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Nigeria: All the Warning Lights are Flashing Red

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Politics and governance took centre stage this week, with the central government under fire for a slow humanitarian response to floods in the country’s central states, lawmakers on the brink of dismantling the country’s stellar pensions management structures, the central bank in need of putting the brakes on some of its hairraising policies and Amnesty International serving a reminder, where none was needed really, of the catastrophic human toll of Boko Haram’s eight-year insurgency. Finally, on the reminder trail, Nigeria’s states have always had a thing for debt and Nnamdi Kanu and IPOB are Nigerian after all.

Lawmakers want to legislate away common sense on pensions

The Pension Fund Operators Association of Nigeria (PenOp), the umbrella body for all pension fund administrators in Nigeria has kicked against a proposed 75 percent lump sum withdrawal from the retirement savings accounts of retirees. PenOp says the proposal if operational will be detrimental to retirees welfare as what may be left of their savings in the RSAs will not guarantee them a quality standard of living. The National Assembly considered in May a private member bill sponsored by Senator Aliyu Wamako, APC Sokoto North, seeking a Law “For An Act To Further Amend The PRA 2104 To Provide For Definite Percentage A Retiree Can Withdraw From His RSA And For Other Matters Related Thereto”. But PenOp in its latest paper titled “upholding and promoting the cause of the contributory pension system in Nigeria” said the new bill is faulty on many levels. The current replacement ratio under the Contributory Pension Scheme is 50 per cent of last pay by virtue of the Pension Reform Act 2014 and Regulations issued by the National Pensions Commission. The report said in part, “It is doubtful if the 25 per cent balance in a retiree’s RSA, after deduction of 75 percent lump sum, would, if spread through the retiree’s expected life span, be adequate to reasonably cater for his livelihood during old age.”

This bill championed by Wamako is one of at least seven currently sitting on the desks of federal lawmakers that combined will do an excellent task of withering away the fail-safe mechanisms that have made pensions assets management, which superintend over a combined ₦6.5 trillion in assets at the moment one of the blazing spots in Nigeria’s economy. One of the more egregious bills seeks to exclude the pensions of staffers of the police, the customs service, the prison service and the Economic and Financial Crimes Commission, institutions which are not exactly bastions of sound financial management from the rigorous rules of the centrally managed Contributory Pension Scheme. It would seem that the country’s legislators, driven by a self proclaimed agenda of driving revenue growth, are intent on plugging into any available pool of funds without respect for rules, laws, principles, process, even plain common sense. In an economy barely crawling out of a recession, that might be the fast track to economic oblivion and provide little comfort for squeezed workers staring down the abyss of retirement.

Nigerian states have always loved debt

Nigeria’s states have raised ₦791.2 billion through the issuance of bonds over the last 40 years to carry out infrastructural development projects or service loans. According to SEC data, the now defunct Bendel State was the first to secure ₦20 million on behalf of the Bendel State Loan Stock in 1978 for housing estate development. Of the current states, Lagos leads the way with a total of ₦290.090 billion in bond issuances, the largest being a ₦87.5 billion government bond – Series 2 under the ₦167.5 billion debt issuance programme of 2013 for maturity in 2020. Two other states, Bayelsa and Delta, follow with the issuance of ₦50 billion bonds. Others include Osun, which under a ₦60 billion debt issuance programme, in 2012 raised ₦30 billion bonds at a 14.75 rate for road and commercial infrastructure (O-Hub, Dagbolu, Osun), urban renewal (Ilesa, Ikire, Osogbo, Ede and Iwo), the Ede waterworks and refinancing of existing loans and Edo’s ₦25 billion for refinancing total debt obligations and ongoing infrastructural projects.

Juxtaposing these bonds with the projects for which they were raised paints a dire picture. Over the years, state governors have gone to town to borrow for projects which they are yet to either complete or derive commensurate value for ordinary citizens. Accountability for the usage of the bonds has generally been opaque, and the repayment obligations constitute a top of the line charge to the states’ allocations, contributing greatly to the near bankrupt position of some of these states. Many are way above the thresholds prescribed by the Fiscal Responsibility Act. The chickens have come home to roost and the only option many of them desire to take is to borrow even more. It is a vicious cycle and we are not encouraged by the outcomes we see and predict to happen.

Time for CBN to retool its economic thinking?

The disparity between the lending and savings deposit rate in Nigeria is at 26 percent, a 10 year high, according to the latest Central Bank of Nigeria data. The maximum lending rate, which is the top rate paid by borrowers in Nigeria topped 31 percent, the highest in over a decade. In contrast, the savings deposit rate is at 4 percent, also the highest in 10 years. In pursuit of a hawkish monetary policy, the CBN in 2016 began a policy of mopping up the local currency from banks at rates topping 20 percent while also selling treasury bills to Nigerians at record levels, with one-year bills topping 22 percent in yields.

The real beneficiaries of 22% treasury bills yields are portfolio investors and banks. The real losers are majority of Nigerians who have see their access to credit stifled either because the banks will rather not lend or, when they do, lend at mind boggling rates. The CBN has unapologetically focused on stabilising the exchange rate due to the impact volatility in that market can have on the country’s economy. The central bank’s initiatives have started yielding results, however at a huge cost to the real sector. Very few organisations around the world can constantly borrow at 30%+ rates to run their operations without going into bankruptcy. If the FG is really serious about its ease of doing business drive, them it must tackle this issue head on.

Makurdi is the Houston (and more) that everyone is ignoring, with deadly consequences

Nigeria’s Vice President, Yemi Osinbajo, visited a camp for internally displaced persons in Makurdi, capital of Benue State, on Wednesday for a first-hand assessment of damage caused by an August 27 flood which ravaged the region. He was accompanied by two ministers, power, works and housing minister Tunde Fashola and agriculture minister Audu Ogbeh, who hails from the state. There have been complaints of an inadequate government response to flood victims and a paucity of relief materials and provisions in IDP camps. According to the Child Protection Network (CPN) and the Benue State Emergency Management Agency (BSEMA),three persons, including a child died in the floods, while 110,000 survivors risk contracting water borne diseases from the disaster which affected 12 local governments in the state.

After the lethargic response of the government, nothing suggests that there is any serious concerted effort to deal with further flooding in Benue or it spread. There are indications that Cameroon will release water from the Lagdo dam shortly. Along with expected peaking of the rainy season, we fear that the worst of the flooding is not over. Already there are reports the flooding has spread into neighbouring Kogi state. It is unclear, one week later, what the government’s plan is going forward. Certainly it needs to do better.

Nigeria can’t keep ignoring Boko Haram’s civilian toll

Boko Haram has killed 381 civilians in Nigeria and Cameroon since the beginning of April, rights group Amnesty International said on Tuesday, a testament to the militant group’s deadly resurgence. The Nigerian military has repeatedly said Boko Haram has been “defeated”. But in recent months, it has carried out a string of lethal suicide bombings and other high-profile attacks on towns and an oil exploration team. The number of deaths since April 1 is more than double that for the preceding five months, Amnesty said. Boko Haram has killed 223 civilians in Nigeria since April. The forcing of women and girls to act as suicide bombers has driven the sharp rise in deaths in north-east Nigeria and northern Cameroon, said Amnesty. In Nigeria, the deadliest attack was in July, when the militants abducted an oil exploration team with staff of the state oil firm and a university while they were travelling in a military convoy. Boko Haram killed 40 people and kidnapped three others, Amnesty said.

There have been many unrealistic targets set for the capture or killing of Boko Haram’s factional leader, Abubakar Shekau. Even worse, there have been more premature declarations of victory against the terrorists. On July 23, the Chief of Army Staff, Lt. Gen TY Buratai gave the Theatre Commander, Operation Lafiya Dole 40 days to abduct or kill Shekau. That period has elapsed and there is no sign that the military is any closer to its goal. There is a pressing need for the military to restrategise its COIN operations in the North-East and put the terrorists on the back-foot as it did for a while in 2015/16. With more that 20,000 people killed over the last eight years, and 7.2 million facing food shortages or outright starvation, it is also important for the government to recognize the humanitarian emergency that this conflict is creating in Lake Chad region, and do all it can to ensure that there is relief, and that government and non-governmental agencies are able to have an effect there.

Kanu and IPOB are only beginning to dig the surface of Nigeria’s messy politics

The Federal High Court in Abuja on 5 September granted a request seeking to serve court processes on Nnamdi Kanu and the Indigenous People of Biafra through substituted service. The court, however, ordered personal service to be carried out on the other respondents in the suit, including the Inspector-General of Police; the Commandant General of the Nigeria Security and Civil Defence Corps and the Attorney-General of the Federation. Justice B.O. Quadri gave the order following an ex parte application by Richard Ndubuaku, a businessman, for an order of court for substituted service of all the processes of the court on the defendants by publishing them in two national newspapers. Ndubuaku, who made the application through his counsel, Smart Iheazor, also asked the court to make an order restraining the Kanu and IPOB, whether by themselves, members or agents from disrupting the forthcoming Anambra governorship election, scheduled to hold on November 18. He also asked the court to make an order restraining Kanu and all members of IPOB from interfering, intimidating and harassing all registered and eligible voters.

Nnamdi Kanu and IPOB effectively crossed the line from Biafra’s flagship separatist group to a pan-Nigerian political bloc with stated separatist intents when it called in July for a boycott of arguably the most important state election before the 2019 election high season. Cue in the revolving door of Igbo politicians at the national level and IPOB statements receiving ice-cold, almost routine retorts from other significant political actors in the country, reports of infighting within the group, and increasingly vocal dissent from other pro-Biafra, pro-Igbo groups and it might seem that the mainstream political space has given the group a seat. Nevertheless, the separatist threat remains and underneath the political jockeying by interested actors in Anambra and beyond for political favours from a Kanu who remains very popular in parts of the South East, Tuesday’s interim ruling is a reminder that the cloud of uncertainty created by the country’s politics and growing calls for a renegotiation of its compact have not quite been lifted yet.

 

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