Category: <span>News</span>

Cabinet reshuffle and high-level board appointments keep Buhari busy…

Nigeria Monthly Briefing Summary

President Muhammadu Buhari (2015-present) reshuffles his cabinet, removing agriculture minister Mohammed Nanonoand power minister Saleh Mamman. Buhari appoints new heads of education, as well as board members for the newly created Nigerian National Petroleum Company Ltd (NNPC) and new petroleum regulators, Nigerian Upstream Regulatory Commission (NURC) and Nigerian Midstream and Downstream Petroleum Regulatory Authority (NPRA). Buhari delivers a letter to the National Assembly proposing amendments to the Petroleum Industry Act (PIA) 2021, passed on 16 August. Former United Kingdom (UK)-headquartered oil major BP Plc oil trader Jonathan Zarembok launches a case in the UK against BP, claiming that his employment was wrongfully terminated after he voiced concerns about the payment of bribes to NNPC officials.Indigenous People of Biafra (IPOB) leader Nnamdi Kanu files a case with the Abia State High Court accusing the Federal Republic of Nigeria and seven other respondents of human rights infringements.The Nigerian Communications Commission (NCC) issues a federal government directive implementing a telecommunications blackout in Zamfara, Katsina and Sokoto states.Nigeria issues a $4 billion Eurobond exceeding a target of $3 billion. The Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC) maintains the benchmark rate at 11.5%.United States(US)-based investment bankJP Morgan forecasts 1.5% growth in Nigeria’s economy in 2021. The National Bureau of Statistics (NBS) estimates that 20% of workers in Nigeria have lost their jobs as a result of the Covid-19 pandemic. The presidential steering committee on Covid-19 revises the quarantine protocol for travellers arriving in Nigeria from 14 September.

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ARC’s Leonard Mbulle-Nziege analyses recent events in Guinea…

Guinea’s latest military junta, which took power in a bloodless coup on 5 September, has lifted a curfew on mining areas in a bid to allay concern about the country’s all-important mining industry. Mining companies such as South Africa’s AngloGold Ashanti, China’s Chalco and Singapore’s TOP International Holding all reported on 7 September that they were operating normally despite the coup.

Groupement des Forces Spéciales (GPS) (special forces) commander Col. Mamady Doumbouya has taken control of the presidential palace, deposed and imprisoned President Alpha Condé (2010-2021), fired the previous government and seized their passports. In a television address on 5 September, Doumbouya dissolved the Assemblée Nationale (national assembly) and suspended the constitution. The military junta will rule through a transitional body called the Comité National du Rassemblement et du Développement (CNRD).

Despite Doumbaya’s assurances that mining sector activities will not be disrupted, the suspension of the constitution creates the risk to mining companies that the CNRD will do as previous military regimes have done, notably scrutinise, review, re-assess or attempt to tweak existing agreements in the mining sector. Mining, notably bauxite, is a significant source of exports, revenue and employment, contributing roughly 90% of export revenue and 25% of GDP. The risk of the CNRD reviewing existing agreements is likely to increase as the international community and its financing institutions respond to the coup. The longer the CNRD’s “transition” to civilian rule – the international community’s likely requirement –  the higher the risk that donors will suspend funding to Guinea, increasing the pressure on the junta to raise funds at home.

There is strong precedent in Guinea for review of mining deals. Former president Condé investigated mining deals that the previous military junta leader, Captain Moussa Dadis Camara (2008-2009), ratified immediately after Camara assumed power in December 2008. The most notable outcome of these investigations was Condé’s decision to strip Brazil-based Vale S.A and Guernsey registered BSG Resources of their rights to the Simandou iron ore deposit in 2014. Doumbouya is known to have links to Mali’s new military junta and may follow its lead.  In November 2020, Mali’s miltary announced a review of all mining contracts attributed during the previous presidency.

Guinea’s leading bauxite producer, Société Minière de Boké (SMB), a subsidiary of China-Singaporean consortium SMB Winning, was awarded the $15 billion concession to develop blocks 1 and 2 of the Simandou iron ore deposit in November 2019. SMB chairman Fadi Wazni is reportedly a key Condé supporter and close associate of the former president’s son, Mohamed Condé, who has served as an intermediary for various mining interests.  Guinea-based civil society organisation, Colléctif pour la Transition en Guinée (CTG), has lodged a complaint in France against Condé junior and former defence minister Mohamed Diané over the “disappearance” of €171m ($201.6m) in several transactions between Condé junior, Diané, SMB and France’s Alliance Minière Responsble (AMR).

The latest military intervention brings to a humiliating end the rule of Guinea’s only president to have come to power through democratic, multi-party elections since independence from France in 1958.  Despite the regressive step and the business uncertainty it brings, the intervention is not yet unpopular domestically. Alpha Condé was returned to power for an unpopular third term in October 2020, having altered the constitution to do so. His third-term electoral bid prompted mass protests in which security forces killed several people, while ten people died in post-election violence.

Events such as the routing of Senegal’s Abdoulaye Wade (2000-2012), the scuttling of Burkina Faso’s Blaise Compaoré (1987-2014) and most recently the military ouster in 2020 of Mali’s President Ibrahim Boubacar Keïta (2013-2020) show that West Africa’s voters do not tolerate engineered third terms, and sons or close relatives doing deals on the presidential coat tails. The CNRD has tapped into this disgruntlement and claims it intends to appoint a government of national unity that will include members of civil society and the opposition. Whatever the make-up of the government, businesses operating in Guinea face at least 18 months of political upset, economic decline  and uncertainty.

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President Buhari signs into law the Petroleum Industry Bill…

Nigeria Monthly Briefing Summary: President Muhammadu Buhari (2015-present) signs into law the Petroleum Industry Bill (PIB). Niger Delta region stakeholders criticise presidential approval of the PIB, citing failures that will impact regional development and inflame separatist sentiments. Justice Binta Nyako adjourns until October the trial of Indigenous People of Biafra (IPOB) leader Nnamdi Kanu after he fails to appear in court on 26 July. Unidentified gunmen attack a convoy transporting contractors to a Shell Petroleum Development Company (SPDC) site in Imo state, killing one police officer and six employees. The Abuja Court of Appeal overturns a 2019 ruling confiscating the Oil Mineral Lease 11 (OML11) field licence from SPDC and transferring it to the state-owned Nigeria National Petroleum Corporation (NPPC). United Kingdom (UK)-national and former London Stock Exchange (LSE)-listed Glencore oil trader Antony Stimler pleads guilty to charges of money laundering and violating the United States (US) Foreign Corrupt Practices Act (FCPA) by bribing NPPC officials. The Central Bank of Nigeria (CBN) (central bank) Monetary Policy Committee (MPC) maintains the Monetary Policy Rate (MPR) at 11.5% citing a fall in headline and food inflation. CBN governor Godwin Emefiele bans the sale of foreign exchange to Bureaux de Change (BDCs) due to fraud concerns. Information and culture minister Lai Mohammed returns from a trip to the US, strongly denying that Nigeria is a failed state.

Download the full August briefing here.

About ARC Briefing:

ARC Briefing is ARC’s essential business information service.

Companies at any stage in their Africa expansion, whether building or communicating an Africa strategy, investing directly, expanding current operations, financing other investors, doing the legal leg-work or researching the Africa growth trend, need ARC Briefing.

ARC Briefing is an information service keeping you:

  • -Up to date with Country Chronologies of business-critical events
  • -In the know via Country Briefings on political, economic, business and operating trends. Written in-country, ARC experts analyse and comment
  • -Ahead with Country Planner which details future elections, budgets, regulatory changes etc.

Nigeria remains on a managed float amid economic turmoil

Amidst skyrocketing inflation, cries for policymakers to harmonise the multiple exchange rates into a single market-reflective rate are not being heard, further weakening investor confidence and endangering stability in Nigeria. Investors are now waiting anxiously for 24 May when the Central Bank of Nigeria (CBN) is expected to revisit the liberalisation of foreign exchange. 

Management of foreign exchange policy continues to create tension between the Central Bank of Nigeria (CBN) and the finance ministry. In March, the finance ministry and the CBN issued conflicting statements regarding changes to foreign exchange policy. Finance minister Zainab Ahmed informed reporters on 22 March that Nigeria would adopt a new system and flexible exchange-rate policy for official transactions, the Nafex rate. Vice president Yemi Osinbajo confirmed the adoption of a unified flexible exchange rate for federal payments at a Chatham House meeting on 23 March. International media reported Osinbajo’s statements, triggering a positive reaction from financial markets, where Nigeria’s favouring of a stronger naira has come under increasing criticism.  

Domestic and international business and the international institutions alike are clamouring for liberalisation. The International Monetary Fund (IMF) made exchange rate liberalisation the sole condition when it approved $3.4 billion in Covid-19 emergency support in April 2020.  A year later, the World Trade Organisation (WTO) – now under the stewardship of Nigeria’s own Ngozi Okonjo-Iweala – has raised Nigeria’s foreign exchange management as a concern for the country’s manufacturing, exports and imports.

Despite pressure from the finance ministry, and growing external pressure, CBN governor Godwin Emefiele has denied any plans to adopt a new foreign exchange management policy and the central bank’s Monetary Policy Committee (MPC) missed another opportunity to announce quick win reforms on 23 March.

The CBN’s intransigence in the face of domestic and international pressure has raised questions about the CBN’s lack of transparency in foreign exchange management. It also highlights the continued weakness of the country’s economic management. Disagreement between the federal government and the central bank is further affirmation of Ahmed’s reputation as “paymaster general” for her perceived lack of power as finance minister. Weakness extends to further embarrassment for vice-president Osinbajo, who was speaking to an international audience on policy reform to enable economic recovery from the Covid-19 fallout. 

Central Bank adds sugar and wheat importers to forex restriction list… 

As if to embed its intransigence, the CBN on 16 April added sugar and wheat importers to its foreign exchange (FX) restriction list with immediate effect.The central bank introduced the FX restriction list in 2015 when it banned companies from using US dollars to import items the CBN deemed could be produced in Nigeria.According to a CBN post on Twitter“Sugar and wheat to go into our FX restriction list. We must work together to produce these items in Nigeria rather than import them.” 

Adding sugar and wheat to the list will immediately boost the incomes of the few local producers and distributors of sugar and wheat but will add to inflation pressures. Nigeria is a net importer of food and adding to the list of restrictions will artificially limit supply and increase food prices further and exacerbate food insecurity. Inflation and food insecurity added to Covi-19-related unemployment is a potent political mix. A local response is expected, and the restriction has prompted widespread concern by national and international stakeholders. It is not clear if reaction will sway the policy makers. 

while double digit inflation eats into domestic incomes

Failure to act on the exchange rate will do little to improve the overall economic picture. Liberalisation would produce a short-term shock devaluation as the currency finds its actual value. But existing measures limiting the supply of goods are equally having an inflationary impact. Inflation has now reached into the high teens for most of the Covid-19 year. Ratings agency Fitch forecasts that inflation will average 16% in 2021 and decline to 13.4% in 2022. Sub-Saharan Africa’s average pre-Covid inflation rate was 8.5%.

Persistent, double-digit inflation and a sustained low oil price have exacerbated the shortage of US dollars, raising more questions – this time about Nigeria’s debt management. Nigeria’s balance of payments gap peaked at $14 billion in 2020. The oil sector continues to account for almost 90% of foreign exchange earnings, leaving limited room to manoeuvre.  Zainab Ahmed confirmed that oil prices were $10 per barrel above projected prices for the 2021 budget, which has allowed for some recovery and a little government flexibility. The 2021 budget requires $6.14 billion to be raised from foreign sources. Debt Management Office (DMO) director general Patricia Oniha hopes that Eurobonds will be an important part of that mix and plans to seek advisors to that end. 

Business hopes that liberalisation will come on 24 May are likely to be dashed – again. Weak government, an incoherent economic policy and poor financial management all militate against it despite its being a quick win for investors, manufacturers and exporters alike. The economic management in Nigeria today is reminiscent of that under General Sani Abacha(1993-1998). The only scope for meaningful reform – including currency reform – is only likely to come once President Buhari has left the presidential palace in Aso Rock.  Until then, the general outlook for Nigeria remains bleak.

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African Societies Plan for a Post-Pandemic Economic Recovery

ARC’s Director, Tara O’Connor, was recently interviewed for the article “African Societies Plan for a Post-Pandemic Economic Recovery” in The Cairo Review for Global Affairs

“We have seen an accelerated global polarisation. The trade war between the US and China has suddenly globalized. It will mean foreign powers will pay for influence – in debt relief, loans, etc. which is good. But we could see proxy wars, proxy political puppetry of the Cold War resume, which is negative for the economies of Africa,” O’Connor warned.

Read the full piece here: African Societies Plan for a Post-Pandemic Economic Recovery