In 2016, Nigeria signed power purchase agreements (PPAs) worth US$2.5 billion with 14 independent power producers (IPPs) to build a total 1,125 megawatts of installed solar capacity for the national grid. Currently, grid power consists mainly of gas-fired power (85%) and hydropower (15%), with less than 1% solar. The solar IPPs are planned mostly in the northern parts of the country, where higher solar radiation is present (see map). However, put and call options agreements (PCOAs), essential to ensure the bankability of the project, are yet to be signed by twelve of the fourteen IPPs (see Table 1) due to extended negotiations on Partial Risk Guarantees with the World Bank and the African Development Bank.

The deadlock is caused by disagreements between the government and the IPPs on the PPA tariff structure. While IPPs want to sell power at the initially agreed US$0.115 per kWh, the government is insisting on a tariff of US$0.075 per kWh, citing declining solar costs and comparable projects in countries such as Senegal (US$0.05/kWh) and Zambia (US$0.06/kWh).¹

Key Factors for Resolution

1. Fair and Competitive Pricing. While the average cost of procuring solar power has declined globally by 74% since 2009, markets differ greatly across countries.² The compromise must reflect the true risk-adjusted costs of solar systems in Nigeria.³ A balance should be struck between generating appropriate investor returns while delivering inexpensive energy to impoverished areas short of power.
2. Commercial Viability and Cost Recovery. Gas suppliers, GenCos, and DisCos are already affected by tariffs set below cost recovery (averaging US$0.066/kWh), which inevitably lead to stalled projects.⁴
3. Country Risk Premium. Nigeria is already a high-risk market. Disregarding legally-binding contracts agreed in the PPAs may contribute to weakening investor trust, raising the country’s overall investment risk profile, negatively affecting future investment and, ultimately, energy prices.

Conclusion: Broaden the tools to find a solution. The Government and investors can renegotiate and compromise in these deadlocks through resourceful policy mechanisms that could yield more desirable outcomes for both parties. These include the removal of the import duty on solar components to reduce total costs for the power producers. It could also include a capacity scale down to a captive market, for instance secluding reliable solar systems primarily for communities with high commercial, agricultural and industrial activities – to ensure that the government and populace get the most out of the new power projects. Different tariffs could also be applied to different IPPs on the grounds of certain considerations such as project locations and sunk costs.

	Company	Capacity	State	PCOA Signed
1.	Afrinergia Power Limited	50 MW	Nasarawa	April 2017 (7.5c/kWh)
2.	CT Cosmos Limited	70 MW	Plateau	April 2017 (7.5c/kWh)
3.	Pan Africa Solar	75 MW	Katsina	Not Signed
4.	Nigeria Solar Capital Partners	100 MW	Bauchi	Not Signed
5.	Motir Desable Limited	100 MW	Nasarawa	Not Signed
6.	Nova Scotia Power Dev Ltd	80 MW	Jigawa	Not Signed
7.	Anjeed Innova Group	100 MW	Kaduna	Not Signed
8.	Nova Solar 5 Farm Limited	100 MW	Katsina	Not Signed
9.	KvK Power Limited	100 MW	Sokoto	Not Signed
10.	Middle Band Solar One Limited	100 MW	Kogi	Not Signed
11.	LR Aaron Power Limited	100 MW	Abuja	Not Signed
12.	En Africa	50 MW	Kaduna	Not Signed
13.	Quaint Abiba Power Limited	50 MW	Kaduna	Not Signed
14.	Oriental Renewable Solutions	50 MW	Jigawa	Not Signed

This Memo was drafted in collaboration with Patrick Okigbo of Nextier Advisory This article was first published on energy for growth hub

Tobacco use and the exposure to secondhand smoke is associated with the rising prevalence of non-communicable diseases some of which are the leading cause of preventable death in Nigeria. In 2018, tobacco use in Nigeria has been linked to 16,100 deaths. According to Tobacco Atlas, economic losses accrued to Nigeria in the form of medical treatments and loss of productivity from tobacco-related diseases are estimated at US$ 591 million as of year 2015, twice the amount spent on all malaria treatment interventions in 2015.

While Nigeria has a low smoking prevalence (about 5 percent of adult population), suggesting that tobacco does not pose an imminent health and social challenge, the trend is rapidly changing. The daily cigarette consumption per smoker has doubled from 7 to 14 sticks between 1980 to 2012. The share of male adults who are smokers has also increased from 11 percent in 2000 to 17 percent in 2015. Some key factors have driven the trend in cigarette demand in Nigeria. One is the shift in the strategy of tobacco companies who are increasingly moving away from high income countries where they face more stringent control measures to low- and middle-income countries in Africa with weak tobacco control systems. Another is the effect of popular culture which makes tobacco use seem fashionable particularly for young people.

Despite these striking changes in smoking trends, the policy space for tobacco control is not evolving as rapidly. In June 2018, the government introduced a N58 specific excise tax which will be implemented between 2018 and 2021. However, the new policy puts the excise tax burden at 16% which is significantly below the WHO recommended benchmark of 70% of retail price. Worse still, the tobacco industry is actively lobbying the government to rescind the tax increment.

Aside implementing only a modest increase in tobacco tax, the government is also deficient in other tobacco control measures. Both states and federal governments do not protect citizens from secondhand smoking. So far, only four out of 36 states have implemented laws prohibiting smoking in public places and even in these states, citizens continue to flout the law with no consequence. Also, there are no help services provided to tobacco users willing to quit. Few programmes exist to provide tobacco cessation advice, and low-cost medicines to people who want to stop smoking. At the same time, there are no accessible telephone lines that offer treatment for tobacco addiction.

These gaps in tobacco control efforts is an indication of the dearth of political will for tobacco control policy reforms in Nigeria? Government officials are hardly committed to designing policies in line with global standards as well as mechanisms to ensure the sustainability of these policies. Civil Society Organizations which continue to advocate for better laws and dialogue with stakeholders to achieve results cannot directly bring about the much-needed reforms. Building the political will among state and non-state actors is crucial to achieving remarkable strides in tobacco control.

How can political will be built?  

The key actors in the tobacco policy space, the Ministry of Health and the Ministry of Finance (for taxation policies) will need to initiate and lead reforms more effectively. The presence of a team of reformers who can convene relevant stakeholders, sidestep bureaucratic bottlenecks and neutralize tobacco industry lobbying can potentially lead to major reforms in the policy space. Nevertheless, collaboration between these ministries and other state and non-state actors is important. This is because implementing tobacco control policies requires the action of other government agencies such as the Customs and tax collection agency. Also, government officials will need to leverage on the expertise and influence of CSOs and advocacy organizations, the research capacity of think tanks, and the financial and political clout of international organizations in order to achieve results.

Also, the research and analysis component of tobacco control will need to be enhanced to allow for proper analysis of tobacco control measures. Presently, available (freely accessible on the internet) research outputs on tobacco control, which can potentially serve as evidence for designing and implementing important health policies, are few and limited in scope. For instance, to the best of our knowledge, no nationwide research has been conducted to identify the cost of tobacco-related diseases and its impact on livelihoods.

Applying credible sanctions is another area where political will needs to be built. Despite the fact that the federal law contains an enforcement component, the support and use of sanctions to provide incentives that promote compliance is weak. Law enforcement agencies should routinely examine the manufacturing, storage and distribution process of tobacco companies in order to curtail their activities that are not in accordance with the law. Failure to punish offenders will turn Nigeria into a target country for exploitative tobacco companies.

To ensure that these efforts are sustainable, more resources should be provided to state agencies to boost their operational capacity. For key government agencies such as the Ministry of Health and Nigeria Customs Service, budget allocations for tobacco control should be put in place to cater to tobacco control activities. In particular, modern equipment and facilities required to curb smuggling should be provided to Customs units in border towns. Also, the technical capacity of officials should be built through trainings and peer-to-peer learning.

Rising tobacco consumption in Nigeria is expected to increase fiscal and health burdens on the general public and government. A bold and innovative policy response is required and tobacco taxation has the potential to deliver in this regard.

According to data from the World Bank, the number of adults (ages 15+) that smoke increased by over 10.5% from 2000 to 2015. The effect of rising tobacco consumption on public health and expenditure is already hitting hard on the populace. In 2015, tobacco related diseases were responsible for about 16,000 deaths (about 246 men and 64 women per week) and about 250,000 cancer diagnoses in Nigeria. A study led by Goodchild in 2016 reported that economic losses to Nigeria in the form of medical treatments and loss of productivity from tobacco-related diseases are estimated at US$ 591 million as of year 2015, twice the amount spent on all malaria treatment interventions in the period. These costs are also borne by non-smokers that are exposed to second-hand smokes.

Need for sizeable tobacco taxation

Reducing tobacco consumption can come through a variety of policies such as a ban on advertisement of tobacco products, education, and providing remedies for cessations, among other measures. However, on the top of all this is the need for significant tobacco taxation, which has been hailed as the single most effective tobacco control measure. The consensus in empirical literature is quite overwhelming on this stand that tobacco taxation always reduce tobacco consumption. Let’s face it, cigarette is like every economic goods and obeys the basic laws of demand. Taxation at appropriate levels will increase cigarette prices and reduce intensity of consumption, especially by the poor who bear a disproportionate burden of tobacco costs. High cigarette prices also act as barriers for adolescents that are on the verge of taking to smoking. But there are three caveats that could limit effectiveness of taxation. First, huge price difference among cigarette brands can allow smokers substitute expensive brands for cheaper brands easily, effectively dampening the effect of tobacco taxation. Second, cigarette affordability – the proportion of smoker’s income spent on cigarette– is another concern. If this is low, then the effect of taxation might be suboptimal. Third, tobacco taxation needs to be sizeable for it to have any desirable effect, giving the potential dampening effects of price variability and cigarette affordability. For this reason, the WHO recommends 75% tax on retail price of cigarettes under a specific excise tax system for the tobacco industry.

A recent research by CSEA found price variation to be high, especially for popular tobacco cigarette brands. Similarly, cigarette affordability was estimated to be high. This means that the potential to considerably reduce tobacco consumption via substantial tobacco taxation is high. However, it is on the third point that Nigeria is performing poorly. Particularly, before the June-2018 excise tax regime, the tax burden on the retail price of cigarette was only 12% charged mostly as ad-valorem duty, which is prone to tobacco industry tax manipulations.

On the recent tobacco taxation

The government’s attempt at a tobacco tax reform, although inadequate, is a step in the right direction. In addition to the present 20 percent ad-valorem excise duty charged on locally produced goods, tobacco products now attract a specific duty of ₦20 per pack, which will rise to ₦40 and ₦58 in 2019 and 2020 respectively. The same study by CSEA estimates that the new excise tax regime is expected to increase the tax burden by only 5 percentage points, to 17%. In addition, despite being a signatory to the WHO Framework Convention on Tobacco Control (FCTC), many of the elements of the treaty are still not operational. For example, tobacco industry maintains influence in decision-making by being involved in the process of policylegislation and regulation through the Manufacturers Association of Nigeria.

Way forward

Nigeria is still far from meeting the WHO recommended level of tobacco taxation and this should be the starting point in the conversation on tobacco control policy by government. Countries like Senegal and Ghana are already the verge of reaching this benchmark in terms of tobacco taxation. However, tobacco taxation will be more effective when complemented with auxiliary tobacco control policies. Global experiences show that the greatest public health and revenue yields are gotten when the government pursues a set of complementary tobacco control measures, tagged MPOWER:

• Monitor tobacco use and prevention policies
• Protect people from tobacco smoke
• Offer help to quit smoking
• Warn against the dangers of smoking
• Enforce bans on tobacco advertising, promotion and sponsorship
• Raise taxes on tobacco

A key challenge here is the huge cost of funding these various measures. Again, this is where the tobacco taxation represents a win-win measure. By a conservative estimate, government stands to raise about NGN67 billion through the modest tobacco tax implemented in 2018 and even much more with higher taxes. This will in part constitute the funding for tobacco control measures, while other national priorities are also addressed.

Migration from Africa commonly evokes the image of a continent fleeing its own home. Many Africans leave to go to other places within and outside the continent in what can seem like a massive exodus. While Africa’s migration remains overwhelmingly intra-continental, evidence shows that there has been an acceleration in emigration to other continental regions. Since 1990, the number of migrants of African descent living outside of the region has more than doubled, with Europe as the most pronounced destination. In 2015, over 16 million Africans had migrated to another African country other than their countries of origin, and an additional 16 million migrated to a different region.

The 8^th African Policy Circle (APC) meeting which was hosted by the Centre for the Study of the Economies of Africa, in collaboration with Konrad Adenauer Stiftung (KAS) and Global Public Policy Institute (GPPi), focused on the theme: “Forced Migration within and out of Africa: Innovative Solutions from African Civil Society and Think-tanks”. The meeting provided a platform for African think tanks and civil society organizations to share knowledge, discuss strategies and develop actionable recommendations for policymakers to meaningfully address the problem of forced migration within and out of Africa. Deliberations were centred around the causes, consequences, local perspectives, and solutions to conflict-induced forced migration. However, while many people are forced to migrate because of conflict and violence, many more, particularly young people, migrate for economic reasons. In light of this, the APC deemed it appropriate to further deepen deliberations and discuss Africa’s economic migration in the 9^th APC meeting which will hold on November 29-30, 2018 in Dakar, Senegal. The APC will meet on the central theme “Migration and Demography: Shaping Migration Policies for Demographic Dividend in Africa”.

MOTIVATION FOR AFRICA’S ECONOMIC MIGRATION

Individual motive(s) for economic migration vary, and many ‘economic migrants’ take to the road because of a number of different factors; but the most commonly cited reason for Africa’s economic migration is the ‘search for better economic opportunities and jobs’. There is an increasing realization that a large number of people are leaving Sub-Saharan Africa for economic reasons, they migrate with ideologies that life is easier across the frontier. In 1990, about 40 percent of migrants moved for economic reasons, this share more than doubled to 90 percent in 2013[1]. According to the European Commission, 6 out of 10 of those heading for Europe are not refugees fleeing war or persecution, but economic migrants in search of better lives, many of which are from peaceful countries in North Africa. Underlying these and many more statistics are baseline problems such as bad governance and inadequate job creation, which has resulted in a range of economic difficulties, including increase in unemployment and underemployment. Every year, the continent creates only 3.7 million jobs, but between 10 and 12 million people join the African labor force annually[2], disproportionately higher than the jobs created.

THE NEXUS BETWEEN DEMOGRAPHY AND ECONOMIC MIGRATION: COST OR BENEFIT?

Africa’s population growth is extremely rapid, with almost all countries growing at over 3% annually. The increasing rate is necessary evidence needed to show that there may well be a surge in economic migration in the next decade or two. By 2050, Africa will account for the highest population spurt, which will more than triple the current 650 million, to reach an estimated 2.3 billion[3]. An increasing number of young and energetic people, who are willing and probably able to work, would make up a huge part of the population boom, and local labor markets may not be able to absorb them. At the same time, the aging population in some advanced economies and segmentation of their labor markets, would create demand for skilled and unskilled labor from Africa’s young population.

On one hand, a mis-management of Africa’s increasing young population will worsen unemployment, and could form the basis for other economic and social issues such as trafficking, conflicts and brain drain. On the other hand, if properly harnessed, there could be increase in remittance flows and knowledge transfers, which will serve as drivers for growth and development in the African region.

WHY DISCUSS AFRICA’S ECONOMIC MIGRATION?

Africa’s economic migration is set to continue its expansion as it will be shaped by the demographic transition already ongoing in the region. Therefore, the subject has steadily risen on the agenda of the international community. Also, the APC’s strategic stance - on providing policy advise and frameworks for stakeholders and governments - is crucial towards addressing issues surrounding this hot topic. The 9th APC meeting aims to provide a platform for African CSOs and think tanks to share knowledge and discuss strategies for policymakers to meaningfully harness the benefits and counter the challenges of economic migration amid demographic transition in Africa. Panel discussions will more in-depthly focus on a range of topics: Profile of economic migrants, drivers/causes, as well as demographic/population growth trends and implications for African migration; the impact of African migration; and the European Perspective of Africa’s economic migration. The workshop will also feature a panel discussion to develop an agenda on African economic migration that South Africa can advance at the United Nations Security Council (UNSC).

We encourage you to join discussions online by connecting with us via twitter (@csea_afric and @africanpolicyO). Please use the following hashtag for related tweets: #9thAPC #Migration.

You can also download the outcome of the meeting below.

[1] Gonzalez-Garcia J, Hitai E, Mlachila M, Viseth A, Yenice M. ‘Spillover Notes: Sub-Saharan African Migration Patterns and Spillover’. 2016. Washington D.C. International Monetary Fund.

[2] Chatterjee, S. and Mahama J.D (2017). ‘Promise Or Peril? Africa’s 830 Million Young People By 2050’. United Nations Development Programme.

[3] Ahmed, M. and Gough, K. (2018), ‘African Migration to Europe is Not a Crisis. It’s an Opportunity’, Centre for Global Development.