15 Jul

The week ahead – Internal security needs urgent attention

The Central Bank of Nigeria (CBN) has reassured bank customers that their deposits are safe. The regulator stated in strongest terms that speculations of distressed banks are untrue and do not reflect the actual health of the individual banks and, indeed, the entire banking industry. This is coming against the backdrop of its intervention at Skye Bank, explaining that the infusion of a new board and management at Skye Bank was a proactive regulatory action meant to ensure that the bank does not continue to fail in its relevant prudential ratios. It, however, pointed out that neither Skye Bank nor any other bank in the industry is in distress.

Over 25 foreign airlines flying into Nigeria have lost a combined sum of $240 million (₦67.2 billion) following the adoption of a new foreign exchange policy by the CBN. The International Air Transport Association, the global trade body for about 260 airlines, had in May put the unremitted ticket sales proceeds in Nigeria by international airlines at $600 million. However, the movement of the CBN’s interbank exchange rate from ₦197 per dollar to over ₦280 per dollar, following the adoption of the new forex policy, has made the foreign airlines to lose at least 40 percent of that money. The foreign carriers are expected to complete the repatriation of the outstanding ticket sales proceeds this month.

The Federal High Court has declared the 45 percent tariff increase made by the Nigeria Electricity Regulatory Commission illegal and ordered that it be reversed immediately. The court held that the implementation of the 45 percent increase constituted a violation of its interim order and awarded ₦50,000 in costs against the Commission. The court had in an earlier suit in May ruled that there should be no price increment until the determination of the substantive suit. The decision was lauded by organised labour and consumer groups.

The militant group, Niger Delta Avengers on Sunday, stormed and bombed the Qua Iboe 48 crude oil terminal operated by ExxonMobil. Multiple reports say the militants carried out the operation with dynamites. According to the statement on the group website; “At about 7:30pm, the Niger Delta Avengers blew up the ExxonMobil Qua Iboe 48″ crude oil export pipeline. When will these International Oil companies (IOC) learn to listen? We (Niger Delta Avengers) said no export.” The oil major later issued a statement on Tuesday refuting the NDA’s claim. It had already declared force majeure — a legal clause that allows it to stop deliveries without breaching contracts — on shipments of Qua Iboe because a subsea pipeline linked to the facility was damaged by a drilling rig.

At least six persons have been arrested over Saturday’s murder of a female pastor in Abuja. The Commissioner of Police in charge of the Federal Capital Territory (FCT), Alkali Usman, ordered the Deputy Commissioner of Police, Criminal Investigation and Intelligence Department, to lead investigations into the murder of a 40-year-old deaconess, Eunice Olawale, an assistant pastor in the Redeemed Christian Church of God (RCCG), who was killed during street preaching at the Bolar pipeline area of Kubwa, Abuja.

No fewer than four persons were killed and 250 others have been displaced due to a clash between Fulani herdsmen and Gbagyi farmers in Niger State. The clash led to the destruction of property in Bara-Kuta in Bosso Local Government Area last Friday. Ahmed Inga, Director General, Niger State Emergency Management Agency (NSEMA), said the displaced people were being resettled in a school in Bosso while a reconciliation process has started. He said that the state government has established links with the herdsmen and the farmers towards restoring lasting peace in the area to enable the Gbagyis go back to their homes and attend to their farms. This clash occurred at a time that similar attacks in Benue and Adamawa states by herdsmen have left dozens dead.

Suggestions

  • The CBN should also move quickly to intervene in other banks that have high liquidity issues as a result of hundreds of billions of naira in past due obligations which has impacted on balance sheet and profitability. Reports suggest that some other banks are in the same precarious position as Skye Bank, and we urge the CBN to go the whole hog rather than adopt halfhearted interventions. The more the delay, the greater the harm done to the economy and depositors’ confidence.
  • No investor would take a look at the scenario with the airlines and invest their dollars in Nigeria. The current foreign exchange flexibility is yet to even attract the badly needed foreign inflows, and it is traceable to the over 12 months delay by the CBN to reform. This is an inevitable effect of floating the currency. Many analysts however, fear the policy came very late and the transaction dynamics of the new regime have been mired in controversy and uncertainty. There is also a concern that the naira is yet to be truly market driven and we urge the CBN to do everything necessary to assuage this fear, so that the long term value from immediate shocks such as this one are derived.
  • Nigeria’s power sector has been dogged by decades of under-investment in generation, transmission, distribution, a disproportionate dependence on one source of fuel – gas, an immature and inefficiently structured electricity market and a socialist inclination by policy makers and consumers who see power as one of the few social goods. One of the consistent complaints by observers and industry operators is that they are forced to charge energy consumers tariffs that are simply not economically sustainable, hence the under-investment in critical infrastructure maintenance and development. In order for real reform to take place in Nigerian energy production, consumers should be expected to bear their own share of the burden, however inconvenient it may be in the short term. This latest court ruling in many ways, represents a step in the wrong direction.
  • Despite the refutation of the latest attack on an oil facility, the optics continue to be terrible for sceptical international investors looking for any sign that the current administration can turn around a bleak economic picture. Qua Iboe is Nigeria’s largest crude oil stream with exports of at least 300,000 barrels per day. Nigeria may be losing about ₦2.79 billion daily as a result of production disruptions to the oil industry. The constant stream of negative news, either from militant attacks or accidents, from the Niger Delta is now a major factor in global oil prices trending higher. It is difficult to envisage a turnaround in the short term.
  • The murder of Mrs. Olawale illustrates the current level of anarchy in Nigeria. It represents a scenario whereby citizens cannot express themselves and move around freely without danger. This lone event is a classic example of homicides being perpetrated across the country either via kidnapping, religious murders, robbery and assassinations, with no adequate police response. The internal security of Nigeria has failed, and we call on President Muhammad Buhari to relive the Minister of Interior of his job, because he has clearly failed to mobilise forces under his purview to curtail these violent crimes.
  • That these Fulani herdsmen attacks have become commonplace show insensitivity on the part of President Buhari and his national security team. They are yet to articulate an approach towards the resolution of these crises, and it’s a tragedy they have not responded the way they ought to, in order to reassure the country. We fear the affected communities may arm themselves for protection, an action that will lead to further chaos and destruction.