By SBM Intelligence,
During the week the FG raised concerns about arbitrariness by announcing travel restrictions on some individuals. These concerns were accompanied by more concerns of arbitrariness as the regulator raised the spectre of capital controls while dangling the carrot of flogging some other state enterprises. But the money raised may be needed as inflation continued its rise, led by food. All this mayhem contributed to our little neighbour taking a hike. In sad news, insurgents murdered an aid worker.
A ban that says nothing, does nothing and is legally nothing
Nigeria’s government announced restrictions on 50 high-profile Nigerians, who it accuses of engaging in corrupt activities, preventing them from travelling abroad without any legal basis and a judicial authorisation on 13 October. The individuals, whose identities were not disclosed in a statement signed by presidential spokesman Garba Shehu, include those whose assets are valued at ₦50 million and above who are the subject of a corruption investigation or litigation. Shehu said the measure is part of the implementation of Executive Order Number 6 which seeks to ensure “that all assets within a minimum value of ₦50 million or equivalent, subject to investigation or litigation are protected from dissipation by employing all available lawful means, pending the final determination of any corruption-related matter.” He added that the financial transactions of these ‘persons of interest’ will be monitored by relevant agencies.
The timing, wording and possible intent of this order is puzzling when consideration is given to a few things. In practice, people under trial for corruption in Nigeria are already subject to passports seizures and the judicial approval of travel. The ban is also on very shaky legal ground – in 1999, the Supreme Court ruled in a case involving the Department of State Security that the Constitution protects the right to go abroad (under the freedom of movement clause) from executive interference which is not supported by an enacted law. The Executive Order 6, on which the travel ban is made is a mere executive directive and not an enacted law. In addition, it flies in the face of Justice Ojukwu’s judgement last week, who while upholding the constitutionality of the executive orders held that its powers must be exercised in accordance with the Constitution and pursuant of the orders of a competent court. On the political plane, Its issuance so close to elections speaks to a possibly punitive political intent that is unlikely to be ignored. Put simply, this ban overreaches, accomplishes nothing and is yet another blot on the administration’s stated commitment to the rule of law.
On this constant talk about foreign reserves
Central Bank Governor Godwin Emefiele, says the Buhari-led administration has chosen to save the naira instead of building reserves. Speaking in Bali, Indonesia at the annual World Bank and IMF meetings, Emefiele said it is difficult to talk about building reserves at the moment. Nigeria’s foreign reserves currently stand above $43.3 billion — one of the highest figures recorded since the 2014 oil price crash. The bank’s spokesman Isaac Okorafor, had said in early October that the fall in reserves was due to a hike in interest rates by US Federal Reserve and the bank’s interventions in the forex market.
One thing the CBN cannot be faulted for is having its priorities straight, and like every central bank, price stability lies at the heart of its focus. A clarification on what foreign reserves are is, however, necessary; reserves are the totality of foreign currencies held by a country’s central bank and are used to back liabilities and influence monetary policy. They are not a country’s savings, though there is a cost to their usage. The liabilities foreign reserves largely back are imports – at current levels, Nigeria can support 17 months worth of import, far above the internationally acceptable level of 3 months – and the national debt (which is increasing at a worrying rate). For an economy like Nigeria’s which is very import dependent, the elevated forex levels represent a necessary comfort which explains why regulators like to talk about it. The real conversation that should be happening are twofold – how to delink the country’s reserves from the price of crude and what to do about the swelling debt bag.
More government companies to go private
The Federal Government is ready to offer more of its assets for sale under the ongoing privatisation programme aimed at raising more money to implement the country’s 2018 deficit-based budget. Last month, the Nigerian Security Printing and Minting Company Limited was offloaded, with the CBN, already has a majority stake, emerging as the preferred buyer, given the national security implications of selling the company. CBN Governor, Godwin Emefiele, said that the Ajaokuta Steel Company of Nigeria is on the cart, first for a total review of the privatisation process and an eventual sale.
A key performance indicator for corporate entities is the return on assets which compares the profit the company is generating to the capital it invested in assets. Whilst it is difficult to use this indicator to assess public sector companies, it is fair to assume that the use of assets to generate monetary and social returns in Nigeria is very poor. We, therefore, encourage the government to step up the ongoing drive to offload idle assets and generate funds for investment in more critical sectors.
Social cost to rise with food inflation
New data from the Nigerian Bureau of Statistics shows that inflation stood at 11.28 per cent in September from 11.23 per cent recorded in August on a year-on-year basis making this the second consecutive month of inflation rise after 18 consecutive months of decline. “On a month-on-month basis, the headline index increased by 0.84 percent in September 2018, down by 0.21 percent points from the rate recorded in August 2018 (1.05) percent,” the NBS said. “Urban inflation rate increased by 11.70 per cent (year-on-year) in September 2018 from 11.67 per cent recorded in August 2018, while the rural inflation rate increased by 10.92 per cent in September 2018 from 10.84 per cent in August 2018. The increase in food inflation was caused by increases in the prices of potatoes, yam, vegetable, fruits, meat, milk, cheese, eggs, bread, fish and cereals. The Pastoral Conflict, and most recently, flooding in some parts of the country, have resulted in a drop in food production.
As the impact of base effect on inflation finally gives way, the impact of the various policies of the government on food production and importation, which has always kept food inflation high, is starting to have an effect on headline inflation numbers. SBM has repeatedly warned that the handling of the Pastoral Conflict would affect food prices and this has proven to be the case. Nigerians are not only getting poorer, but the key component of their expense basket is getting more expensive – a double whammy which will have political and social consequences in the medium to long term.
Liman’s murder and military suffering illustrate a gruesome truth
Premium Times reported, citing multiple military sources, that Boko Haram gunfire which erupted at an army base on 8 October was far greater in severity than the military publicly admitted. The newspaper said that at least 18 soldiers were killed, eight critically wounded, and about 157 feared missing when insurgents raided an outpost of 157 Battalion in the village of Metele, Borno state. Heavy military equipment including at least two T-72 tanks, two armoured personnel carriers and two gun trucks were either set ablaze or rendered “unserviceable” by the insurgents. The Nigerian Army acknowledged the attack on Twitter late Monday, and updated on Wednesday, 10 October but put the casualties at seven for troops and seventy-six for the insurgents. It also said 16 soldiers were wounded. Meanwhile, an aid worker, Hauwa Liman, 24, was murdered by the terrorists on Monday. Ms Liman was working in a hospital supported by ICRC in a displacement camp in Rann outside Maiduguri in Borno State when she was kidnapped. Liman was the second aid worker murdered in as many months. In September, Saifura Hussaini Khorsa, 25, was executed by the militants.
It is a disservice to the men who lose their lives defending the country and fighting against Boko Haram for their casualty numbers to be “managed” in a cavalier manner by the military. There have been recorded cases of the military denying the deaths of soldiers in the line of action, only for their families to find out on social media. But this is only a follow up thought to the overarching one – the loss of lives of civilians and military personnel to Boko Haram – as exemplified by the callous and painful murder of Ms Liman at the hand of a vicious Boko Haram faction over an unfulfilled ransom demand – is rising and worrying and the government will do well to own up to the reality of the situation and implement a sensible hard as well as soft strategy.
The little brother up north gives up
Niger Republic, through its shippers council, has opted to use seaports in the Republic of Benin and Ghana due to better reliability and efficiency of both as compared to Nigeria. The country, which still has an MOU with the Nigerian Shippers’ Council to ship transit cargo through Nigeria, now prefers to work with both countries. The Executive Secretary of the NSC, Hassan Bello, cited a number of hindrances shipping transit cargo through Nigeria, many of which have remained a major problem with the Lagos ports. Some of the issues raised are the lack of commitment on the part of the Nigerian Shippers’ Council to over-turn the amount of time wasted in positioning containers and processing documents, a lack of automation of processes, lacklustre and poor attitude of operators and government agencies to work towards customers, high port charges and inadequate improvement to existing infrastructure.
We daresay that if the Nigerian Shippers Council had their way, they would circumvent shipping via Nigeria as well. From a geographic perspective, Nigeria is positioned to be the transit cargo shipment hub of West and Central Africa, serving most of the landlocked countries of the Sahel. But Nigeria is unable to efficiently handle its own domestic logistical needs, so talk of regional transshipment is moot at this point. While Nigeria has the largest economy in the region and will remain so for the foreseeable future because of its sheer size, as more countries take the decision to circumvent Nigeria in facilitating trade, the country will lose out on the positive network effects of creating and operating an intercontinental trade network like Belgium and Germany, thereby losing value for the citizens and the government. As long as Nigeria continues to measure port performance merely by revenue and not the speed and quality of customer service, the incentive to improve will not arise.