12 Dec

Review: Assessing our predictions for 2017, and how they fared

2017 has been an eventful year in Nigeria as the country finally exited its first recession in a generation. As we put finishing touches to our review of 2017 and our forecast of 2018, due for release this Friday at noon, we did a review of our key 2017 predictions from last year and how these have panned out as the year unfolded.

A year ago, we forecast that the following were likely to happen in 2017:

1 – Oil prices would hover in the mid $50/bbl for the most part of 2017.

  • We have scored this forecast CORRECT as can be seen in the chart below.

Oil prices 1/1/2017 to 9/12/2017 – Source: TradingEconomics.com

2 – Non-OPEC producers such as Russia who had agreed to clamp down on production following talks with OPEC look for the first excuse to ramp up production again.

  • This was WRONG. Whilst there have been signs that Russia is going restless with the production cuts as American producers seem to have reaped the benefits of elevated prices and constrained supply.

3 – Nigeria’s oil production would rise, but would not meet the target set in the 2017 budget.

  • This was CORRECT. On the 2017 performance of crude oil production from January to October, the average performance stood at 1,885,000 barrels per day which is equivalent to about 86 per cent of the budgeted 2.2 million barrels per day.

4 – The federal government’s continued exploration activities in the Benue Trough.

This was CORRECT as the NNPC intensified oil exploration activities in the Benue Trough, particularly in Adamawa, Benue, Borno and Nasarawa, and began moves to commence a biofuels project in the Agahsa/Guma area of Benue State.

5 – The Petroleum Industry Bill would not be passed in 2017.

  • This was CORRECT. In May this year, the Senate passed the Petroleum Industry Governance Bill (having broken up the existing Petroleum Industry Bill into various sections). However, the Bill has to go through the House of Representatives and the President to become the law of the land.

6 – 2017 budget performance would be as poor for capital spending as the 2016 budget was.

  • This was CORRECT as the federal government pointed on November 28 2017 that it had achieved a 47% performance of the 2017 budget and had plans to achieve a 50% implementation before the year runs out. The poor implementation of the budget was further buttressed when members of the House of Representatives on November 29, 2017, expressed their outrage over the poor implementation of the 2017 budget. Another indication of the poor implementation of the Budget was when the Minister of Finance, Mrs Kemi Adeosun, revealed the federal government’s intention to roll over at least 60 percent of 2017 capital projects to the 2018 fiscal year. Recurrent releases to federal Ministries, Departments and Agencies (MDAs) under the 2017 budget had reached ₦4.24 trillion. Capital releases to MDAs from January – September 2017 was ₦138 billion. ₦1.54 trillion had been used for debt service obligations. ₦450 billion had been released as at October 2017 for capital projects. The ₦100 billion Sukuk Bond raised in October for instance was was raised for the construction of 25 roads around the country, but the money has not yet been released to the Federal Ministry of Power, Works and Housing.

7 – If the OPEC deal holds through the end of Q1, Nigeria could come out recession by the end of Q2.

  • This was CORRECT as Nigeria exited recession at the end of the second quarter of 2017.

8 – The FX situation will worsen and the parallel market rates will cross the ₦500 mark and close the year closer to the ₦600 per dollar mark.

  • We have scored this as PARTIALLY CORRECT for the following reason: on February 9, 2017, the naira hit the ₦500 per US dollar mark, and peaked at ₦518 per US dollar on February 20. However, intervention by the CBN saw it cross back below ₦500 per USD on February 24, and following the CBN’s actions towards convergence of the various exchange rates, the naira closed at ₦363 to the US dollar on December 9, 2017.

Nigerian naira against major currencies at the parallel market – Source: Trading Economics

9 – Despite promises, power generation in 2017 would not reach 10,000MW.

  • This was CORRECT. Power generation in Nigeria, unsurprisingly failed to rise to 10,000MW as the government promised, severely affecting the government’s effort at kick-starting an economic recovery. Data from the National Bureau of Statistics (NBS), show that power generation statistics for first quarter 2017 at a total average of 3,687 megawatts of energy generated by power stations as Afam VI Power Plant contributed about 12.64 percent of the total, the highest generation among the twenty-three power plants within the period under review. The Minister of Power, Works and Housing, Babatunde Fashola, on August 15, 2017 said power generation and transmission in the country had improved. A communique issued at the 18th monthly power sector and stakeholders meeting in Kano, chaired by Mr. Fashola, said power generation improved beyond what was recorded in 2016.
    “As at August 10, 2017, 6803MW was recorded as the current available generating capability, with a wheeling capacity of 6700MW by TCN, currently constrained by DisCos inability to take load,” the communique read. “This is in line with incremental power policy with improvements from TCN improving the wheeling capacity from 5000MW to 6700MW.”

10 – The federal government will increase funding to Transmission Company of Nigeria.

  • We scored this as CORRECT as in 2017, the federal government as part of the collateral for a loan, handed the management of Transmission Company of Nigeria, to the African Development Bank.

11 – Power tariffs are likely to be increased again in 2017.

  • This prediction was WRONG, as tariff prices were last increased in 2016. An effort to increase them in 2017 was not followed through.

12 – The impending food shortage will likely be felt more in the Northern parts of Nigeria, with the depletion of the grains in the silos.

  • The was CORRECT. The effect of a worsening Pastoral Conflict in parts of the country’s main food growing areas, the continued insurgency in the North East, mildly favourable seasonal weather and incoherent agricultural policies on the part of the federal government and the states all impacted food prices substantially, and this was accompanied by reports in the media about severe food shortages in various refugee camps.

13 – Food costs will continue to rise, and Nigeria may resurrect the 1980s era regime of essential commodities.

  • This was PARTIALLY CORRECT. While food inflation kept rising through the year, so far the essential commodities regime has not been brought back.

14 – Nigerian manufacturing and job losses will continue well into 2017.

  • This was CORRECT as many companies across the country folded and workers got laid off. According to the National Bureau of Statistics, banks sacked 360 workers every week from January to June 2017. The NBS also estimated that 8,663 workers lost their jobs in the first half of 2017. Banks reported to have retrenched workers in huge numbers include Heritage Bank, Ecobank Nigeria and First Bank of Nigeria.

15 – The tax regime in Nigeria would get more stringent.

  • This was CORRECT. This year, the Federal Executive Council, the highest Executive decision making organ in Nigeria, approved a new National Tax Policy for the country. Implementation of the tax policy appears to be gaining momentum. First the government announced a tax amnesty. The Voluntary Assets and Income Declaration Scheme, designed as an amnesty for tax defaulters effective through March 2018, is reported to have yielded over $50 million in revenue since its launch in June, according to the Chairman, Federal Inland Revenue Service, Babatunde Fowler. Also proposed has been a luxury tax, and reintroduction of toll gates for the country’s highways.

16 – The Nigerian government would reach a deal with the Niger-Delta militants in 2017.

  • This was CORRECT. The Nigerian government and the Niger-Delta militants did reach a deal to end pipeline vandalism, kidnapping of oil workers among other. This was as a result of the consultation and visits by the Vice President, Yemi Osinbajo and various stakeholders in the Niger Delta. However, the honeymoon period appears to be over – the Niger Delta Avengers are threatening to resume pipeline vandalism again and have said the agreement stands repudiated.

17 – The intensification of Pastoral Conflict in the middle belt, as a result of increasing distrust between Fulani communities, and indigenous farming communities.

  • This was CORRECT as 2017 saw escalating clashes between Fulani herdsmen, and various communities. These clashes have caused not only the loss of life but the displacement of communities.

18 – Operation Python Dance would either be extended, or another operation will take its place in 2017.

  • This proved CORRECT, as Operation Python Dance II returned to the South Eastern part of Nigeria. Unfortunately, this operation caused a tremendous amount of political and social tension in the region. Despite this, the operation was still fully executed by the military.

19 – The extension of military operations would further radicalise frustrated youths in the South East.

  • This was CORRECT, as we witnessed clashes between the Nigerian Army during the Operation Python Dance and Indigenous People of Biafra (IPOB) supporters. Despite Kanu’s disappearance, it is clear that the can has only been kicked down the road.

20 – An event in the south East which would end in a bloodbath in 2017.

  • Sadly, this was CORRECT. During Python Dance II, the Army attacked IPOB in Aba and Umuahia, resulting in the loss of lives and property both among natives to the region, and Northern settlers.

21 – Kidnapping and armed robbery would escalate in Nigeria in 2017.

  • This was CORRECT as cases of kidnapping increased in various parts of the country. Some notable examples were, the kidnapping of six male students of Igbonla Government College, Epe, Lagos. The students were abducted from their school premises, and spent 57 days in captivity. The rise in the kidnapping of individuals along the Abuja- Kaduna express way such as the recent kidnapping of Damishi Sango, a former minister of sports, comes into sharp focus. Even, the capture of the notorious kidnapper, Evans, did not reduce the rate of kidnapping in the country. Armed robbery in Nigeria continues to escalate as a result of a stuttering economy and rising unemployment. Some notable examples are constant reports of robbery during traffic snarls on various bridges in Lagos; the armed robbery at a Zenith Bank branch in Owerri, Imo State in February 23, 20172, UBA and First Bank branches in Lapai town, Lapai Local Government Area of Niger state, which killed two policemen, and a still undisclosed number of civilians and among many more.

22 – More security agents would be involved in criminal activities in 2017.

  • This was CORRECT. Through 2017, reports filtered through documenting ever rising levels of impunity in the conduct of some members of Nigeria’s security forces, this trend epitomised by the rise, late in the year, of the #EndSARS movement which shone a spotlight on a police unit particularly infamous for widespread human rights abuses.

23 – The Trump Administration not being as stringent in upholding the Leahy Act against selling lethal weapons to Nigeria.

  • This was CORRECT. The arrangement with the United States will see Nigeria purchase up to twelve Embraer A-29 Super Tucano aircraft with sophisticated targeting gear for nearly $600 million despite a written protest from at least two American Senators.

24 – More towns and villages being secured by the military in the North East region with IDPs returning home.

  • This was CORRECT, as in 2017 we saw the Nigerian military take more control of territories that had been taken over by Boko Haram. Also, residents of IDPs in the northern part returned home.

25 – The IMN will evolve into the early stages of open insurgency at some point in 2017.

  • This was WRONG. So far, the Islamic Movement of Nigeria has remained steadfast in seeking to push for the release of Ibraheem Zakzaky through peaceful protest marches, which have sometimes been violently broken up.

26 – The government will be left with no choice but to increase the price of petrol, leading to protests which will dent President Buhari’s popularity even in his base.

  • We got this WRONG. While there have been calls to increase the price of petrol, especially as oil prices have begun to rise and an existing subsidy becomes more apparent, the government has thus far resisted this, and the President remains as popular as ever in his base.

27 – The PDP will enter terminal decline in 2017.

  • This was PARTIALLY CORRECT. For long stretches of the year, the PDP appeared finished. The settlement of the tussle between the factions of Ali Modu Sheriff and Ahmed Makarfi gave the party a lease of life, but the fall out from the December 9 convention may see a lot of the South-West membership of the party defect.

28 – There will be further use of state security agencies to settle political scores.

  • This was CORRECT. The case of the Nigerian Ports Authority and Intels Nigeria, part owned by former Vice President, Atiku Abubakar was the most visible example of this trend, one which is sure to continue in 2018.

29 – The ASI will continue to decline through 2017, but at a slower rate.

  • We got this WRONG. In 2017 to date, the ASI has appreciated by 41.19%.

30 – A cabinet reshuffle will happen in 2017.

  • This was WRONG. While there were rumours of a cabinet reshuffle, especially each time the President returned from medical leave, it did not happen.
Summary Spot on – 21
Partially correct – 3
Wrong – 6

SBM Intelligence’s forecast for 2018 will be published at noon WAT on Friday, December 15, 2017.