28 Jul

The week ahead – Of truths and dare

An attack on a Nigerian oil exploration team by Boko Haram militants killed at least 48 people, according to hospitals and military officials in Borno state. Those who died in the 25 July attack include 18 soldiers, 15 local vigilantes, five geologists from the University of Maiduguri, 4 drivers from the Nigerian National Petroleum Corporation and six others, Bloomberg reports citing unnamed sources. The exploration team was in a convoy of 11 vehicles with security escorts on their way to Maiduguri, the state capital, when they were ambushed in the town of Barno Yasu, officials said. Nigeria is trying to expand exploration outside the restive Niger Delta. The NNPC exploration team which was conducting geological surveys in parts of the Lake Chad basin, may resume work when “there is security clearance,” oil minister Ibe Kachikwu said.

The Central Bank of Nigeria, July 25, warned that Nigeria’s economy may relapse into a protracted recession, citing the ₦2.5 trillion budget deficit recorded by the federal government in six months and other factors as major threats to a fragile economic recovery. Governor Godwin Emefiele, while reading the communiqué of the MPC after their meeting, said, “The MPC noted the widening fiscal deficit of ₦2.51 trillion in the first half of 2017 and the growing level of government indebtedness and expressed concern about the likely crowding out effect on private sector investment.“While urging fiscal restraint to check the growing deficit, the Committee welcomed the proposal by government to issue sovereign-backed promissory notes of about ₦3.4 trillion for the settlement of accumulated local debt and contractors arrears.”

Nigeria’s acting president will meet again with community leaders from the oil-rich Niger Delta next week in a bid to shore up a fragile truce between militants and the government there. Delegations including Acting President Yemi Osinbajo have held talks since late last year with leaders in the oil-producing states. But the local leaders have said the efforts to secure peace are empty promises, and a return to violence in the area would derail any broader recovery in the crude-dependent economy. In the meeting next week, the government and representatives from the Delta will discuss key issues such as legalising illicit refineries and turning them into so-called “modular refineries”, which the administration hopes to start from next month. The contentious cleanup of the heavily polluted Ogoni region and plans to open a maritime university in October, which many community leaders have voiced support for, will also be discussed, said the spokesman.

At least 32 of Nigeria’s 36 states, including those that span the southern cocoa belt, are likely to experience flooding during the current wet season due to irregular rainfall patterns, the Nigerian Meteorological Agency, NiMet, said in its weather outlook for this year. “When you have serious cases of flooding, the tree crops will be forced to accommodate more water than they can absorb,” Sani Mashi, the director general of NiMet said in an interview, 20 July. “Unlike a cereal crop like rice that can be submerged, cocoa will be seriously hampered.” Wet conditions such as those created by flooding engender fungal diseases, such as black pod, that reduce both cocoa output and quality. Nigeria is looking to expand investments in agriculture to cut food imports that cost it $3.2 billion in 2015, according to the National Bureau of Statistics. With additional fields cultivated in recent years and improved yields, Nigeria expects to meet all its domestic requirements for rice by the end of this year, according to Agriculture Minister Audu Ogbeh.

Suggestions

  • This week’s attack continues to prove the presence of Boko Haram in areas outside Maiduguri especially to the north and east of Borno state. It also shows the shortcoming of the current strategy of the military to defend and repel attacks, rather than seek out and destroy the terrorists. The recent order given by the Chief of Army Staff for Abubakar Shekau be captured within 40 days, will test the ability of the military to seek out and engage the terrorists. The downside to it is if it fails, it will hand the terrorists a huge propaganda initiative.
  • Barely two months ago, the National Assembly passed the 2017 budget which the government promised would take the country out of the current recession. Key assumptions were average crude oil production of 2.2 million barrels per day, oil price of $44.5, foreign borrowing of ₦175.9 billion and domestic borrowing of ₦1.488 trillion. While oil prices have largely hovered above the benchmark, there has been substantial shortfall on the production side for various reasons. The effect has been glaring – the projected fiscal deficit for FY 2017 has been exceeded in just 6 months and some market watchers are warning that deficits could scale 80% above the government projection based on the current realities. With debt levels already at record levels and debt service to revenue ratio already at worrying levels, the country is in dire straits as the only option the government seems able or willing to explore is to rack up more debt to finance this deficit. We agree with the CBN governor’s position as opposed to the Finance Minister’s pronouncement that Nigeria is slowly coming out of a recession. What is also clear is that the adjustments that need to be made are mainly fiscal and not monetary policy. The government needs to act fast.
  • Oil exports are now set to exceed 2 million bpd in August, the highest in 17 months, from as little as just over 1 million bpd at certain points last year. This is important to note because it shows how last year’s uptick in militancy affected Nigeria’s economy. Half measures will not resolve the problem in the Niger Delta, neither will a piecemeal approach. We hope the Acting President carries through these promises and ensures a comprehensive approach is guaranteed for them to work. The solutions, as we have reiterated in the past, involve granting more control of the resources in the region to the people, and a real clean up process. We will like to throw in another – the region is in desperate need of jobs.
  • That NiMet has repeatedly warned of increased rainfall every year since 2010 and that the central and state governments have paid no heed is testament to the insensitivity of the country’s leadership to the needs of many Nigerians. Having established that, the floods could also affect agricultural production in ways that would impact the pockets of consumers. Nigeria ranks seventh globally in cocoa production, with 2015-16 output estimated at 190,000 metric tonnes by the International Cocoa Organisation. Furthermore, it imported 2.1 million metric tonnes of rice and produced 2.7 million tonnes in 2016, according to the U.S. Department of Agriculture. So, while cocoa’s impending travails will be bad news to FMCG giants, a slowly recovering export industry and mothers at the breakfast table, many Nigerians won’t be complaining, if Audu Ogbeh is to be believed, so long rice, a staple that is disproportionately consumed in the latter months of the year, occupies a smaller share of the Christmas shopping bill than last year.