10 Mar

The week ahead – The returning President has some unhappiness to deal with

President Muhammadu Buhari returned to Nigeria this morning from the UK where he had been receiving medical treatment for an undisclosed ailment over the last six weeks. The President left Nigeria on January 19 for what was announced as an annual vacation, to last ten days. The vacation was extended indefinitely when the President sent a letter to the National Assembly asking for more time to attend to medical issues as suggested by his doctors.

The CBN intervened for the third time on March 5 in the inter-bank retail foreign exchange market, supplying a total of $367 million to meet the requests of customers. In the first two placements, the bank made an initial placement of about $500 million in the market shortly after its forex policy review in mid-February. At the end of trading, the market could only absorb $350 million. In the follow-up placement of about $270 million, the market could only take about $221 million. The impact of two interventions in the parallel market was immediate as the naira’s value strengthened significantly, from about N515 to the dollar to about $485 to the dollar in the first week. It received a further boost to about N450 to the dollar in the second week.

Etisalat Nigeria is in talks with three banks to renegotiate the terms of a $1.2 billion loan it took four years ago after missing a payment. Vice-President, Regulatory Affairs, Etisalat Nigeria, Ibrahim Dikko, said the firm missed payment schedules due to the economic downturn, devaluation of the naira and dollar shortages in the interbank market. “We are in discussions with our bankers and have been for quite a while. They have not taken over the business and we are hoping that we can resolve the issue and find a way to renegotiate terms,” Dikko told Reuters. Etisalat Nigeria which signed a $1.2 billion medium-term facility with 13 local banks in 2013 to refinance an existing $650 million loan and to fund a modernisation of its network, accounted for around 3.7% of the group’s global revenue in 2013.

A senior military official said the cause of the accidental bombing of a Displaced Persons Camp in the country’s north-east in January, was the result of incorrect coordinates. Major General Leo Irabor told a visiting U.N. Security Council delegation on March 5 that the January 17 bombing in the town of Rann, which killed 236 civilians, was a “grave mistake” that was the result of faulty information. He went on to say that although he was not trying to justify the military’s error, two days later Boko Haram did attack the town, which is located in Borno state – the epicentre of the group’s insurgency. A military jet dropped two bombs on the camp for displaced persons in Rann – a small rural town where at least 20,000 people have sought refuge from Boko Haram. At the time of the attack, aid distribution was taking place and many women, children and at least nine humanitarian workers were killed.

Suggestions

  • As President Buhari returns, it is important to note that he did well in obeying the Constitution and handing over to Prof. Osinbajo before departing. Two points however: First; during his absence, the Vice President brought animation to the role – a bustle that had been missing for 19 months of Buhari’s service. Second; in Nigeria’s daedal political space, Prof. Osinbajo’s activities made diverse interests uneasy, and matters were muddled up even more by the President’s media team who kept sending out conflicting messages regarding his health, and an increasing backlash from foreign media on the President’s extended leave of absence. If the pictures released yesterday of the visit by the Archbishop of Canterbury to the President are anything to go by, President Buhari is very ill. We believe that President Buhari should have come clean on his health status to Nigerians, stayed put in London, listened to the advice of his doctors, and catered to his health. No office is worth the life of any Nigerian, including when that Nigerian is the president.
  • Buoyed by increasing revenues from crude oil sale, the country’s foreign reserves crossed the $30 billion mark last month. This improved the CBN’s ability to defend the naira, and the regulator quickly suspended the managed float of the currency which it implemented last June after the reserves had fallen below the $20 billion mark. Unfortunately for the CBN, oil prices have this week fallen below $50/barrel as crude from Nigeria, Libya, Iran and the United States flood the market, making OPEC’s unprecedented cuts meaningless. The downward trend is set to continue and we expect the country’s foreign reserves will begin to dip as the government attempts to implement its 2016 budget in full force. Soon the CBN will need to stop playing “hide and seek” with Nigeria’s foreign exchange market and allow market forces determine the true value of the naira.
  • In the midst of the disparate communications, one thing is clear – the policies of this government have negatively affected the biggest component of the services sector of the economy. MTN recently declared a loss for the first time and it was due to a regulatory fine. Etisalat’s current woes have been blamed on the current FX policy, with some merit. It has become crucial for the government to turn around its policy positions, on FX and on some key regulations to stymie the haemorrhaging of key sectors of the economy, if it is serious about bringing the country out the current recession. The recently released ERGP outlined allowing the market determine the FX rate as one of its key immediate actions. We cannot agree more, and we hope that the returning President Buhari agrees as well.
  • Unfortunately, General Irabor’s explanation lacks the empathy that is required for such a sensitive incident. Nigerians were killed because of that ‘grave mistake’ two months ago. To attempt to brush it off as an error of coordinates is capricious behaviour, and that is the least we can say. It appears that the military is yet to learn that to win a war completely requires not just winning on the battlefield, but winning the hearts and minds of the people in the combat area as well, in order to forestall future conflict. The very least that has to be done in the Rann case, is that the people responsible for the ‘wrong coordinates’ be punished. That, is too little to ask for.