16 Dec

The week ahead – Old budget, new budget, same tale

President Muhammadu Buhari presented the 2017 budget proposal of ₦7.298 trillion to the National Assembly on December 14. The proposal, named, ‘Budget of Recovery and Growth,’ seeks to increase agriculture output and productivity, promote domestic manufacturing and ‘Made in Nigeria’ goods through intervention funds, eliminate costly cash calls for the NNPC and increase funding for infrastructure, especially roads, rail and power. The budget will also borrow heavily to plug a ₦2.36 trillion deficit for 2017, which is estimated at about 2.18 percent of GDP. The 2017 budget is based on a benchmark crude oil price of $42.5 per barrel; an oil production estimate of 2.2 million barrels per day; and an average exchange rate of ₦305 to the US dollar. The 2017 budget proposal is 20.4 percent higher in nominal terms over 2016 estimates with 30.7 percent of this expected to be allocated to capital expenditure.

Several banks will not renew agreements worth billions of dollars with the Central Bank of Nigeria, highlighting the erosion of confidence in the monetary authority, several top bankers told the Financial Times this week. The move, which relates to foreign currency swap agreements between banks and the central bank, risks depleting the country’s dwindling foreign reserves as Nigeria faces a severe dollar shortage. Gross reserves have plummeted by 40 percent to $24 billion since oil prices crashed in mid-2014 as the country grapples with its worst economic crisis in decades. As a result, the CBN has sought to use foreign currency swaps to bolster dollar reserves, swapping large amounts of naira in return for dollars with about six of the country’s 22 banks. The report says bankers have been refusing to allow the CBN to renew these swaps – most of which expire within the next year – because they have lost confidence in Governor Godwin Emefiele’s management of the currency and the forex market.

The United States has announced an additional $92 million (₦44 billion) in aid for people affected by the Boko Haram insurgency and food insecurity in North-Eastern Nigeria and the Lake Chad Basin region. It follows warnings from the United Nations that 120,000 people were at risk of dying from starvation in the region as a result of the conflict, which it called the “greatest crisis on the continent”. The latest aid brings the US contribution to $291 million, money that will go to the UN and NGOs to provide food, water, shelter, health services and food. The Boko Haram insurgency has left over six million people in need of emergency food assistance, and has displaced almost three million people, the US said. The UN has appealed for an additional $1 billion to meet humanitarian needs in the region in 2017.

Boko Haram fighters on December 13 attacked a military base in the remote village of Kamuya in Borno leaving scores dead. Media reports say the insurgents stormed the community at about 10 am and engaged Nigerian soldiers in a gunfight that lasted two hours. There has been no independent confirmation of casualty numbers. In a related development, a military officer, Lieutenant-Colonel O. Umusu, Commanding Officer of the 118 Task Force Battalion was killed following injuries sustained when his vehicle drove over a Boko Haram Improvised Explosive Device just outside Zare, on their way to Gudumbali, Borno on December 12. He died while being medically evacuated to Maiduguri. Umusu is the fourth officer killed by Boko Haram in the past two months after Lieutenant-Colonel K. Yusuf, Lieutenant-Colonel Abu Ali and Colonel B.U. Umar.

In a resumed hearing on December 13, Justice Binta Nyako of the Federal High Court ruled that key witnesses in the case against Nnamdi Kanu, director of Radio Biafra and scion of the nascent Indigenous People of Biafra movement be kept behind a screen while delivering their testimony with their names withheld from the public. She went on to say that the pattern of the trial could not be labelled ‘a secret trial’ as widely believed by the defendants. Kanu reacted angrily in court at the ruling, which was based on an application by the Department of State Services requesting for a secret trial, lashing out at President Muhammadu Buhari for orchestrating a show trial against him and intimidating the nation’s judges. Kanu and three others are facing multiple charges of treasonable felony and management of an unlawful society among others.

Suggestions:

  • We learnt from President Buhari’s first full year in office that talk can be cheap particularly with regards to budget funding and implementation. The 2017 budget presented continues on the tradition of the 2016 budget. It is steeped in assumptions that do not match the reality that even the most casual of observers can see. Full figures on to date implementation of the 2016 budget are not out but it will not take a clairvoyant to divine a poor to average performance. Now, the government is being more aggressive with its proposal particularly with regards to crude production. When we look at what actually played out in 2016 in terms of actual budget performance, we can make an informed guess at how the 2017 budget will end up: high performance of recurrent expenditure fuelled by borrowing, and non-performance of capital expenditure. We disagree that this budget is aptly named. It will not get Nigeria on a path of growth.
  • This is perhaps the most emphatic statement from the domestic economy of a loss of confidence in the ability of the leadership of the Central Bank to manage monetary policy. Just yesterday, the government attempted to sell ₦100 billion worth of Treasury Bills but got an uptake of only ₦44 billion in spite of very high rates. This speaks to one thing. Confidence and trust are the currency the financial system runs on, and the Nigerian government and the Central Bank are incredibly low on this in the eye of the public as well as the rest of the financial system at the moment.
  • Just this week, the World Health Organisation said a third of the 743 health facilities in Borno had been “completely destroyed,” with a further 29% “partially damaged” by the abeyance of a Boko Haram seven-year insurgency that has experienced a renewed surge in the dry season months. The humanitarian need in the North-East is enormous, the resources to address it are paltry, the political will to make it a reality is virtually non-existent. The new aid commitments, while welcome, fall well short of funding a $1 billion UN humanitarian funding appeal for North-East Nigeria. Even more critical is the distribution of these badly needed relief materials – SBM had reported earlier in the year of the difficulties NGOs face in wading through Nigeria’s notoriously corrupt, insensitive and inefficient bureaucracy in an honest bid to do their jobs. Getting the money may be one thing, ensuring the aid reaches the people who actually need it is the ultimate challenge. On that front, not even the US can help Nigeria.
  • It is of grave concern that just as the Boko Haram terrorists increase the frequency of their attacks, some of the best commanding officers in the theatre are being killed in ambushes by the terrorists. In the last few weeks, three Lt Colonels have died in such ambushes which appear to be precisely targeted at these officers who have been acclaimed as critical to the victories the Nigerian Army recorded. We had warned about this in our report on the increasing attacks by the terrorists. It is imperative that the military launches an investigation to achieve the twin goals of fishing out those who might be leaking information on troop movements to the terrorists, as well as boost the morale of the men.
  • In his now viral angry tirade, Kanu made an elegant point about the government’s disrespect for the judicial process. In his words, “There is a contempt of court, they don’t obey a court order and you’re telling me a secret trial.” He is right to an extent. This is no secret trial in the legal sense of the banning of the press or cameras. The judge’s precaution in protecting the identity of witnesses is understandable considering how politically fractious cases like this can easily lead to retribution outside the courthouse. Nonetheless, the government has persistently disobeyed a series of court orders in this, and another politically charged case, that of Islamic Movement of Nigeria leader, Ibraheem El-Zakzaky (whose son wrote an impassioned open comment on his father’s continued incarceration this week). Nigeria’s leadership surely has to understand that no one takes seriously a country where lip service is paid to the rule of law. To ignore that first lesson of democratic practice is akin to living in an alternate reality.