THE WEEK AHEAD – REALITY TAKES A BACK SEAT

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This week, an unhappy President Buhari signed his third and most political budget into law while his finance minister went ga-ga over tax certificates. In other news, IPOB announced an unrealistic referendum, Brexit politics met far-fetched Boko Haram permutations, Abraaj’s demise sullied investment perceptions, and Cameroon took stock of its unforced own goals.

We have a budget that changes nothing and will achieve little

President Muhammadu Buhari signed a record ₦9.12 trillion 2018 budget into law on Wednesday but said it required changes he would seek through a supplementary spending plan. The National Assembly passed the budget last month although the total sum was higher than the ₦8.6 trillion spending plan presented to parliament by Buhari in November because lawmakers increased the benchmark oil price to $51 per barrel from $45. I am however concerned about some of the changes @nassnigeria (National Assembly) has made to the budget proposals I presented, Buhari wrote on his official Twitter feed. Buhari criticised the national assembly over some of the changes made in the budget claiming that they have cut down provisions for 4,700 projects that was to cost ₦347 billion and substituted them with 6,403 projects of their own worth ₦578 billion.

The President’s statements that the 2018 budget might be difficult, if not impossible to implement are at best a red herring. The crux of the matter is that first, the executive and the legislature, both from the same party, were unable to find a consensus on what should be in the budget for eight months. Second, is that both the budget proposal as well as the bill that the National Assembly passed, are decoupled from on-the-ground realities. This gulf between the budget and reality has accelerated under this administration. When we compare budget figures with actual budget performance in the past Buhari administration budgets, it becomes clear what we should expect from the 2018 budget.

Much ado about procurement

The Federal Government on 19 June issued a directive to all Ministries, Departments and Agencies (MDAs) to verify all Tax Clearance Certificates (TCCs) presented by companies and individuals engaged in public procurement processes. In a statement, the finance ministry said the validation of the certificates was a result of “the proliferation of forged TCCs purportedly issued prior to the automation of the certificates from 22 August 2017, adding that the exercise would enhance the integrity of the nation’s tax system. Finance minister, Kemi Adeosun, in the circular directed that MDAs should authenticate all TCCs prior to making any payment. For the TCCs issued prior to the automated date, MDAs should forward a list of the companies and photocopies of the TCCs to the office of the executive chairman, Federal Inland Revenue Service (FIRS) for authentication. She said the authentication exercise would be carried out within 72 hours.

The submission of current tax clearance certificates is a routine part of bid tendering and procurement process. With this in mind, we wonder why there needs to be a backward verification of TCCs. Key questions will be – will a company, which has executed a contract be left unpaid if the ministry determines that the TCC it submitted at the time of bid, which would perhaps be years ago, are forged? Will criminal action be brought against such companies for forgery? Will back taxes be collected? Rather than expend resources on a back verification, the ministry would be better served to focus, as it has done, on ensuring that such forged TCCs are unable to scale the bid process in the future.

Abraaj’s investment story set for a sully end

Africa-focused private equity firm Abraaj’s imminent liquidation means its shareholding in eight Nigerian companies is hanging in the balance, according to BusinessDay. These companies include Indorama Eleme Fertilizers and Mouka Foam, where it invested an undisclosed amount under its Sub-Saharan Africa fund III in October 2016 and April 2015 respectively. The others are Bridge Clinic, which it invested an undisclosed amount in five years ago in 2013; Therapia Health, which received $5 million in April 2012; C & I Leasing, which got $10 million in September 2010, Computer Warehouse Group (August 2009), Custodian & Allied Insurance (August 2008) and AOS Orwell (in December 2006). They may have to sell their holdings to pay off their clients depending on the strategy of the new fund manager,” a source told the paper.

With $8 billion in assets under management and a 20-year track record of successful returns investing in some of the world’s more difficult places, Abraaj was regarded as both an industry stalwart and a trendsetter. Abraaj’s African philosophy was grounded in its ability to see the continent as a consumer story rather than a resource story and backed that by investing over $2.2 billion, mainly in financials, consumer staples and healthcare, with Nigeria holding 15 percent of the Group’s Africa investments, third highest after Kenya and Ghana). The model generally followed included taking a major equity stake in a company, improving upon the core product offerings in the markets where it already operates, and then creating new products that can be distributed through existing channels. A major problem faced by Abraaj in these markets was finding buyers once it was ready to sell and pull out. Now with the naira’s devaluation, the Group will surely suffer a huge haircut on any sale. Another issue which recently came to the fore is its governance and accountability practices – some investors including the Bill & Melinda Gates Foundation and the International Finance Corporation have filed petitions and commissioned a forensic audit to question how the Group spent over $500 million of their investments on healthcare delivery in Nigeria, India, Pakistan and Kenya. In view of allegations of commingling funds, as well as potential funds misuse and litigations on loan defaults, Abraaj has filed for a court-supervised restructuring in the Cayman Islands. Whatever the final verdicts of the various proceedings that are about to commence, this will, unfortunately, be seen as yet another unhappy African investment story sure to spook image-sensitive investors and donors.

When Brexit meets Boko Haram

The terror group, Islamic State are sneaking battle-hardened jihadis from Syria into Nigeria to train terrorists for possible attacks in Britain. Fanatics, including Boko Haram insurgents, were also being sent to the Middle East for training in a chilling “exchange programme,” The UK’s Sun newspaper reported on 18 June. The paper said there were fears that strong links between Nigeria and the UK would make it easier for IS to send its killers to Britain to orchestrate terror attacks, death and destruction. It noted that more than 150 British troops are conducting counter-terror training with Nigerian forces in an attempt to stem the bloody tide — and stop IS from taking hold in the West African region.

We believe that this is an unlikely scenario. There is no evidence that fighters are being transferred from Syria to Nigeria for this purpose. A question that immediately comes to mind is why would already battle-hardened fighters need “training”? We think that the Boko Haram insurgency is being drawn into the UK’s local politics. Given The Sun’s ownership and the tabloid’s right-wing political allegiance, this report is more reflective of its bias within the context of the ongoing debate over immigration in Britain. The primary Jihadist threat to Britain comes from second generation and third generation subjects of Middle Eastern and Asian descent who are being radicalised within its territory. A secondary threat is from British nationals who are returning directly from participation in the Syrian conflict. The evidence available to us does not indicate that British nationals of Nigerian descent contribute anything more than a very negligible proportion of British Islamic State members.

Biafra secessionist plans a referendum amid gloomy realities

The Indigenous People of Biafra has announced plans to hold a referendum towards the peaceful restoration of the defunct Republic of Biafra. IPOB spokesman, Emma Powerful, in a statement on Tuesday, said the first phase of the three-stage referendum would take place in 2018. Although the IPOB spokesman did not disclose the date for the planned plebiscite, he revealed that, already, 40 million ballot papers were being printed for the exercise. The said ballot papers would be distributed to all adults in every clan and village in Biafraland, the statement said. IPOB said it would consult widely towards the success of the referendum, and as well as all its future programmes.

This move will diminish the secessionist cause. Based on Nigeria’s current realities, such a referendum can only be conducted underground, which means it will be of doubtful authenticity, and will certainly be disregarded by the Nigerian state, and all credible international organisations. It is also doubtful that IPOB possesses the logistical capacity to conduct it. After its recent bruising encounters with the federal government, the strength of IPOB vis a vis other secessionist groups such as the Movement for the Actualisation of the Sovereign State of Biafra (MASSOB) and the Biafra Zionist Force (BZF) has to be reassessed. If indeed the referendum holds, it could, depending on its scale and profile, attract another crackdown by the security forces.

Cameroon takes stock of its Anglophone crackdown

Anglophone separatists in Cameroon have killed 81 members of the security forces and more than 100 civilians in their months-long campaign for independence, according to a new government report, the AFP news agency reported on 20 June. Seventy-four soldiers and seven police have been killed by separatists since clashes erupted in the two regions in late 2017, it said. It added that more than 100 civilians had been killed over the past 12 months, and at least 120 schools, a favourite target of the separatists, had been torched. The document calls for an emergency humanitarian aid plan worth $21m, funded from the state budget, an appeal to national solidarity and contributions from international partners.

The situation in western Cameroon continues to take a significant toll even when the disparity in the figures is taken into account, according to the ICG, at least 120 civilians and 43 members of the security forces have been killed since the end of 2016. Yaounde’s latest thoughts come on the heels of growing international criticism over its crackdown in the Northwest and Southwest Regions, home to most of the country’s English-speakers who account for about a fifth of a mainly French-speaking population of 22 million and has left a dire humanitarian situation. The UN says 160,000 people have been internally displaced, with a further 20,000 seeking refuge in Nigeria. Inflated casualty figures and patriotic platitudes will do little to placate an increasingly radical force or pave the way for necessary political reform.

SBM Intelligence

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