22 Jul

The week ahead – “Technical” or not, Nigeria cannot afford to remain in recession

Failure to meet revenue targets for the first and second quarters, persistent oil production shut-in from militancy and foreign exchange supply challenges have renewed concerns on the feasibility of the 2016 budget. Statistics from the NBS show that in Q1, Nigeria made ₦176.25 billion and ₦196.57 billion from company income tax and VAT respectively as against projected annual revenues of ₦1.87 trillion and ₦2 trillion respectively. Revenue projections failed to materialise, and even worse, the poor performance of VAT as compared to the projections point to a serious fall in consumption and spending.

The Minister of Finance, has admitted to the Senate that Nigeria is “technically in a recession.” While we await the official GDP numbers from the Nation Bureau of Statistics, this admission by Ms. Adeosun confirms what many observers have already predicted. The Minister of Budget and Planning, Udo Udoma, however refuted these claims, and promised that Nigeria will return to growth in 2017 while giving assurances that Nigeria’s economy remains the largest in Africa.

President has Buhari appealed to states to take over the repair and maintenance of federal roads to reduce the burden on the federal government. States that can afford to take over federal highways should do so as quickly as possible so that the roads do not deteriorate further. The President’s appeal followed a request by Kaduna governor, El-Rufai for the transfer of two roads in Kaduna State to state government, so that the state government would have the power, without any inhibition, to work on the roads to make them better for the people of Kaduna.

The Federal Government through the Minister of Agriculture and Rural Development has said, a security arrangement is being put in place whereby farmers in the country will pay fees for protection from kidnappers while on their farms. The Minister of Agriculture and Rural Development, Audu Ogbeh, said he, and the Minister of Interior had met and considered the security situation in the agriculture sector. He suggested that the government had to use a legitimate instrument of state to stop the abductions because a farmer has no right to buy a rifle to protect himself. Ogbeh also said that a development programme was underway in Abuja to stop cows from being moved around. Ogbeh added that the federal government would not force anyone to provide land for grazing reserves.

Youths in Bokkos Local Government Area of Plateau State rioted, and set ablaze three Fulani communities. The unrest was a reaction to the murder of the traditional ruler of Bokkos, Lazarus Agai, the Saf Ron Kulere. Agai, his son, daughter in-law and aide (a police inspector) were ambushed and killed Monday evening while they were returning from a farm in Sha village. The youths, on suspicion that the attack was carried out by Fulani herders, burnt the three Fulani settlements – Fokkos, Danan and parts of Kwatas.

About 244,000 persons are suffering from severe malnutrition in Borno, which has been hit the hardest by a five-year Boko Haram insurgency, according to the United Nations Children’s Fund. Of these, at least 49,000 are at risk of dying from starvation, the international organisation said. This comes as the Senate directed the executive to release funds from the Victims Support Fund for the provision of basic needs of the Internally Displaced Persons in Nigeria.

Last December’s massacre of at least 347 members of a Shi’a Muslim group in Zaria has been blamed on a colossal failure of intelligence, a judicial commission of inquiry into the killings says in its report. The commission, set up by the Kaduna State government, said the Nigerian Army, Police and the State Security Services, failed in their responsibilities, thereby allowing the killings by the army to occur. The judicial panel said it could confirm 349 deaths – including a soldier. It said that military officials refused to cooperate with investigators, hindering the panel’s ability to know the exact number of deaths. The army claimed it killed only seven Shiites. The inquiry indicted the General Officer Commanding the Nigerian Army 1st Division in Kaduna, Adeniyi Oyebade, a major general, and A.K. Ibraheem, a colonel, who led the operation, while recommending the trial of officers who partook in the killings.

Boko Haram fighters yesterday ambushed Nigerian troops returning from a mop-up operation in Guro Gongon village in Borno State. Official reports states that 19 Soldiers and 3 Civilian JTF members were wounded in the fighting. An undisclosed number of soldiers have also been declared missing in action after the event and a search and rescue party comprising Special Forces have been dispatched to locate and retrieve them while the wounded have been transported to Maiduguri for treatment.

Suggestions

  • This year’s budget was designed to be an ambitious one. However, it was also a faulty one, based as it were on a optimistic global oil price benchmark, an increase in social spending that was intended to put more cash in potential consumers and the idea of running a fiscal deficit. Add to that the delayed implementation of the budget and all assumptions proving wrong, and a perfect storm of fiscal unreasonableness was created. It will be difficult for the FG to implement its fiscal plan without a corresponding revenue and unresponsive foreign exchange environment. The situation looks beyond remedy unless the government walks back on some of its beliefs, a highly unlikely prospect if the past year is any guide.
  • We have repeatedly called for a coordinated fiscal and monetary policy response to the impending recession. However, it still appears that the government has chosen to live in denial of this fact. The current recession, coupled with inflation that is not driven by consumer spending is one that requires the government to begin to take deliberate action. Government’s domestic borrowing costs are already high at 14% and this is bound to rise. Investors have repeatedly stated that Nigeria still remains a choice destination for investments, but only once they see policy seriousness from the government.
  • The request for states to take over federal roads is a positive development that will strengthen the debate for a restructuring of Nigeria. We also see it as an attempt, inadvertent or deliberate, to push for a fiscal federalism where states can also control all revenue accruable to them and in return contribute some percentage to the federal government. We however believe that actions such as this should be within a thought through framework, not piecemeal approaches. As a result, we suggest that the President should engage with state governments to determine and redesignate roads, rather than leave it to discretion as his statement implies.
  • The proposal by the Ministry of Agriculture is unacceptable for a growing economy such as Nigeria. It is the responsibility of government to ensure security of lives and property, without demanding more from citizens beyond their legitimate taxes. It makes a mockery of the current government, casting them as unserious with security. That the attacks by herdsmen on farms are not viewed as a national security problem, but rather a problem of the farmers is extremely worrisome. We hold this policy decision will not stand the test of time, and will do damage to the prospect of investments in the agricultural sector. The government should discard this idea, and evolve a coherent national security strategy that will address insecurity.
  • We are not surprised by the unfortunate developments in Bokkos, and we predict more will happen, as a result of inability of the Nigerian government to proffer a comprehensive solution to the myriad of internal security challenges such as the one in Plateau. We hold the view that that the federal government has not shown a commitment to resolve these problems and believe these vulnerable communities may resort to vigilante action to protect their communities.
  • The current administration ran on a platform that contained in part, a promise to guarantee the welfare of IDPs in the country. Notwithstanding the commitment, Nigeria is signatory to a host of multilateral treaties which guarantee the fundamental rights of refugees, IDPs and other victims of armed conflict. The government’s actual track record leaves much to be desired. The executive needs to expedite and fast track disbursement approvals to IDP-targeted programmes while the legislature should work to ratify these international instruments that Nigeria is already a party to, so they never need to have recourse to appeals – it will be a matter of law, not charity.
  • The inquiry’s findings are a fair representation of the anecdotal observations of eyewitnesses, journalists, human rights observers and other independent actors. Nigeria’s security agencies must understand that its actions must be subsumed under a regime of law and order; to operate otherwise would be to foster the kind of anarchic climate that they are ostensibly supposed to prevent. It is hoped that the commission’s recommendations are fully implemented.
  • While Boko Haram’s fighting capability has been greatly reduced, we have reported previously that the availability of the Diffa Region in Southern Niger Republic, right at our border, as a sanctuary and forward base to the insurgents means that the threat of these types of attacks remain possible. We urge the government to continue to put pressure on our neighbours to step up their commitment to the MNJTF in order to eliminate sanctuary positions that Boko Haram uses to recuperate and launch these attacks.