pilgrims would deplete the nation’s treasury by no less than a hefty N7.6 billion even when recession is threatening the economy.

“It is counter-productive that we say we have floated the naira and yet religious sections of society get subsidised dollars which will cost the Nigerian state ₦7.6 billion in tax payers’ money.

“This is particularly so when we are struggling with a recession and desperately need to turn the economy around. This comes in spite of repeated promises by the government to end sponsorship of religious pilgrimages”.

The influential economic and financial Intelligence agency also expressed fears that it would serve as a disincentive to the country’s quest for the inflow of foreign direct and portfolio investments, imploring government to show more seriousness in its avowal to rebuilding the economy.

“Those whose FDI and FPI we desperately need to flow in will take note and make adjustments accordingly”, adding that the government “needs to show more seriousness about steadying the ship of state and in allocating resources that are scarce almost to a point of desperation.

It also blamed the continued erratic power supply that has further weakened the industrial sector on lopsidedness in government policy citing, as an example, the inability of a major sector player, Transcorp, to raise $1 billion to build a 1,000-megawatt gas-fired facility due to a 15-month currency peg by the Federal Government which was only lifted in June, noting the company’s suspension of its plans to build one of Nigeria’s biggest power plants as gas shortages makes it difficult to obtain fuel and a recession hinders efforts at raising funds for the flagship project.

“The company had announced in 2014 that it would raise $1 billion to build a 1,000-megawatt gas-fired facility. This followed a 2012 purchase of the Ughelli plant in Delta State from the government whose capacity it more than doubled its output to 700 megawatts”, blaming it, on the 15-month currency peg which raised import prices and inflation, with the economy contracting for the first time since the 1990s.

It lamented that “government has shown a unique under-appreciation of the concept of market forces. For all of its pretensions about being committed to addressing the seemingly unsolvable problem of providing power to millions of Nigerians, its actions seem to suggest the opposite”.

As a panacea to the myriad of problems, SBM Intelligence called on government to discard the concept of economic nationalism, stressing that the power sector must be fully deregulated so that the forces of demand and supply will sort the winners from the losers.

“The long term benefits for power generation, transmission and consumption far outweigh the short term squeeze deregulation will undoubtedly wreck on the pockets of Nigerian consumers.

The economic and policy Intelligence agency also decried government’s policy inconsistency in the Niger Delta where government had resumed financial inducement of the militants as a solution to the renewed attack on critical oil and gas facilities in the troubled region which has in the whittling down of revenue accruable to the national treasury. It therefore called on government to find a “practical solution” that would entail conceding the control of the natural resources to their natural owners.

The financial and economic Intelligence agency also decried the spate of cybercrime which is taking a negative toll on the nation’s economy, calling on both the government and corporate institutions to be more proactive in deploying technology in tackling the menace.

Citing the 2014 report by the UK Centre for Strategic and International Studies, SBM Intelligence observed that the annual cost of cybercrime to Nigeria was estimated to be ₦127 billion annually, or 0.08 percent of GDP even as regulatory agencies suggest that between 2004 and 2014, Nigerian banks lost over ₦165 billion via electronic fraud and cyber-crime.

“Companies must be smarter in ensuring data is better protected with a focus on the institutions in sensitive sectors including government, financial, oil and gas, and telecommunications. Threats to financial institutions appear to be higher than others, as the recent increase in financial inclusion and cashless banking across the country is generating large amounts of data and placing billions of naira in financial assets at play. Regulatory agencies suggest that between 2004 and 2014, Nigerian banks lost over ₦165 billion via electronic fraud and cyber-crime.

“We (therefore) call on government to continue the crackdown on online theft by using enhanced security measures, better online monitoring and policing as well as creating policy and enacting laws – the new Cybercrime Act is a step in the right direction – that empower security agencies to tackle an emerging and uniquely 21st Century phenomenon”.