Home Features The Week Ahead – When Bad Ideas Grow Wings

The Week Ahead – When Bad Ideas Grow Wings


By SBM Intelligence,

Former President Olusegun Obasanjo once called maintaining the defunct Nigeria Airways (NAL) irresponsible. Six years after that statement, one of his successors, who has a petition from former NAL employees appealing for the payment of ₦45 billion in severance pay on his desk, is shopping the world for an investor for a proposed national carrier. Between a bitter state election, an even more ferocious fight over revenue sharing, ignoring the obvious on Boko Haram and a questionable budget supplement, bad ideas die slow deaths, it would seem. It’s so heavy that it has almost obscured the recognition Nigeria’s music industry received this week from the world’s largest music label.

The deadly resilience of terror in the North East

Boko Haram jihadists overran a military base in northeast Nigeria after a ferocious firefight, military and vigilante sources said 15 July, the second assault on the country’s forces in two days.The militants on Saturday evening invaded a base holding hundreds of soldiers in Yobe in an attack that lasted for hours, a military source told the AFP news agency on condition of anonymity. “Boko Haram terrorists attacked troops of the 81 Division Forward Brigade at Jilli village in Geidam district. The terrorists came in huge numbers around 7:30 pm (1830 GMT) and overran the base after a fierce battle that lasted till 9:10 pm,” said the military source.“The base had 734 troops. Currently the commander of the base and 63 soldiers have made it to Geidam (60 kilometres away) while the remaining 670 are being expected,” he said. The attack on the base took place just days after Boko Haram fighters ambushed a military convoy in neighbouring Borno on 13 July, leaving 23 soldiers missing as well as seizing some Nigerian military vehicles.

The latest attacks do not suggest a resurgence of the terror group so much as they demonstrate its resilience, capacity for strategic hibernation and stealthy strikes. The attacks also indicate that the group’s financing with which it procures weapons and its recruitment remain largely uninhibited. While the military has certainly made gains in the North-East, its successes have been qualified by a comparative lack of involvement by other security sector actors. The disruption of the terrorists’ financing and recruitment is fundamentally the purview of intelligence and covert assets. One of the major difficulties in tracking the group’s financing is that it is funded largely by activities in a vast, unmapped informal economic domain that covers everything from the sale of illegally obtained petrol to cattle rustling and ransoms from kidnappings. The persistent deficits in terms of securing Nigeria’s notoriously porous borders also represent a clear vulnerability. The Sahel is awash with an assortment of criminal activities, including weapons traffickers. The existence of trans-border black markets has been a boon to the insurgents. Until these fundamental issues are frontally addressed, the military’s role in the North East will increasingly resemble a Sisyphean task.

Ekiti a gory preview of what is to come

Nigeria’s ruling party won a governorship election in southwestern Ekiti state, unseating the opposition and giving President Muhammadu Buhari a boost ahead of national polls next year. Kayode Fayemi of the All Progressive Congress (APC) took almost 45 percent of the vote held on Saturday, the electoral commission announced on Sunday.The opposition People’s Democratic Party (PDP) rejected the result, alleging electoral fraud, a claim that the Independent National Electoral Commission (INEC) rejected. Fayemi, who was governor of Ekiti between 2010 and 2014, resigned as Buhari’s minister for mining and steel development to contest the race against several opposition parties in a state where the PDP had been vocally critical of the government.

The APC’s victory in the Ekiti State election secured and strengthened its electoral foothold in the southwest geopolitical zone, and in seizing one of the opposition’s strongholds, it also removed one of its most vocal figures in Ayo Fayose from the political chessboard. The APC will see this victory as a boost to its chances of sweeping the southwest in next year’s polls. The much remarked open use of money to suborn voters during the elections suggests that both parties will use every means at their disposal to secure the electoral initiative in the coming elections. If it does come down to which party has deeper pockets, the ruling APC with its unfettered access to public resources will have a distinct advantage. The role of security agencies in the polls will also be critical. As the ruling party, the APC will certainly exploit the executive control of security agencies to its benefit. Regardless, the 2019 elections can be expected to be more competitive than the 2015 vote given the breadth of discontent with the present administration.

A fight over finances exposes urgent restructuring needs

In a bid to check the controversy associated with the Nigerian National Petroleum Corporation (NNPC) remittances into the Federation Account, members of the Federation Account Allocation Committee (FAAC) are moving to stop the state oil company from collecting and remitting royalties accruing from oil. Mahmood Yunusa, the chairman of the Commissioners of Finance Forum, said the meetings will not hold until an effective revenue collection process is implemented. The FAAC also said it plans to probe the ₦90 billion allegedly underpaid into the Federation Account by the Federal Inland Revenue Service (FIRS). The move, largely championed by the states, represented in the FAAC by the commissioners for finance is considered a way of breaking the frequent deadlocks at FAAC meetings brought around by the rejection of NNPC remittances. Controversies over possible under-remittances by the NNPC had culminated in five inconclusive FAAC meetings this year alone – three of them occurring between 27 June and 12 July.

These moves are skirting around the real issue – the need to restructure the Nigerian federal state, how the finances of the country are run, and its sub-national units operate. The fact that monthly gatherings in Abuja to share FAAC allocations have been around for so long should not distract from the anomaly of the situation. Nigeria urgently needs to restructure. The current manner in which the country is run is not sustainable financially or politically, and as recent internecine conflicts prove, even the security architecture is creaking. We hope that a collapse will not become the prerequisite to this restructuring, and that the country’s leadership will have the presence of mind to do what needs to be done before it is too late.

Budget supplement exposes Buhari’s precarious situation

President Muhammadu Buhari on Tuesday submitted a ₦228.9 billion ($750 million) supplementary budget for 2018 to lawmakers, Reuters report citing a copy of the document. In Buhari’s accompanying letter, he said implementing the ₦9.12 trillion ($29.92 billion) budget for the year “will be extremely challenging,” without elaborating. The new supplementary budget includes ₦164 billion to prepare for the 2019 elections and ₦64.7 billion to reinstate projects cut by lawmakers from the main 2018 budget, signed into law last month after over a half a year of wrangling.

Only last month, President Buhari signed the 2018 appropriation bill into law whilst raising concerns over some of the changes made by the National Assembly in the budget. With barely nine months to the general elections which will decide if he is to remain in power, we understand why the president is uncharacteristically in a hurry to have the supplementary budget assented to by the legislature. So far, the implementation of the Nigeria Economic Recovery and Growth Plan (ERGP: 2017-2020) has been abysmal and with raging insecurity in the country coupled with the emergence of a coalition of opposition parties, Mr. Buhari is finding it more difficult to make a compelling argument – politically or through governing – for his reelection.

Nigeria Air really should not take off

Nigeria plans to relaunch a national airline in December, its junior aviation minister said on Wednesday, as the government seeks to make good on President Muhammadu Buhari’s election campaign promise to introduce a new carrier. The Nigerian government will not own more than five percent of the new carrier, Nigeria Air, junior minister Hadi Sirika said at the Farnborough air show in England, according to the government’s official Twitter account. “This will be a national carrier that is private sector led and driven,” Sirika said, according to the Twitter account.“It is a business, not a social service. Government will not be involved in running it or deciding who runs it. The investors will have full responsibility for this.”The junior minister said 81 domestic, regional and international routes were planned, and that the government had been in talks with Airbus SE and Boeing Co about Nigeria Air’s planes.The government’s Twitter account did not quote Sirika elaborating on who the investors in the remaining 95 percent stake of the airline would be.

Tentatively named Nigeria Air, according to a Nigerian government investor document, the initial startup capital of the proposed carrier, much of which will be provided by the FG, is likely to be about $150 to 300 million, invested in tranches over time from start up through the first few years of operation. The carrier is expected to be carrying over four million passengers annually, and have a fleet of 30 modern aircraft operating out of hubs in Abuja and Lagos within five years. The FG’s projections are very optimistic considering its chequered track record and the lack of a proper public debate on the issue in the country. Nigeria Airways, the country’s original national airline and once a poster air service in the post-colonial period, operated for 45 years until it was closed in 2003 after many loss making years characterised by inconsistent scheduling, poor customer service, government interference and employee strife. The government is yet to fully resolve the long standing legacy issues, for example, pensions benefits of Nigeria Airways. A successor airline, first structured as a public-private partnership with UK airline Virgin Atlantic, later renamed Air Nigeria, which ran from 2005 to 2012 collapsed amid concerns by the private investors about the government’s persistent inability to meet its commitments under the PPP. Perhaps more importantly, this latest venture will be going up against the grain of modern airline economics. To use just one African example, South African Airways woes are emblematic of the struggles of traditional flag carriers around the world, contending with low-cost rivals and a spike in oil prices, which puts pressure on those with the highest labour and other non-fuel costs. Despite SAA being consistently rated among the best airlines in the world in terms of customer experience, South African taxpayers have forked out more than 30 billion rand (₦796.5 billion) since 2012 to keep it in the air. While the airline industry is set to grow globally, Africa is the weakest region of all, with airlines struggling to improve load factors – that is, the percentage of seats filled – from the world’s lowest level of 61.5 percent in 2018, compared with 81.7 percent globally, according to the International Air Transport Association despite strong passenger growth in recent years. The process for setting up Nigeria Air is scheduled to be completed by the end of 2018 but with less than six months to go, no big investors, local or foreign have expressed any interest in the venture and for good reason – the corroding fuselage of many of Nigeria Airways and Air Nigeria’s once proud aircraft, which can still be seen from the window of an arriving jet into Lagos’ international airport, are a potent reminder of where this new venture could potentially land. Afropop rhythms prove too much for Vivendi to ignore

Vivendi’s Universal Music Group (UMG) will launch a new division in Nigeria as part of efforts by the world’s largest music label to expand into Africa’s most populous nation and the wider region. The music entertainment group said on Tuesday its new strategic division, Universal Music Nigeria, will operate from Lagos. Universal Music Nigeria also plans to open a recording studio in Lagos, which would be the label’s second fully purposed studio in Africa alongside another in Johannesburg, South Africa. Sipho Dlamini, Managing Director of Universal Music South Africa and Sub-Saharan Africa said the Nigeria division will focus on developing West African artists and musicians, particularly Nigeria, Ghana and Gambia. UMG said the new division will work alongside the label’s existing operations in Ivory Coast and Morocco.

Nigeria’s music industry has grown in acceptance locally and internationally over the last decade, dominating airwaves across Africa and entering the mainstream in Europe and America. However, monetising this has remained a huge problem and very few of the typical streams of income found around the world are available to Nigerian artistes in Nigeria. Music revenue in Nigeria – mostly derived from sales of mobile phone ringtones – grew 9 percent in 2016, year-on-year, to reach $39 million and is expected to rise to $73 million by 2021, auditing firm PwC said last year. We see this move as an acknowledgement of the potential of the industry to grow exponentially in terms of revenue once the monetisation problem is solved. UMG might be further encouraged by the country’s arts, entertainment and recreation sector contributing 0.29 percent to real GDP in the first quarter of this year alone, according to the NBS. It still has to do its homework properly.


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