THE WEEK AHEAD – WALKING THE LONG BLOODY ROAD

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Plateau’s bloody week holds important long-term consequences for the rest of the country, as does our global poverty profilemore debt, the President taking a swipe at restructuring advocates, a potential NCC data floor, and the finance ministry’s chest thumping while not saying much.

Plateau violence a sad prelude to a grim future

More than 200 people were killed last weekend in violence in Plateau state, the state governor said late on Tuesday. The latest death toll, up from the police’s previous figure of 86 killed, makes the violence one of the bloodiest incidents this year in a series of escalating communal clashes across much of Nigeria’s hinterland states. The attack is very disturbing and alarming because it has left behind a painful loss of over 200 people, Simon Lalong, governor of Plateau state, said at a press conference with Nigerian President Muhammadu Buhari.

This incident underscores the simmering nature of multiple low and medium intensity conflicts occurring across the country, a historically certain prelude to a total breakdown of law and order. Inter-communal distrust has continued to escalate with cyclical patterns of strife in conflict areas. The pervasive loss of confidence in the federal government and its security forces as neutral arbiters is also a key factor in this escalation as it encourages communities to adopt vigilantism with catastrophic results. On its own part, federal security assets are overstretched, and rural Nigeria continues to be under-served in the distribution of security resources leaving such places vulnerable to predatory actions by non-state actors. In the short term, the federal government could deploy troops, but as our July 2016 report showed, there is a real concern that given the multiplicity of conflicts in Nigeria, there may be no troops left to deploy. Without a requisite investment in boosting the material and manpower capacity of the internal security architecture, especially the long-neglected police, these conflicts will persist, their impact differentiated only by peaks and troughs in casualty numbers. The approaching elections will lend an added volatility to areas such as the Jos Plateau and the Benue Valley where there is significant anti-Fulani resentment. As we have seen in recent incidents, reprisals against Fulani and Muslim communities could also escalate in an area in which a strong populist tradition of challenging perceived Fulani Muslim domination exists.

New poverty report highlights Nigeria’s jobless growth

Nigeria now has the highest number of extremely poor people, overtaking India according to a new report by the Brookings Institution. According to our projections, Nigeria has already overtaken India as the country with the largest number of extreme poor in early 2018, and the Democratic Republic of the Congo could soon take over the number 2 spot, the report read. At the end of May 2018, our trajectories suggest that Nigeria had about 87 million people in extreme poverty, compared with India’s 73 million. According to the Brookings report, 14 out of 18 countries in the world where the number of extreme poor is rising are in Africa.

These latest figures provide evidence that the administration is failing to lift Nigerians out of poverty and has also failed to diversify government revenue sources. The much-touted recovery was in fact driven by the rebound of global oil prices and growth has been sequestered in the oil and gas sector, thus making this growth a “jobless growth” with no increment in employment figures. The recession was seen in some quarters (including SBM) as a crisis that could spur the diversification of government revenues away from oil and gas. In hindsight, it is now clear that the administration’s main strategy was to wait for the rebound in oil prices. The administration has tried to position agriculture as the go-to sector in its efforts at economic diversification. But the country’s agricultural base remains too vastly subsistence-oriented and rain-fed and with a very low-value addition to drive a boost in employment or food security. Given the growing impoverishment of Nigerians, there will be some concern as to how these numbers impact on security with rising rural and urban crime and conflict; a spike in the social consequences of poverty is certain to ensue. The fundamentals of the Nigerian economy remain unchanged in a world in which oil is of diminishing strategic value. This means that Nigeria remains vulnerable to global price shocks. Finally, it is important to keep an eye on population growth which is almost twice the rate of economic growth. For poverty figures to trend downward, economic growth has to outpace population growth and remain above it. Failing to achieve that has important political and social implications.

Amid budget fog, Adeosun trumpets capital spending

The federal government has released ₦1.58 trillion as capital expenditure to Ministries, Departments, and Agencies from the 2017 budget. Finance minister, Kemi Adeosun in a statement issued on 26 June, said the total capital releases for 2017 were higher than the ₦1.219 trillion total capital releases for 2016. Adeosun said that in the 2017 capital releases, the Power, Works and Housing sectors received the highest allocation of ₦523 billion, 33.10 per cent of the total capital releases. The sector received the highest releases in the 2016 capital budget, which was a total of ₦307.4 billion (25.21 per cent) of the 2016 capital budget. Defense and security received the second highest capital release at ₦197.5 billion (12.50 per cent) in 2017, as against ₦77.5 billion (6.36 per cent) total releases the sector received in 2016, she said.

Mrs. Adeosun may make such vaunted claims but Nigerians have done well to demand details from her, details which her ministry or the accountant general’s office have been unable to provide so far. In the past, Budget Performance Reports which contained such details were routinely available online. However, under the current administration, not only are such reports not available, several FOI requests by multiple organizations have gone unanswered on budget performance details. Until these details are made available to Nigerians, this bragging about figures without supporting context will remain just, chest thumping.

New debt programme butts head with emerging realities

The federal government plans to raise $2.8 billion of debt offshore as part of its 2018 budget and will explore all options to lower costs, the head of the Debt Management Office (DMO) told Reuters. Nigeria, approved a three-year plan in 2016 to borrow more from abroad so that 40 per cent of its loans would come from offshore in an attempt to lower borrowing costs. It now has around 23 per cent of its debt from abroad, up from 16 per cent when it approved the plan. The debt office has sent a request for a proposal to banks for an international bond offering, according to media reports. Nigeria raised $2.5 billion through a dual-tranche Eurobond offering in February, selling a 12-year note at 7.1 per cent to raise $1.25 billion and a 20-year tranche at 7.7 per cent. The National Assembly needs to approve the new borrowing.

In dollar terms, Nigeria’s recently passed 2018 budget comes to a dismal $25.33 billion, of which 21 per cent was penciled for debt service a figure which is only slightly below the 31.5 per cent earmarked for capital expenditure. For the first time ever, the country intends to borrow more money from foreign sources ($2.36 billion) than local sources ($2.02 billion) all with the objective of reducing the debt service burden. Unfortunately, this is coming at a time when the U.S. Federal Reserve has started increasing interest rates, hence Nigeria’s next trance of Eurobonds will likely attract higher than anticipated interest rates thus dampening the savings expected. Borrowing to fund a budget dominated by recurrent expenditure is not sustainable, meaning that the government must work harder to generate more revenues from taxation and the sale/ concession of underutilized assets. More troubling is the delay in passage of key reforms like the Petroleum Industry Bill which industry experts agree is annually costing the country trillions of naira.

Buhari’s restructuring diss is significant

President Muhammadu Buhari came under severe criticism yesterday for saying that the calls for the restructuring of the country were laced with parochial interests. While receiving traditional rulers and the leadership of the Urhobo Progress Union (UPU) and members of the Delta State All Progressives Congress (APC) from Delta State at the Presidential Villa on Monday, Buhari had said that some of the views being canvassed by interest groups on restructuring were not properly coordinated and did not align with constitutional provisions. In reaction, the Pan Niger Delta Forum (PANDEF) said Buhari’s position on restructuring indicated his lack of awareness of the prevailing realities in the country. The need for restructuring was supported by statements issued by the Yoruba socio-cultural organization, Afenifere; the Igbo think-tank organization, Aka Ikenga and former Vice President and Peoples Democratic Party presidential aspirant, Alhaji Atiku Abubakar.

At the heart of the growing calls for restructuring is a reimagination of the country’s social compact. Nigeria’s political system, while nominally federalist, has since the dissolution of the regions in the wake of the first military coup of 1966, steadily concentrated power in the central government while reducing the provincial constituents to recipients of resource disbursements – a scenario that has guaranteed poor infrastructure growth, left whole portions of the country in economic decline, stunted overall national growth and presaged the rise of many of the country’s security challenges. For a president saddled with revitalizing the economy, wilfully ignoring these realities smacks of borderline delinquency.

NCC revisits its data price floor obsession

The Nigeria Communications Commission is looking to release a new price for data, according to Executive Vice-chairman, Umar Danbatta. Danbatta made the disclosure on 22 June during his induction as a Fellow of the Nigeria Academy of Engineering. With the new framework, you can transfer, lease and share your spectrum. These recent achievements of the commission will ensure optimum utilization of spectrum, he said.

The devil is always in the detail. We have had such policy announcements made in the telecoms space in the past, including a rise in the floor price for data, which when first mooted, was greeted with a public backlash, forcing the regulator to reconsider the policy and has hitherto gone unimplemented. We will wait for further details on the new policy directive to be released and hope that it will continue to respect market dynamics which have so far provided a fair framework for all sector participants.

 

SBM Intelligence…

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