Overview.Nigeria’s monthly minimum wage now stands at NGN33,000 (USD39.40) but as inflation continues to soar the spending power that salary brings dwindles. Tinubu’s unpopular decision to remove fuel subsidies means the cost of travel to earn even such a meagre amount leaves many asking if it is worth it. As the nation continues to battle the crime, insurgency, incompetency and corruption, the problems left largely ignored by previous administrations. Will this government be any better?
Budget.After struggling through two recessions President Tinubu is now keen to paint a rosy picture of his country’s financial situation. In his presentation of next year’s budget he has promised that under his watch, economic recovery has already begun. This is his first budget since he assumed office in May and he estimates NGN27.5 trillion will ensure economic growth and development. How he plans to fund this, however, is becoming controversial. He has approached the National Assembly for approval to take foreign loans in the amounts of USD8.6 billion and EUR100 million. If the Assembly vote in his favour it will take Nigeria’s debt profile to an eye watering USD51.759 billion. Tinubu says the money borrowed will be used for critical infrastructure upgrades for electricity, roads, water, railway and health. Supporters of the President say that borrowing to improve infrastructure is a good thing but his critics say that it is only positive if the work is actually built and completed and the finances are totally transparent. It is the latter opinion that appears to be the most widely held. Nigeria has a history of over promising and under delivering. Its politicians have a history of ‘re-purposing’ funds for their own benefit. Tinubu has promised a cleaner, clearer spending style. We are about to see if that will come to be. This is his first test on transparency, and it will not be his last. How he starts will provide a good guide to how he will move forward. To his credit, when he was Governor of Lagos he did manage the coffers well. What remains to be seen however is if he can do the same on a much larger scale. Tinubu has been hot off the blocks in some areas but slow to start in others. As he widens his gaze across more of his portfolio we are beginning to build a picture of how the next 4 years will go. If he can hold firm to what he says he believes in and stay committed to the common and greater good instead of pandering to political cronies he should begin to make some headway. But should those used to profiting from lucrative construction and infrastructure contracts decide to put some roadblocks in his way – for now we must wait to see if he smashes through them or simply stalls and then idles.
Legislation. The Senate is reviewing the Cybercrime (Prohibition and Prevention) Act of 2015 with the view to expanding its powers to cut down on cyber-crime. The Nigerian Communications Commission (NCC) estimates losses to online crime at over USD500 million per year. This move comes as Police announce the arrest of politician, Wilfred Bonse, on charges of the theft of NGN200 million from Patricia Technologies’ crypto wallet. Patricia is Africa’s largest Bitcoin Marketplace. Nigeria’s crypto currency usage is also the highest in Africa. A report published by Chainalysis ranks Nigeria in 3rd place on a list of only 6 nations recording constant growth since 2021. The government has in recent years tried to regulate this sector and banned banks from crypto related activity. We anticipate that a new approach of ‘if you can’t beat them join them’ may now be on the horizon. Tighter laws governing this sector appear to be paving the way for more open trading – something that inflation adverse Nigerians will absolutely grab with gusto. Last year, the Securities and Exchange Commission updated rules aimed at regulating digital assets. More significant however is The Finance Act 2023 which was passed in June. Under this new legislation, individuals and businesses trading in digital assets will be taxed on earnings at 10%. For a country as cash strapped as Nigeria, monetising this sector is too good an opportunity to pass up.
Unions. There have been persistent rumblings coming from unions affiliated with the Nigeria Labour Congress (NLC) and the Trade Union Congress of Nigeria (TUC). The complaints range from poor pay to working conditions to security concerns to political disputes stemming from disputed election results. Repeated threats of strike action and a national shutdown have been made but so far have been cancelled at the last minute. The threat of industrial action however remains high, particularly as the festive season swings into high gear.
Diplomacy.Tinubu will attend the COP28 Climate Summit in the United Arab Emirates. Taking place on 1st and 2nd December in Dubai, Tinubu is scheduled to make a statement which will detail his nation’s stance on climate financing and renewable energy among other things. While there he will also participate in some side events in the hope of attracting overseas investment along with technical support not only for Nigeria but for all developing nations participating in the conference.
Economic. The economy grew at 2.54% in Q3 of this year. The National Bureau of Statistics reports, “the performance of the GDP in the third quarter of 2023 was driven mainly by the services sector, which recorded a growth of 3.99% and contributed 52.7% to the aggregate GDP.” However, the oil sector, the government’s biggest earner and contributor to FX reserves, contracted by 0.85%. Inflation has risen for the 10th consecutive month reaching 27.33% in October – the highest rate recorded in almost two decades.
CBN. The Central Bank of Nigeria’s (CBN) new Governor has a massive job on his hands. Olayemi Cardoso, who assumed his position in September, has announced plans to tighten policies and to allow market forces to determine exchange rates. Former CBN Governor Godwin Emefiele, arrested on charges of fraud and corruption, has been given bail by the courts. Speaking at his inauguration, Tinubu said the CBN needed a “thorough house-cleaning” but was that because Emefiele had stood as a candidate against him in the Presidential election? Emefiele has pleaded not guilty to all charges, however, the jury is still out on whether his successor will perform any better in the role than he did. Cardoso has inherited an economy in turmoil he will have to work hard to stop the tailspin.
Aviation. United Nigeria Airlines (UNA) has been forced to cancel flights after Nigeria’s Civil Aviation Authority (NCAA) suspended its right to use leased foreign aircraft. The decision came after a UNA flight travelling from Lagos to Abuja diverted and landed in Asaba. UNA say that poor weather at the destination forced the change in route, a claim the NCAA dispute. An investigation has been launched. The flight disruptions have caused chaos for travellers, and the entire sector, as passengers scramble to secure seats on other carriers. This will persist until the enquiry ends. Do not rule out that this is also linked to FX shortages.
Beer. The devaluation of the Naira and FX shortages has also hit the brewing industry harder than they would like. Despite consumers spending NGN517.29 billion on beer between January and June 2023, brewers recorded a 13.66% drop in turnover when compared with the same period last year. The blame for this slide can be laid firmly at the feet of high inflation and devaluation. Brewers faced with higher production costs have increased retail prices. Consumers now have to make some hard choices. Food on the table or drinks in a glass. The spending power of the average Nigerian has sunk to almost a pittance. Fewer and fewer can afford to drown their sorrows. For now, it is impossible to predict but if Tinubu’s much touted recovery plans begin to take hold we may also see a toast in celebration should the economic woes dwindle and incomes improve. What is absolutely clear, however, is that until the currency stabilises and the FX markets flow freely, brewers will be in for a bumpy ride in the last half of 2023 and that shows a real possibility of rolling over into 2024.
Kidnap. A mass kidnap of over 100 people was carried out on 24th November. The incident occurred in the Madu Local Government Area of Zamfara State where dozens of armed men on motorcycles stormed villages. At least one person was killed in the attack. No group has claimed responsibility but reports indicate that ransom demands have been made. The International Committee of the Red Cross say they have registered more than 25,000 as missing in the last 10 years – 23,000 of them are still unaccounted for. Amnesty International has filed a case with the Economic Community of West African States (ECOWAS) Court of Justice demanding justice for the ‘disappeared’.
ISWAP.A reported 50 Islamic State West Africa Province (ISWAP) fighters were killed when the vehicles they were travelling in drove over a landmine in Borno State late November. ISWAP, a spin off from Boko Haram (BH) hold strong positions in the Lake Chad region. Both BH and ISWAP are known for planting mines on routes used by military personnel. It can be assumed that this explosion was, in fact, a home goal. A similar landmine killed 20 civilians in October in Yobe State.
Conclusion. Nigeria continues to rely on external borrowing to keep the wolf from the door. The possible implications of this are concerning. The impact on the country’s debt profile cannot be ignored. We firmly believe that sometimes it is necessary to speculate in order to accumulate but is Nigeria now dangerously overstretched? For Tinubu’s stated plans to gain traction he must plough through. To offset the loans he must focus on improving tax collection, cut back on unnecessary expenditure and, most importantly, urgently find ways of diversifying the economy away from oil. Investing in other industries and agriculture will bring jobs and growth to the restive north of the country. Upgrading infrastructure will bring stability to the volatile south. If – and it is a big if – he is seen to be doing this, it will go a long way to increasing his chances of being able to form and implement a security strategy that calms his nation, increases investment and feeds families. Only then will there be any chance of the kidnap for cash culture ending and the radicalisation of an ever-growing number of young people willing to fight as they have nothing to lose. It is still early days in Tinubu’s time in office. We said when he got the job that he had much work to do. He has started but has he done enough and will it make an impact in time?