16 Jun

The week ahead – One hurdle has been crossed, now for the steeple

Acting President Yemi Osinbajo has signed the 2017 budget into law. The budget was due to be signed a fortnight ago, but the signing was put off for undisclosed reasons. President Buhari had presented a budget proposal of ₦7.298 trillion to the National Assembly on December 14, but the senate which passed it on May 11 jerked it up by ₦143 billion. The budget has a projected revenue of ₦5.08 trillion with a deficit of ₦2.36 trillion. A total of ₦2.98 trillion was earmarked for recurrent non-debt expenditure, while ₦2.17 trillion was earmarked for contribution to the development fund for capital expenditure exclusive of capital expenditure in statutory transfers. A total of ₦434.41 billion was earmarked for statutory transfers; ₦1.84 trillion for debt service and ₦177.46 billion for sinking fund for maturing bonds.

The foreign exchange market has recorded a noticeable convergence between the investors and exporters window (I&E) and the black market. The US dollar was quoted at the rate of ₦367/$ at both markets, after trading Wednesday. Analysts say this is an indication of rising confidence, occasioned by sustained intervention of the central bank in the market. The CBN has been intervening in the official market, in an effort to narrow the spread between the official interbank and black markets. It has sold over $4 billion since February, improving dollar supply and providing support for the naira. A Bureau de Change (BDC) operator however said the stability of the naira was due to low patronage and expected dollar sales to BDCs. Isaac Okorafor, the regulator’s spokesman, expressed confidence that the interventions will continue to guarantee stability in the market and ensure availability to individuals and business concerns.

Members of the Miyetti Allah Cattle Breeders Association of Nigeria yesterday protested an anti-grazing bill that is in front of the Taraba State House of Assembly. The protest started at the Ministry of Works in Jalingo and proceeded to the state assembly complex. Led by its state chairman, Sahabi Mammud, the association “rejected the bill in its entirety because it was ill-intended, discriminatory and a misplaced priority.” Citing various sections of the 1999 constitution (as amended), they complained that the bill would “restrict the movement of certain group of people who are constitutionally guaranteed of freedom of movement.” The speaker of the Taraba House, Peter Abel Diah, urged the protesters to attend the public hearing that would be conducted in the state’s geopolitical zone, and added that the bill was not targeted against any group as claimed by the association.

An online newspaper, TheCable reports that none of the families of the 126 people who were killed or the 108 persons who sustained various degrees of injury in an accidental air bombing by the Nigerian military on an Internally Displaced Persons camp in Rann, a small village in Borno has been compensated, more than six months after the incident. Some others have died in the days following the attack, but none, not a single household has been compensated for the military misnomer. The International Committee of the Red Cross (ICRC) said twenty aid workers from the Nigerian Red Cross Society were injured while seven were among the casualties while Médecins Sans Frontières (MSF), an international humanitarian non-governmental organisation said it lost three of its staff. Lucky Irabor, a major general and theatre commander of the operation Lafiya Dole, said 112 persons were killed and 97 injured in the accidental bombing. The military was not immediately available for comment.

Suggestions

  • Finally, the budget saga for 2017 has come to a close and as has been done in the past, the government has promised that the 2018 budget will be different. This remains to be seen. Moving on, the critical issues now are around funding the budget and transparency with budget performance. Clearly, the debt service to revenue ratio is already a matter for concern and there is ₦2.36 trillion that will be financed by debt, further driving this up. Interest rates remain high, crowding out private capital. Half of the year is gone already and there is the ongoing political limbo around the President’s health. While the Acting President has made the right noises, we do not see how the passed budget will be delivered.
  • There are several factors which have led to the current stability of the naira. Most important is the intervention of the CBN, backed by rising dollar revenues from crude oil sales. Another is that June is not usually peak period for Nigerian travellers. A third and more unfortunate factor is that the lingering recession has led to weakened demand for goods and services across board. We expect dollar demand to rise in Q3 as productivity increases on the back of the 2017 budget implementation, and as Nigerians begin to make school fees payments and take summer vacations. That will be a better time to assess the stability of the exchange rate.
  • It is somewhat reassuring that the debate surrounding the herdsmen-settler conflict has moved from the almost endless bloody clashes spread out around the country and unhelpful fiery rhetoric by politicians to addressing the gaping hole in the country’s legal framework for dealing with these issues. We reiterate our firm belief that the best forum for addressing these issues is at the federal level, in concert with the states and the recent lull in violent clashes should deceive no one that this crisis has gone away – time is running out and one wrong move by any of the many parties involved in this conflict may tip the balance in favour of more destruction.
  • It is very likely that the military brass is hoping that the Rann matter dies a natural death especially as it is not in the news cycle any more. The report of the investigation of the incident has still not been released, and if there is any compensation, it will not come soon, and will most likely be inadequate. What the military brass do not seem to understand is that routine failure to close issues such as this have repercussions. In a June 8 letter to the US Secretary of State, Rex Tillerson, two U.S. senators, Cory Booker and Rand Paul opposed the sale of American fighter jets, to aid Nigeria’s war against Boko Haram in part because of the Shi’ites massacre carried out by the Nigerian army and the Rann bombing by the Nigerian air force, amid concerns about allegations of corruption, abuse, and misconduct within the military. The Americans have a very valid point in their opposition especially in relation to the Shiites. Shiite leader, Ibraheem El-Zakzaky is still held in detention despite numerous court orders for his release. The military is yet to hold anyone responsible for numerous human rights abuses. Its response is to always deny the allegations despite the preponderance of evidence. This makes it easy for the US government to invoke the Leahy Act and refuse to sell weapons to Nigeria. This, is a real world repercussion of the many failures to act.