Menas Associates

>>>Menas Nigeria Focus
06/15
June 2015 · Volume 16 · Number 06
Politically independent monthly news and analysis of strategic developments in Nigeria
Buhari faces insurgency,
empty coffers, and
partisan manoeuvres
The first month in power for President Muhammadu Buhari has been a whirlwind of summit
meetings with world leaders, regional diplomacy, economic turmoil, tough negotiations
with state governors, and gamesmanship within
his own All Progressives Congress (APC).
This would be a further recognition of Nigeria’s
central importance to US commercial and
security interests in Africa. The fact that Obama
made his first African visit as president to
Ghana – not Nigeria – in 2009 still rankles with
some top officials in Abuja.
The scorecard is mixed so far. Buhari’s attendance at the G8 meeting in Germany, hosted by
Chancellor Angela Merkel, revealed the level of
goodwill shown to his government by Western
leaders. During the meeting, discussions started
between Nigerian and US officials about an
arrangement for President Barack Obama to
add a stopover in Nigeria to his planned trip to
Kenya and Ethiopia in July.
For Western leaders, a reformed Nigeria is central to many of their policy imperatives in Africa.
The trade and investment potential of the
biggest economy on the continent is considerable, and its oil and gas resources make Nigeria
one of Africa’s top energy producers. As well,
resolving Nigeria’s security is key to tackling
the crises in the wider Sahel region, and a credible government in Abuja makes Nigeria a key
interlocutor because the West’s relations with
Spotlight
1
> Buhari faces insurgency, empty coffers, and
partisan manoeuvres
Energy industry
> Corruption investigations mount
> Acquisitions news
> Shuffles at the DPR
> Fuel crisis raises questions
2
states such as South Africa and Kenya are more
tendentious.
At the same time, Nigerians form one of the
largest groups of economic migrants to Europe
at a time when the migration issue is prompting
political disarray.
Buhari’s foreign policy strategy takes the form
of concentric circles of priority: starting with the
region, then the continent, then the developing
world, and then global institutions such as the
UN, World Bank, and IMF. With that in mind, he
made his first foreign trips to Chad and Niger.
There he explained to Presidents Idriss Déby
Itno and Mahamadou Issoufou, respectively,
how Nigeria is reordering its security policy. It
Niger Delta
> Oil spill compensation disputes
> Paying protection contracts
> Oil theft in brief
> Rivers State governors clash
5
Politics & society
> Senate and House leadership
> Buhari delays nominations
> Policy priorities
> Tackling Boko Haram
> PDP in opposition
will be moving the military’s command and control centre to Borno State capital Maiduguri in
order to demonstrate its determination to tackle
the Boko Haram insurgency at its source.
The counter-insurgency effort
Buhari also diplomatically explained to his
regional counterparts that Nigeria wants to
assume leadership of the multinational counterinsurgency effort. Tensions have already surfaced in this relationship – particularly between
Nigeria and Chad – and Islamist insurgents are
trying to exploit those strains by stepping up
terrorist operations in both countries.
After a suicide bomb in N’Djamena, the Chadian
air force announced it would be bombing >>>
6
Economy & finance
> Central Bank policy news
> Banking sector scrutiny grows
> Falling oil revenue
10
2
>>>Menas Associates
Nigeria Focus · June 2015
Nigeria Focus is published monthly
Sold by subscription only
Produced by Menas Associates staff
Managing Director: Charles Gurdon
Editor: Patrick Smith
Production Editor: Blakeley Words+Pictures
ISSN 1477-2426
© 2015 All rights reserved
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Spotlight
1
Boko Haram encampments, some of which are
in Nigeria. This prompted a predictably hostile
response from Abuja, which has long claimed
that arms supply networks close to President
Déby are linked to the insurgents.
ENERGY INDUSTRY
Resolving these issues and ensuring better
regional coordination on security are evidently
aspects of Buhari’s priority of priorities: to defeat
the Boko Haram insurgents decisively within the
year. He does not accept the more commonly
held view that real success against the insurgents will take many years. To some extent he
sees the region through the prism of the 1980s,
when the Nigerian military was in far better
condition despite having a far smaller budget.
Only a few weeks into President Muhammadu
Buhari’s tenure, the oil industry faces several
corruption investigations, some old and some
new.
Buhari’s key adviser on security matters is
now former chief of army staff Abdulrahman
Dambazau, who is likely to be named minister of
defence in the coming days. He is likely to preside
over an extensive but gradual restructuring of
the military, with trainers from Britain and India
arriving soon to help develop specialised counterinsurgency programmes and boost the army’s
capacity to handle information technology.
Economic strains
The economic backdrop to high-level diplomacy
and regional security issues is complicating many
of the new government’s policies: particularly its
reforms to oil and gas, and the power sector.
So depleted are the federal and state treasuries
that Buhari held a meeting with the 36 state
governors on 23 June to discuss the deepening
financial crisis and the payment of federal and
state salary arrears. The president expressed
surprise that the governors had not voiced
Energy industry
2
Niger Delta
Corruption
investigations mount
Goodluck Jonathan
stronger concern about the level of federal
financial malfeasance under the Goodluck
Jonathan administration, which is being blamed
for the current budgetary crisis.
Buhari was being ironic. He and his advisers
well know that financial malfeasance extended
to both the federal and state governments,
and that many of the governors now petitioning Buhari for a bailout had wasted previous
allocations on white elephant projects, bloated
administrations, and outright corrupt procurement and contracting.
Some of Buhari’s advisers are suggesting the
government embark on a new programme of
municipal and state bonds issuance to raise
funds to rescue the state governments. The
governors want the federal government to
transfer funds from the back taxes owed by the
Nigerian Liquefied Natural Gas (NLNG) export
company and joint-venture oil companies. But
collecting those taxes is likely to be complex
and surrounded by legal disputes.
>>> www.menas.co.uk
5
Politics & society
The claim by former Central Bank governor
Lamido Sanusi, covered in a PricewaterhouseCoopers (PwC) forensic audit, that billions have
gone missing from the Nigerian National Petroleum Corporation (NNPC) finances still has to
be fully investigated.
Nigerian Investment Promotion Commission tax
holidays, flagged by former president Goodluck
Jonathan’s finance minister, Ngozi OkonjoIweala, allegedly allowed indigenous Seplat
and other oil companies to benefit.
The matter of Malabu Oil & Gas and OPL 245 is
being reviewed. In fact, the Economic and Financial Crimes Commission (EFCC) questioned former
petroleum minister Dan Etete, whose company
Malabu received US$1.1 billion, at its Abuja office
on 19 June. Further interviews are planned.
Investigations are also being made into the
role of Jonathan’s petroleum minister, Diezani
Alison-Madueke, in controversies such as crude
oil swaps, diesel subsidies, and strategic alliance
agreements.
The Nigerian Extractive Industries Transparency Initiative (NEITI) is calling for Buhari >>>
6
Economy & finance
10
Nigeria Focus · June 2015
3
to investigate an allegedly missing US$18
billion – comprising US$11.6 billion in Nigerian
Liquefied Natural Gas (NLNG) dividends supposedly paid to the NNPC and at least US$7.5
billion in underassessment or underpayment of
oil and gas company taxes. According to NEITI
these should have been forwarded to federal
government coffers.
and offshore processing agreements (OPAs)
between the NNPC and foreign oil trading companies that some believe to have links to Jonathan and senior Peoples Democratic Party (PDP)
members. The investigation has significantly
gained in profile and attracted the attention
of the Department of State Security (DSS). Oil
companies are denying any wrongdoing.
the NNPC and its subsidiary Duke Oil and
denying March allegations that it owed up to 20
cargoes to the NNPC and its subsidiaries. Aiteo
then announced, however, that it is ending its
swap and OPA arrangements with the NNPC/
Duke Oil and is completing a reconciliation
process to ensure no over- or under-deliveries
under its arrangements.
Both of these claimed payments could help to
plug the gaping holes in the Nigerian treasury.
The NEITI claims that at least US$500 million
was lost to federal coffers from crude oil swaps
between 2009 and 2012. The findings of the
2013 Berne Declaration report (see December
2013 issue), which implicated largely Swissbased oil traders, have added to the intrigue.
The sensitivity of the matter may well have
forced Aiteo’s hand. The company has evidently
felt pressure to issue an explicit denial that it
‘directly or indirectly represented the interests’
of Alison-Madueke or Jonathan, or that it owes
US$150 million as rumoured.
The current investigation focuses on the role
of indigenous or Nigerian-founded companies,
including Aiteo (85%) and its minority partners
Tempo Energy Resources (10%) and Taleveras
(5%), which were major players in 2014 bidding for major Shell, Eni, and Total stakes in
Niger Delta OMLs. Some of the companies and
individuals involved assert that the probes are
politically connected, as a means to denigrate
the Jonathan administration.
Talveras issues denial
Aiteo issues denial
EFCC questions officials
Earlier this month, Aiteo issued a statement
on its role in NNPC crude oil swaps and OPAs,
claiming complete probity in its dealings with
In fact the EFCC and DSS have questioned
several officials from other oil companies such
as Sahara Energy, Ontario Oil & Gas, and
What about Cheney?
An investigation into the US$6 billion Bonny
LNG export plant is being revived. Already
Halliburton, Snamprogetti, Technip, and JGC
Corporation have pleaded guilty to grand corruption and paid some US$2 billion in fines to
the US Department of Justice.
www.menas.co.uk
In the US, political interest in the probe into
former vice-president Dick Cheney’s role in
the affair is reviving. He was chair and chief
executive of Halliburton when the company
paid several substantial bribes to secure the gas
plant construction contract, which is regarded as
unjustifiably inflated.
Although Cheney’s lawyers were able to shut
down a Nigerian prosecution against him in 2010
with a settlement of US$30 million, some officials
in the new Nigerian administration want to see
much greater clarity on the role of Cheney and
other senior Halliburton officials in the scandal,
and especially their relations with senior Nigerian
military and political officials at the time.
Swaps and OPAs
The EFCC is examining swap transactions
Spotlight
1
Taleveras, founded in 2004 by Nigerian
businessman Igho Sanomi, has also this month
denied allegations about its swap arrangements
with the NNPC/Duke Oil and a separate management and operations agreement, also with
Duke Oil. Taleveras officials have also explicitly
dismissed reports that the company has been
requested to refund US$115 million under
these arrangements.
various senior officials at the NNPC, Nigerian
Petroleum Development Company (NPDC),
and Petroleum Products Marketing Company
(PPMC). The passports of key oil traders have
reportedly been confiscated.
What about Alison-Madueke?
Adding to the intrigue is the alleged role of
Petroleum Minister Alison-Madueke, who
appears to have requested in the weeks prior to
Buhari’s inauguration that the EFCC investigate
or clarify the swap and OPA arrangements.
Nigerian billionaire Aliko Dangote is reported
to have raised questions of probity in the oil
industry with a senior Buhari aid. Although
Dangote’s involvement in oil and gas in Nigeria
has been low profile – he has concentrated on
building his global cement company – this looks
set to change with his plans for a refinery and
gas processing plant.
Despite Alison-Madueke’s attempt to direct
the spotlight elsewhere, her role is set to come
under further scrutiny. Already, the House of
Representatives has dismissed an ad hoc House
committee that appeared to exonerate the minister on her alleged role in a separate matter:
the sale or transfer of stakes in OMLs 4, 26, 39,
34, 41, and 42.
>>>
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service from Menas:
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Energy industry
2
Niger Delta
www.menas.co.uk
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Politics & society
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Economy & finance
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4
Meanwhile, the NNPC denies reports that any
of its officials or those of its subsidiaries have
been placed in detention or faced arrest.
Nigeria Focus · June 2015
Taking the bull by the horns
The new Senate president and former Kwara
State governor, Bukola Saraki, is taking a handson approach to the oil and gas sector. Saraki
claimed earlier this month that, in addition to
prioritising the Petroleum Industry Bill (PIB), the
Senate will focus on tackling NNPC corruption.
President Buhari has also pledged to implement
the NEITI’s numerous recommendations. He was
represented by Vice-President Yemi Osinbajo
at a 17 June meeting in Abuja at which international EITI chair and former UK politician Clare
Short was present.
It also appears that other oil and gas operators
are under investigation to recover allegedly lost
funds, including billions of dollars from oil block
deals and subsidy-stealing marketers and downstream operators. Nigeria Focus sources suggest that questions could be directed towards
Wale Tinubu’s Oando and Forte Oil.
www.menas.co.uk
In this whirl of claim and counter-claim, few
significant players in the oil industry appear
to have been left out of the script: whether
they are leaders of the country’s fast-growing
indigenous industry or officials of some of the
world’s biggest multinationals.
Nigeria
Politics & Security >>>
Spotlight
1
Acquisitions news
granted approval prior to President Muhammadu Buhari’s inauguration.
First E&P purchases completed
Midwestern purchase
The trend of international oil company divestment of onshore (or shallow water at most)
Nigerian operations and greater indigenous
participation continues.
Midwestern Oil & Gas now has more time to
make its planned acquisition of Mart Resources,
consortium partner of Erotron in the purchase of
a stake in OML 18. News is emerging of indigenous Sahara Group’s purchase of 40% in Erotron
and therefore a significant stake in OML 18.
Chevron is making progress on the sale of
its 40% stakes in Niger Delta shallow water
OMLs 86 and 88. It confirmed last week its
sale of stakes in OMLs 83 and 85 to indigenous
First Exploration & Petroleum Development
Company (First E&P). The sale price for the two
OMLs is modest by recent standards, at US$70
million or so.
First E&P claims the sale was officially completed as early as February. It was made possible when Chevron obtained licence renewals
for OMLs 83 and 85 around that time. Speculation persists that First E&P may have prevailed
over Petroleos De Geneve SA partly thanks to
political and industry influence and not merely
because Petroleos was allegedly unable to confirm sufficient financing, which it denied.
Otherwise, the prolonged nature of the acquisition has been typical for the industry. The
process commenced in 2013, when First E&P
also moved on Shell, Total, and Eni stakes in
OMLs 71 and 72. That sale has also now been
completed at a price of over US$300 million.
Petroleos’ court action played a significant role
in delaying the OML 83 and OML 85 deal, until
the soon-to-be-departing petroleum resources
minister, Diezani Alison-Madueke, finally
Energy industry
2
Niger Delta
Midwestern, whose first deadline to agree the
Mart purchase was 15 March, has just received
an extension of its second deadline from 15
June to 16 July, with financing to be completed
no later than 10 days after that. There is little
comment from Mart and Midwestern as to the
cause of the delay.
Shuffles at the DPR
The pace of a reshuffle in the Department of
Petroleum Resources (DPR) – whose officials
have often been accused of holding up the sale
of OMLs and the process for allocation of marginal oil fields – may be about to change.
President Buhari has made it clear that he
wants all changes in the state oil bureaucracy
to follow due process: his aides say he is
extremely wary of allowing what could amount
to a flurry of score settling in the DPR and the
Nigerian National Petroleum Corporation
(NNPC) that would leave the state company in
an even worse position.
The Buhari administration’s focus on rooting out
5
Politics & society
corruption will necessitate additional scrutiny
of sales processes, perhaps counterbalancing
a reduction in horse trading and the allegedly
politically motivated blocking of deals by
Petroleum Resources Minister Diezani AlisonMadueke and others.
Fuel crisis raises
questions
Following prolonged negotiations with Nigeria’s
fuel marketers prior to President Muhammadu
Buhari’s inauguration, his government has
around ₦200 billion (or US$1 billion) in legacy
debts to pay.
The effect of the fuel crisis on the economy,
drawing both domestic and international attention, was marked. It leaves no doubt about the
leverage of marketers in the current environment, in the absence of more severe sanctions
or increased refining capacity. Not only individual consumers but also major organisations
such as banks, airlines, and telecommunications
companies were affected, making public
announcements to that effect.
The suggestion earlier this month by marketers,
including the Independent Petroleum Marketers
Association of Nigeria (IPMAN) – that the current fuel subsidy system be replaced by a crude
oil swap system – does not inspire confidence.
The inefficiency of the four state-owned
refineries – two at Port Harcourt, one in Warri,
and another in Kaduna – has not helped
matters. Nigerian National Petroleum >>>
6
Economy & finance
10
Nigeria Focus · June 2015
5
Corporation (NNPC) officials claimed last
week that following completion of turnaround
maintenance, the Port Harcourt refinery will
resume operations in July. Earlier this year it
emerged that the NNPC had spent around ₦150
billion (US$753.8 million) on such maintenance.
With recent statistics revealing that Nigeria
has been spending ₦2 billion (US$10 million)
a day on subsidies, Buhari faces an important
downstream sector decision: the abolition of
fuel subsidies.
Several groups want their complete removal,
while unions such as the militant Petroleum and
Natural Gas Senior Staff Association of Nigeria
(Pengassan) warn against such a move, fearing
that it will make fuel too expensive for the
masses.
Others claim that fuel hoarding by marketers
and distributors has been disrupting the market.
The Senate requested – on the day preceding
Buhari’s 28 May inauguration – that the Department of Petroleum Resources (DPR) target such
hoarders and revoke licences of wrongdoers.
www.menas.co.uk
It is unclear whether or at what point Buhari
might follow through on his preference for
eliminating subsidies altogether. The 2012 protests during Goodluck Jonathan’s administration
have surely not been forgotten.
Political and
Social Risk Consulting
>>>
Spotlight
1
NIGER DELTA
Oil spill
compensation disputes
The latest round of disputes between local
communities and international oil companies
has been decided by a 5 June Supreme Court
judgement. The court dismissed the objection of
the Shell Petroleum Development Company
(SPDC) to a ₦30 million (US$151,000) award
first handed down against it in 1997 for Delta
State oil spill pollution.
Now, Ijaw communities in Bayelsa State have
resumed protests against an immeasurably
more significant appeals court decision in favour
of the SPDC. The 2007 decision quashed Ijaw
hopes that the oil company would distribute
US$1.5 billion for environmental damage, as the
House of Representatives had resolved in May
2002 and a Port Harcourt federal high court had
subsequently awarded in February 2006.
On 4 June, large numbers of former militants
held a protest over non-payment along the
east–west road close to its terminus at Warri,
Delta State. In mid-June, former Niger Delta
militant leader Mujahid Asari-Dokubo called
on Buhari to pay out on a pipeline protection
contract allegedly awarded in March rather than
‘violate the law of the land.’ Asari-Dokubo claims
the contract covers Bayelsa, Delta, Rivers, Lagos,
Ogun, and Ondo states. And former militant chief
Pastor Reuben Wilson directed similar accusations of non-payment at Buhari last week.
By contrast, the Civil Society Network against
Corruption has urged Buhari to cancel a contract granted by Goodluck Jonathan, allegedly
for over US$100 million, to Global West Vessel
back in 2012. Global West, owned by former
militant Government Ekpemupolo (aka Tompolo), was at the centre of a 2014 scandal over
its acquisition of several decommissioned Norwegian warships (see December 2014 issue).
Paying
protection contracts
Buhari has so far issued seemingly contradictory statements on amnesty and pipeline
protection. While his representative at the OPEC
Vienna meeting, Jamila Shu’ara of the Department of Petroleum Resources, told delegates of
the president’s commitment to continuing the
Niger Delta amnesty programme, Buhari himself
emphasised in his inaugural speech that the
amnesty was scheduled to end in December
– though he indicated that his administration
plans to invest heavily in current programmes.
The change in federal government has
prompted reconsideration of past and on-going
Niger Delta matters, including that of pipeline
protection contracts.
Warnings from militants immediately followed.
Others want Buhari to review pipeline contracts
with a view to broadening participation and/
or cutting out the participation of what the
Earlier this month Ijaw community leaders said
that they would file suit at the Supreme Court
to reverse the allegedly corrupt appeals court
decision. The Supreme Court ruled against a
similar appeal back in 2011.
Energy industry
2
Niger Delta
5
Politics & society
National Coalition of Niger Delta Ex-Agitators
head calls ‘bad eggs.’
Given the role of vandalism not only in shutting
down significant oil exports but also in affecting
gas supply to Nigerian power stations, Buhari
may have to compromise to avoid a vandalism
spike in a region generally hostile to the All
Progressives Congress (APC).
Oil theft in brief
Foreigners face charges
The Economic and Financial Crimes Commission
(EFCC) last week arraigned four Bangladeshi
citizens and five Filipinos at a Lagos federal
high court and at another Lagos high court is
prosecuting several foreign nationals, including
defendants from Japan, the UK, Russia, and
Ukraine.
The former group faces charges over alleged
illegal dealing of over 3,400 metric tonnes
of petroleum products aboard the MT Asteris
vessel on 27 March. The latter group faces four
charges related to improper storage and dealing
in petroleum products, with the trial set to commence this week.
Praise for the Navy
Chief of Defence Staff Air Chief Marshal Alex
Badeh has lauded the Nigerian Navy’s achievements against oil theft under Chief of Naval
Staff Vice Admiral Usman Jibrin. The Navy’s
parade of recently captured oil thieves contrasts
with another illustration of the dangers of the
fight against thieves and pirates. >>>
6
Economy & finance
10
Nigeria Focus · June 2015
6
Bad homebrew
POLITICS & SOCIETY
In Rivers State, problems have emerged
with the production of local gin, known as
ogogoro. Reports emerged in the middle of
June that 70 or more residents have died
from ingesting contaminated alcohol, leading to a state prohibition on the production
and sale of this traditional drink. The drink
is also blamed for various degrees of visual
impairment in another 10 cases.
Senate and
House leadership
Nyesom Wike
Three police officers and one civilian were
reported killed at the hands of illegal oil bunkerers in Kogi State’s Okene local government area
at the end of May, and suspected pirate gunmen
fatally wounded a naval officer at the Brass/
Akassa waterway on 13 June.
Rivers State
governors clash
Rivers State continues to be at the centre
of political party controversies across the
spectrum. Local All Progressives Congress (APC)
leaders still characterise the recent elections as
fraudulent, as former governor Rotimi Amaechi
repeats allegations of vote rigging.
www.menas.co.uk
Just weeks into President Muhammadu Buhari’s
tenure, the first signs of strain in the All Progressives Congress (APC) coalition are starting to
show. The embarrassment inflicted by elections
for the leadership of the Senate and House of
Representatives is regarded by the opposition
Peoples Democratic Party (PDP) as an important
shot across the bow of the new administration.
Departing Independent National Electoral
Commission (INEC) head Attahiru Jega has flatly
denied these and other allegations of electoral
fraud, most recently during a trip to Washington,
DC. Moreover, recently inaugurated governor
Nyesom Wike of the Peoples Democratic Party
Spotlight
1
(PDP) has created a judicial commission to
investigate a number of asset sales that took
place under Amaechi’s watch.
Assets and financial deals facing scrutiny by
commission head Justice George Omerije’s scrutiny include four gas turbines, which in theory
support generation capacity exceeding 700
MW, and a sizeable payment for the construction of a hospital named after former Supreme
Court justice Adolphus Karibi-Whyte. Adding
insult to injury, just days after his inauguration,
Wike accused Amaechi of stealing from the
official Rivers State governor’s residence.
Amaechi, in return, accuses Wike of a set-up,
in what is fast becoming a personal vendetta
between the two men that could further divert
limited state resources.
Sahara Focus >>>
Energy industry
For the opposition, it shows the fractiousness
of the APC coalition and the apparent failure of
Buhari to impose his writ on the party. Although
Buhari announced from the start that he would
not get involved in leadership elections in the
National Assembly, his political fixers were
at work.
On 9 June, the day Buhari returned from the G7
meeting in Berlin, the APC choices for Senate
and House leadership were roundly defeated by
the combined forces of PDP National Assembly
members and dissenting APC members.
To make matters worse, APC Senate choices
Ahmed Lawan and Ali Ndume – selected at
an Abuja International Conference Centre (ICC)
straw poll after prolonged regional zoning
negotiations – were defeated by PDP-supported
candidates Bukola Saraki and Ike Ekweremadu
while the majority of APC senators were absent.
They had been side-tracked by an APC meeting
at which Buhari was to be present, but the
2
Niger Delta
5
Politics & society
president failed to show. Calls for the resignation of APC national chair John Odigie Oyegun,
who allegedly called the ill-timed meeting, have
inevitably followed.
The results in Table 1 demonstrate that the
diminished PDP, which critics derided as a
south–south/Niger Delta rump, still has teeth.
That may be good for the country’s multiparty
system, given that many had predicted the
return of a one-party system.
Saraki, who is affiliated with the APC but supported by the PDP, was able to win over half the
Senate’s 109 seats. That would mathematically
have ensured his victory even if the absent APC
senators were present, not accounting for the
effect of their influence on other APC senators
intending to vote for Saraki.
Even with a Senate minority, when combined
with dissenting APC senators the PDP can
inflict defeat. The ruling party is now trying to
impose some discipline and its idea is to install
the defeated Lawan as Senate majority leader
to keep dissenters in line.
There are also suggestions of a bipartisan Senate leadership: the PDP’s Ekweremadu will act
as de facto president during Saraki’s absence.
When acting together, Saraki and Ekweremadu
are unlikely to support the APC-leadership
agenda at every turn. The whole point of the
attempt to ensure the APC’s preferred ticket of
Lawan and Ndume was to guarantee the party
automatic – or near automatic – passage of its
bills through the Senate.
Reports of an APC plot to oust or even >>>
6
Economy & finance
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Nigeria Focus · June 2015
7
Table 1: Senate and House votes
WinnerRunner-up
Candidate
Party and region
Candidate
Votes
Party and region
Senate
President
Bukola Saraki APC, Kwara State
Ahmed Lawan APC, Yobe State
North Central North East 57, including 49 PDP,
with most of 59 APC
senators absent
Deputy President
Ike Ekweremadu 54 to 20,
including PDP bloc
PDP, Enugu State
Ali Ndume South East
APC, Borno State
North East
House of Representatives
Speaker Yakubu Dogara APC, Bauchi State
Femi Gbajabiamila APC, Lagos State
North East South West 182 to 174, enabled
collaboration between
APC dissent and 125
PDP members
Deputy SpeakerYusuf Lasun 203 to 153
APC, Osun State
Mohammed Mogunu APC, Borno State
South West
North East
impeach Ekweremadu have surfaced, prompting
an angry PDP response. The APC in any event
lacks a sufficient Senate majority to do so.
Neither can it remove Central Bank of Nigeria
governor Godwin Emefiele despite a tide of
criticism against him from the ruling party.
www.menas.co.uk
continuing influence of former military leaders.
In the House of Representatives, elected
Speaker Yakubu Dogara opposes an APC
attempt to install the preferred Femi Gbajabiamila as House majority leader, thus providing
a counterbalance to Dogara’s influence. His
deputy, Yusuf Lasun, in turn insists that he will
not resign as House deputy speaker in the face
of APC pressure.
Although Lasun has dismissed reports that he is
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under fire, others claim that former Lagos State
governor and APC grandee Bola Ahmed Tinubu
wants him to stand down.
Power broker politics
Tinubu’s position within the APC remains important: he certainly has enough power to stop
certain decisions being made, although often he
lacks the power to insist that his own favoured
course of action is carried out. This suggests he
has lost some influence within the party but is
fighting a rear-guard action and using his close
relationship with Vice-President Yemi Osinbajo
to some effect.
That doesn’t always go down well with the
other party barons. For example, Saraki failed to
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attend the APC summit meeting in Abuja on 9
June because he was annoyed at receiving the
invitation from Osinbajo rather than Buhari.
Although Buhari publicly claimed that the Senate and House contests were validly conducted
under the constitution, he has yet to meet the
new Senate president, suggesting continuing
personal rancour between the two men.
APC national publicity secretary Alhaji Lai
Mohammed publicly lamented Saraki’s victory
although his position was in turn lambasted
by local APC leadership in Saraki’s Kwara State.
Now Saraki has courted former president
Olusegun Obasanjo, whose tentacles reach
into both the main parties and illustrate the
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Politics & society
It also supports the view that Nigeria is run
mainly by power brokers rather than by political
parties. It is also notable that Saraki is thought
to be a favourite of Atiku Abubakar, who
was one of Buhari’s rivals in the 2014 APC
presidential candidacy contest.
Even while incorporating the former Action
Congress of Nigeria (ACN) and the All Nigeria
Peoples Party (ANPP) among others, the APC
includes several high-profile defectors from
the PDP such as former Rivers State governor
Rotimi Amaechi. Party defections can seem to
be a way of life for Nigerian politicians.
New leaders speak up
Despite APC displeasure at their election, both
Saraki and Dogara have been vocal since their
election. Saraki, who was promptly congratulated
by the UK government, has both downplayed a
growing controversy over the scale of financial
allowances to National Assembly members and
suggested that the much-delayed Petroleum
Industry Bill (PIB) will be his first priority.
Dogara has urged Nigerians to assist the
national economic recovery, while stating that
National Assembly allowances are the responsibility of the Revenue Mobilisation and Fiscal
Commission, which also deals with weighty
matters such as state allocations from federal
coffers.
Recent statistics indicate that the official 2015
budget of the National Assembly, at ₦130
billion (US$653 million), is greater than the
budgets of the majority of the 36 states. >>>
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Buhari delays
nominations
The shape of the
new administration
The main institutional hold-up in June was the
failure of President Muhammadu Buhari to
make his ministerial selections. Once he has
announced them, they will still have to be confirmed by the Senate, an institution over which
the All Progressives Congress (APC) will now
enjoy less influence than it had expected.
Buhari faces practical constraints in ensuring he
satisfies his party’s factions and power brokers,
so that he can in turn count on their support or
acquiescence as he tries to push through muchneeded institutional and policy reforms.
www.menas.co.uk
The delay in appointments has prompted
much debate, and in the absence of ministerial
announcements speculation and ‘alternative
lists’ have been circulating. Some talk of Buhari’s
bureaucratic reticence; others put it down to
his distaste for partisan politics and frustration
with the intensive lobbying for jobs in Abuja.
Buhari himself claims that un-cooperative
members of the Peoples Democratic Party
(PDP) transition team deliberately delayed the
transmission of handover notes. He also says
that at 72 he has ‘less capacity’ than he did as a
40-year-old military head of state in the 1980s,
while spokesperson Femi Adesina talks up the
new older-but-wiser Buhari.
At the beginning of the month, Buhari asked
the Senate to allow him to appoint 15 unnamed
advisers, which the Senate promptly approved.
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Current speculation is still that Buhari will
announce a slimmed-down list of appointments
before the end of June. APC transition committee chair Ahmed Joda, who in served this role in
1979, has recommended that Buhari select 19
ministers and a further 17 ministers of state for
a combined 36 ministers – equal to the number
of states.
That means each of the states will be represented in the Federal Executive Council as
specified in its constitution. This would represent a reduction from current levels.
Furthermore, while 19 federal ministries are
expected to remain, Buhari is apparently
considering a far-reaching shake-up in the management and structure of the civil service. His
concern is that bureaucratic dysfunctionality is
likely to be a major obstacle to policy reform.
Possible appointments
Insiders claim that Buhari is taking the opinions
of power brokers Atiku Abubakar, Bola Ahmed
Tinubu, and even former president Olusegun
Obasanjo seriously. Buhari has met with Atiku
and APC national chair John Oyegun to discuss
the management of the ruling party in the
aftermath of the Senate and House defeats.
Probable ministerial appointees are as follows:
Rotimi Amaechi; former Lagos State governor
Babatunde Fashola; former Ekiti State
governor Kayode Fayemi; and even Tanimu
Kurfi, the PDP-affiliated economic adviser to
former president Umaru Yar’Adua.
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Insiders say that Buhari is likely to appoint
himself as petroleum minister. His justification
is that this will take the job out of the political
realm, permitting him to push through the
institutional reforms in league with a new management structure at the Nigerian National
Petroleum Corporation (NNPC).
The problem with that interpretation is that
Buhari is said by all to be a ‘big picture’ president, more concerned to set the parameters
and ethical character of the government than to
be consumed by detail. Yet the oil minister will
have to deal with masses of detail, given the
legacy of disputed deals and claims of missing
revenues left by departing petroleum minister
Diezani Alison-Madueke.
There was no certainly sign that Buhari warmed
to Alison-Madueke when they met on a Londonbound British Airways flight on 21 May. Indeed,
one Nigeria Focus source on the aircraft indicated that the president studiously avoided the
controversial minister.
A possible scenario is that Buhari will appoint
a very technically savvy deputy oil minister
to deal with the mountain of detail that goes
with the job while he himself retains oversight
on only the biggest policy and contractual
decisions. Local and international lobbying to
propose the right deputy minister is already
well underway.
East Africa
Politics & Security >>>
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Politics & society
Policy priorities
On the policy front, corruption, the economy and
Boko Haram remain key priorities for President
Muhammadu Buhari and the All Progressives
Congress (APC).
Settling state arrears
His broader economic plans are already being
overshadowed by increasing pressure from
influential governors, both APC and Peoples
Democratic Party (PDP), who have held separate
and combined meetings to discuss state-level
debts and diminished revenues.
Buhari met with state governors at the Abuja
presidential villa on 23 June, where he faced
calls to settle state salaries arrears despite,
for example, the Excess Crude Account (ECA)
holding a mere US$2 billion or so.
With some states facing arrears of over six
months, settlement of a substantial amount of
these claims would exceed recent payments
made to disgruntled fuel marketers and payments by the Central Bank of Nigeria (CBN)
to satisfy electricity company debts to gas
suppliers.
Introducing transparency
On corruption, Buhari’s progress and his support
for what could be numerous investigations could
be harmed by charges of hypocrisy. His preinauguration suggestion that all ministers publicly
declare their assets contrast with growing controversy over why his and Vice-President Yemi Osinbajo’s declarations are being kept confidential by
the Code of Conduct Bureau (CCB). >>>
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In response to a request on 1 June from civil
society group Stop Impunity Nigeria, the CCB
indicated that federal privacy laws prevent it
from releasing this information. That will not prevent further criticism of Buhari and Osinbajo if
they do not permit their assets to be publicised.
Addressing war crimes
The topic of war crimes may also be on Buhari’s
agenda, given allegations contained in Amnesty
International’s Stars on Their Shoulders –
Blood on Their Hands. The June report alleges
that senior military officers either directed or
were indirectly responsible for approximately
1,200 extrajudicial executions and the deaths
of 7,000 or more in military custody over the
past decade.
www.menas.co.uk
Specifically named individuals that Amnesty
believes should face direct investigation for war
crimes of ‘murder, enforced disappearance, and
torture’ include commanders of the army’s 7th
Division, which has played a major role in recent
advances against Boko Haram in Borno State.
similarly unlikely that his administration will
publicly acknowledge wrongdoing by senior
military officers.
Buhari’s closeness to the military is illustrated
by the speed with which his request that it
move its command and control centre to Borno
State capital Maiduguri was accepted. As well,
the Department of State Services strike force
that protects the presidency is to be replaced by
a team taken directly from the military.
The military has also responded to Amnesty’s
allegations via its administration chief, Adamu
Abubakar. He dismissed the report as a ‘rehash’
of 2011 allegations.
Tackling Boko Haram
Other named individuals Amnesty believes
should be investigated for ‘potential command
responsibility’ include at least two of those
meeting with Buhari and other security chiefs
in Abuja’s Defence House the week after the
presidential inauguration.
In the effort to defeat Boko Haram, President
Muhammadu Buhari has increasingly courted
and accepted international assistance and
shows of support. At the same time, when
meeting with his counterparts from Benin, Cameroon, Chad, and Niger on 11 June he successfully demanded that the new multinational joint
task force (MJTF) be permanently headed by a
Nigerian, even if his deputy alternates between
regional allies.
Lieutenant-General Kenneth Minimah and
Air Chief Marshal Alex Badeh are both key
figures in the fight against Boko Haram and
would probably be supported even if Amnesty’s
findings are taken seriously by the ICC Office
of the Prosecutor. Although Buhari has since
indicated that he will look into the report, it is
That acquiescence has not prevented disagreements between Chad and Nigeria. In mid-June,
these focused over whether Chad had in fact
bombed Boko Haram bases in Nigerian territory
in response to unprecedented suicide bombings
in N’Djamena. This jockeying for position does
not obscure the broader strategic significance
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Niger Delta
Buhari demanded that the new multinational joint task force (MJTF) be permanently headed by a Nigerian
of the export of suicide bombing by Boko Haram
to neighbouring countries.
Pledges of support from G7 leaders during the
recent Berlin summit, a US donation of US$5
million to the MJTF, a US pledge of military
advisers, and additional UK pledges of training
and intelligence assistance are likely to be
welcomed.
This comes a little over a year after Goodluck
Jonathan acknowledged around the time of
the World Economic Forum in Abuja that US
assistance might be needed – in what many
Nigerians deemed an embarrassing revelation.
According to the just-released US Department
of State terrorism report and rankings, Boko
Haram outdid the Islamic State (IS) group in
fatalities caused during 2014. This comes as
IS influence over other terrorist and insurgent
operations in northern Africa, eastern Africa,
and Nigeria is seen to be increasing.
Further evidence of cooperation between
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Politics & society
Boko Haram and IS has also become apparent,
although for now it appears focused on the
groups’ media strategy.
No let-up in violence
Buhari’s statement, issued last week by special
publicity assistant Garba Shehu, that Muslims
worldwide should maintain peace during
Ramadan is unlikely to affect Boko Haram’s
operations. During last year’s Ramadan several
Nigerian churches were attacked by insurgents,
among other targets.
Attacks over the past month by Boko Haram or
actors believed to be Boko Haram have been
legion. They include bombings and firearms
attacks, generally leading to fatalities, in Monguno, Alagarno, Gubio, Musari, and Maiduguri in
Borno State; Potiskum in Yobe State; and Yola in
Adamawa State.
In return, Nigerian troops claim to have blocked
attacks, killed insurgents at Maiduguri and Babbangida, Yobe State, and captured a suspected
bomber thought to be responsible for a >>>
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Central Bank
policy news
Investigating
cowardice and mutiny
It remains to be seen what impact Buhari’s
leadership will have on on-going internal military
investigations into cowardice and mutiny.
Harmonising public
and private CRRs
Seriake Dickson
Brigade commander Victor Ebhaleme was
acquitted of alleged weapons supply negligence
one week prior to Buhari’s inauguration. Just
days later, by contrast, 40 or more soldiers from
Ogun State’s Alamala barracks and around 200
soldiers from Plateau State’s Rukuba barracks
were dismissed for alleged ‘failure’ and ‘disobedience’ during attempts to root out Boko Haram
forces in Sambisa forest.
into ministers of the previous administration.
Given the relative success of Chadian forces,
Buhari may soon determine that training, weaponry, and coordination are as important, or more
important, than troops’ occasional unwillingness
to fight.
One group, calling itself Concerned Bayelsa
Elders, has asked Jonathan, who originates from
Bayelsa State, to encourage his wife and her
supporters to refrain from intervening in state
politics. Regardless of hyperbole, the contrast
between her public profile and that of Buhari’s
wife is heightened by the latter’s insistence
that she does not desire the title of First Lady.
PDP in opposition
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ECONOMY & FINANCE
major bombing in Gombe State in 2014. Chadian
forces claim to have killed hundreds of insurgents at towns close to the Nigeria–Cameroon
border.
The first few weeks of Muhammadu Buhari’s
administration have seen the Peoples Democratic Party (PDP) attempt to adjust to a new
political landscape – with little evident success.
Persistent investigations by the Economic and
Financial Crimes Commission (EFCC) into former
state governors, along with oil industry investigations, may presage additional investigations
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Quite apart from the party’s decline on the
national scene, tensions persist in PDP-dominated states, including Bayelsa, where tension
between Governor Seriake Dickson, former
president Goodluck Jonathan, and former first
lady Patience Jonathan are reflected in local
party divisions.
Jonathan has at least seen the election of
one of his appointees, Agriculture and Rural
Development Minister Akinwumi Adesina, as
president of the African Development Bank
(AfDB). Adesina diplomatically meted out
gratitude to Jonathan, Finance Minister Ngozi
Okonjo-Iweala, and Buhari in a 31 May statement about his appointment, thanking the latter
for lobbying on his behalf.
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Niger Delta
Central Bank of Nigeria (CBN) governor Godwin
Emefiele and bank officials surprised many
by their decision to harmonise the public- and
private-sector cash reserve ratios (CRRs) at
31%. Previously, the ratios were set at 75% and
20%, respectively.
At the 18–19 May Monetary Policy Committee
(MPC) meeting, they also agreed to maintain the
policy interest rate at 13% within the +/–200
basis point corridor.
Reaction to the harmonisation has been mixed,
some suggesting that it could harm the sector
and reduce the relative attractiveness to banks
of private-sector deposits. Others claim that
harmonisation has merely removed a ‘moral
hazard’ favouring private-sector deposits and
increased domestic liquidity.
Bismarck Rewane, managing director of the
Lagos-based Financial Derivatives Company,
argues the measure will reduce interest rates
but also weaken the naira.
Most now expect CBN monetary policy to
remain relatively tight in the short term, with
interest rate reductions or reductions in the
harmonised CRR unlikely for now. Some also
expect the CBN to introduce a more flexible
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Politics & society
– albeit not fully floating – naira regime, allowing
the currency’s value to fluctuate more according
to supply and demand.
Inflation figures
May inflation figures released by the National
Bureau of Statistics (NBS) have hit 9% – the
top end of the CBN 6–9% inflation corridor
target. This reduces the likelihood of loosened
monetary policy. Inflation may yet increase,
although the NBS believes that reversible factors such as the recent fuel crisis and the effect
of delayed rains on agricultural production were
responsible for the uptick last month.
Confidence in Nigeria’s post-election economic
prospects – set forth in the CBN communiqué
accompanying its MPC policy decision – appears
to be backed by the belief that the naira is
enjoying a period of relative stability in both
the official market and the parallel market, and
that capital inflows from reassured investors
will ensue. While many will wait and see, being
potentially reassured once President Muhammadu Buhari confirms his economic team and
policies, other developments could derail CBN
confidence.
Foreign exchange rules
At the time of writing, the CBN was in discussions with Nigerian banks about the potential
relaxation of foreign exchange rules, which
include various restrictions on bank foreign
exchange trading and net forex holdings that
were introduced by the CBN in late 2014 and
this year. The CBN may yet, for example, block
Nigerian importers (including rice importers)
from accessing foreign exchange in order to
slow the depletion of slightly over US$29 >>>
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billion in Nigerian foreign exchange reserves
and to bolster domestic rice production.
At stake is the inclusion of Nigerian bonds in
the influential JPMorgan GMI-EM emerging
market bonds index. Inclusion of Nigerian bonds
bolsters foreign portfolio investment in Nigeria,
as those following or even tracking the benchmark index purchase bonds accordingly.
Removal of Nigerian bonds, as JPMorgan has
again warned, may occur if liquidity in Nigeria’s
foreign exchange market does not improve and
could lead to investment outflows – and even
renewed downward pressure on the naira.
JPMorgan appears to be delaying its decision for
approximately six months, partly to allow the
market implications of the change in Nigerian
government to become apparent. The CBN,
according to Emefiele, will do its utmost to
avoid this adverse eventuality.
Currency fraud
Proactive CBN action is also reflected in a
growing scandal over currency fraud by CBN
officials and those at, or dealing with, various
private-sector banks – including Sterling Bank,
Ecobank, and First Bank of Nigeria (FBN). The
alleged miscreants allegedly kept at least ₦8
billion (US$40.2 million) that was to be removed
from circulation under the CBN’s ‘cash destruction’ protocol.
www.menas.co.uk
given fears that the All Progressives Congress
(APC) could use any corruption engulfing
Emefiele and his team to encourage a CBN
leadership change. Supplementing these anticorruption efforts is a 12 June directive that
Nigerian banks create specialised fraud desks
from 1 July.
According to a 1 June CBN press release,
executives based at Ibadan, Oyo State, were
suspended back in October 2014. They and a
number of private-sector employees are facing
prosecution in the Ibadan Federal High Court by
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1
Lamido Sanusi
Heading the Africa
infrastructure fund
Former CBN governor and current emir of
Kano Lamido Sanusi has been hired by
the influential Blackstone private-equity
group to head its Africa infrastructure fund.
This move is likely to be of great benefit
to Blackstone given Sanusi’s political credibility and technical capability. It will also
allow Blackstone to tap into his extensive
regional network of modernising officials
and business people.
the Economic and Financial Crimes Commission
(EFCC). The cases are presided over by Justice
Ayo Emmanuel.
While the sums involved are so far relatively
minor in the grand scheme, analysts speculate
that more widespread currency fraud could have
been undermining monetary policy.
CBN leadership may be more concerned by
being seen to root out corruption, especially
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Banking sector
scrutiny grows
Debate about the health of Nigeria’s banks is
deepening as analysts take a fresh look at the
sector in the wake of political change. The persistence of low international oil prices – maintained by the refusal of the Saudi-dominated
OPEC at its 167th meeting, in Vienna on 5
June, to lower its 30 million b/d oil production
target amid projections of increased US shale
oil production – continues to feed through into
both federal and state accounts in Nigeria and
the finances of the oil and gas sector.
A mid-June statement by Nigeria Deposit Insurance Corporation (NDIC) officials that Nigerian
banks are in rude health has done little to alter
this perception. Moreover, a host of bank financial releases in recent months, for both 2015Q1
and for the full 2014 financial year, has been
mined for evidence of questionable exposures.
These include the almost ₦450 billion (US$2.3
billion) in 2013 and 2014 loans extended by
indigenous Skye Bank to oil, gas, and power
companies, some of the beneficiaries being
linked to the bank’s non-executive directors.
These beneficiaries include Pan Ocean and
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Politics & society
Newcross Exploration and Production, along
with two non-upstream operators.
The efforts of Skye Bank chair Olatunde
Ayeni to reassure investors have done little to
assuage the concerns of more forensic analysts.
These include the emerging markets bank
Renaissance Capital (RenCap), which has highlighted the aggregate US$500 million exposure
of Skye Bank and FBN to indigenous Atlantic
Energy as a major banking sector concern.
Atlantic Energy, according to RenCap, is overly
dependent on an unreliable agreement with
the Nigerian National Petroleum Corporation
(NNPC) subsidiary Nigerian Petroleum Development Company (NPDC), which in turn could
be investigated by Buhari’s administration. Last
year, the NNPC denied allegations that it had
improperly transferred NNPC equity to Atlantic,
among others.
Unlike Skye Bank, FBN is among the banks
deemed ‘systematically important’ by CBN officials, and according to its financial statements it
extended an additional ₦1.46 trillion (US$7.3 billion) in oil and gas loans during 2013 and 2014.
On an unrelated matter but potentially controversial matter, FCN has also been requested by
a Lagos court to disclose information on alleged
loans allowing over ₦250 million (US$1.3 million) of improper vehicle purchases by former
Nigeria aviation minister Stella Oduah, who
was dismissed in February 2014 following
revelations that she had improperly claimed a
master of business administration qualification
from an institution awarding no such degree.
>>>
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RenCap believes that official non-performing
loan (NPL) statistics, the percentage in the
modest single digits, does not reflect the
reality that banks are restructuring and will
restructure oil-sector loans to avoid official NPL
classification.
Both increased upstream and midstream NPLs
appear likely even though many banks are
partially protected by oil price hedges, with
an increase in downstream NPLs possible if
Buhari’s administration dismisses the claims of
disgruntled fuel marketers that subsidies have
gone unpaid.
Adding to these potential woes could be policy
changes seeking to increase federal revenues.
Former president Goodluck Jonathan’s finance
minister, Ngozi Okonjo-Iweala, has recommended, for example, that Buhari double the
VAT rate, but RenCap believes low-hanging fruit
like bank tax rates and the reversal of various
tax exemptions granted by a December 2011
executive order could cut into banking-sector
profitability.
www.menas.co.uk
According to Asset Management Corporation
of Nigeria (AMCON) chief executive Mustafa
Chike-Obi just prior to Buhari’s inauguration, if
Nigerian banks start sinking in stormy waters,
they are unlikely to benefit from another bailout.
Chike-Obi claims not only that AMCON has
recovered or regained over half the impaired
debts it acquired during its prior bailout but that
Nigerian banks are as a result better able to
withstand a subsequent storm.
Skye Bank is in any event still digesting the
restructured successor of one of the banks
bailed out by AMCON, Mainstreet Bank,
which was sold to Skye despite 2014 claims
by New York fund Intangis that it and other
former shareholders were still owed significant
sums. The irony of the acquirer of an AMCONrestructured bank being in turn restructured
would not escape Nigerian policy makers or
Skye’s executives.
Falling oil revenue
Recent claims by both President Muhammadu
Buhari and Vice-President Yemi Osinbajo that
Goodluck Jonathan, Ngozi Okonjo-Iweala, and
others have left the economy in dire straits will
find adherents among the All Progressives Congress (APC) and both APC and Peoples Democratic Party (PDP)–affiliated state governors.
Recent data from the National Bureau of Statistics (NBS) indicate that the federal government’s
2015Q1 revenue take from crude oil and other
petroleum product exports, such as LNG, LPG,
and liquefied butane, was slightly over ₦2.8
trillion (US$14 billion). That is approximately
30% less than during the equivalent quarter in
2014. Without a compensating increase in taxes,
royalties, and other revenue sources, this places
the budget under further pressure.
Other statistics show weakness on key non-oil
exports and, reflecting the health of Nigeria’s
‘consumer’ story, international corporates such
as PZ Cussons and Unilever have disclosed differing recent experiences.
While the former remains optimistic and has
claimed strong 2014 full-year profits, the latter
experienced a significant fall in net income in
part exacerbated by the naira’s decline and its
local cost of imports.
The full effect of devaluations – according to
discussions with Citigroup economists, among
others – often takes several months to feed
through, at times causing short-term woes even
if beneficial in the longer term. Whether this will
be the case for multinationals, and particularly
smaller Nigerian businesses dependent on
import inputs, is another matter.
Okonjo-Iweala’s diminished legacy and the disruptive impact of the fuel crisis at least presents
Buhari, Osinbajo, and the still-to-be-confirmed
APC economic team with an opportunity to
improve on a downside story rather than squander budget riches.
Already, Buhari is championing economic
diversification. His representative at the
Nigerian Association of Chambers of Commerce,
Industries, Mines, and Agriculture (NACCIMA)
annual meeting in Calabar, Cross Rivers State,
held during Buhari’s first week in office, stated
that augmenting private-sector investment in
the agriculture value chain is a key priority.
In the meantime, his team will scrutinise the
2015 federal budget that was approved by
Jonathan in late May following earlier House
and Senate approval. Concerns over his government’s ability to meet Nigeria’s spending needs
is partly reflected in the increased interest rates
that investors are demanding on Nigerian bonds,
although inflation fears and the JPMorgan index
uncertainty appear to be the key drivers of the
increasing cost of government debt.
Fortunately for Nigeria and Buhari, debt is still a
modest portion of GDP – albeit more significant
when servicing costs are compared with
government revenues.
While having minimal mathematical impact on
Nigeria’s debt ratio, estimates of 2015 GDP
growth continue to fall. The World Bank, for
example, believes lower Nigerian 2015 growth
will have a measurable impact on 2015 growth
for sub-Saharan Africa overall. Like RenCap,
the World Bank Global Economic Prospects
June report warns of the effect of currency
depreciation/devaluation and low oil prices on
Nigeria’s ‘heavily exposed’ banking sector.
It also notes, as do other analysts, the
disproportionate impact of 2015 budget cuts on
capital expenditures rather than more modestly
reduced recurrent expenditures such as salaries,
which will have longer-term implications for the
Nigerian growth and borrowing strategy.
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