President Tinubu has made some quick decisions in certain areas but then slowed down in others. He first turned his attention to government fuel subsidies and corruption but took his time appointing his cabinet. Nigeria’s economy remains on the brink and the Naira continues to decline. If ever there was a need for some swift policy decisions it is now. Historically, we know from Tinubu’s time as Governor of Lagos that he is more than capable of dealing out some tough love yet he seems strangely hesitant to face up to national problems with the same vigour he showed at state level. He cannot afford to delay any further. He needs to find a well thought out approach to solving his nation’s financial woes and so far we haven’t seen much detailed deliberation. Only by growing the economy can he even begin to address insecurity.
Policy. President Tinubu had a blistering start to his time in office. In June he removed the fuel subsidy – a move not well received by those who voted for him. Nigeria spent USD9.7 billion on fuel subsidies in 2022. On the surface, this is money that the country could ill afford but digging a little deeper this policy change may have been a misplaced priority for Tinubu. Pump prices have soared plunging even more people into poverty and firing up already painfully high inflation levels. What may have been a more prudent move was to increase refinery capacity, cut imports and then gradually lower government support. Petroleum Minister, Heineken Lokpobiri, has announced that the country’s four refineries will be fully functioning by the end of 2024. The refineries have not been operational in years. Successive Ministers have promised to revamp them but with nothing achieved we see no sign of a concrete plan or schedule that will make this pledge any truer than prior ones. Since the price hike, fuel consumption has dropped but not for the reason you would imagine. In July, Nigerians consumed 52 million litres daily, down from 64.96 million litres in the previous month. Tinubu says this is a sign that Nigerians are tightening their belts and conserving fuel but everything else points to fuel smuggling across borders. Either way, we suspect Tinubu may be on the verge of reversing his decision and implementing a ‘temporary’ subsidy aimed at stabilising prices and encouraging investment. The subsidy removal was followed by a foreign exchange reform that led to a large devaluation of the Naira. Black market FX dealers are currently buying the greenback for NGN 907, selling at NGN 915.
Government. As August ended, Tinubu finally appointed his cabinet, three months after taking office on 29th May. People have questioned what took him so long but what is sure is that they have much work to do. By law, he must include a member from each of the country’s 36 states. Tinubu’s cabinet has 45 members which has provoked criticism about increased expenditure despite Tinubu’s promises to cut spending. Ministers must address surging inflation, a slumping economy, increasing insecurity and an ever weakening currency. Most members of the cabinet are well known names on the political scene and there are no surprises. Many of them were instrumental in Tinubu’s election campaign.
Corruption. Tinubu campaigned on pledges to reduce corruption in the Nigerian government. Already, he has ordered an audit of the central bank to be followed by an audit of the federal payroll. He has also promised that his administration will conduct a judiciary remuneration review to combat corruption as soon as the court summer recess ends. The current economic crisis has made corruption more visible but that is also being aided by some very high profile international cases. Former Oil Minister, Diezani Alison-Madueke, who also served as president of the Organization of the Petroleum Exporting Countries (OPEC) has been arrested and charged with bribery in the UK. The National Crime Agency (NCA) has published details of the allegations against her. The NCA has also ordered the former governor of Delta State, James Ibori, to pay back more than GBP130 million following a financial investigation by the agency. Ibori was found guilty of corruption and sentenced to 13 years in prison in 2012. This is one of the largest ever confiscation orders issued in the UK. If Ibori fails to comply, he faces an additional eight years behind bars.
Niger. Following a military coup in neighbouring Niger in late July which overthrew democratically elected President Bazoum, Nigeria closed its 1,500km border with the country in early August. The Economic Community of West African States (ECOWAS), of which Tinubu is currently the Chairman, has imposed sanctions against Niger signalling that coup leaders have seriously misjudged the regional block’s response to their actions. Ecowas has not ruled out military intervention in the nation. Nigeria would most likely provide the bulk of the troops for an ECOWAS peacekeeping effort should one be launched. In response, Niger has ordered the armed forces to be on maximum alert citing an increased threat of attack. Niger’s military rulers on 25th August gave ambassadors from the United States, France, Germany and Nigeria 48 hours to leave the country further elevating tensions. France’s President Macron has said his Ambassador will not comply with the order to leave. Nigeria has denied any order was issued. In a statement the government said “the attention of the Ministry of Foreign Affairs has been drawn to news making the rounds on social media that the Nigerian Ambassador to the Republic of Niger, H. E. Mohammed Usman was on Friday, August 25, 2023 expelled and given 48 hours to leave the country. The Ministry of Foreign Affairs wishes to inform the general public that this information is false and as such should be disregarded.” Trade between Nigeria and Niger was worth more than USD226 million in 2022.
Diplomacy. Tinubu will meet US President Joe Biden at the United Nations General Assembly in New York this month. The meetings are scheduled between 18th and 26th September in New York. The pair are expected to discuss the situation in Niger and the on-going mediation efforts. The invitation was delivered by US Special Presidential Envoy and Assistant Secretary of State for African Affairs, Ambassador Molly Phee, who said “President Joe Biden is asking to meet with you on the side-lines of UNGA and you are the only African leader he has requested to meet. It is a mark of his high regard for your leadership.”
The economy grew at a slower than anticipated rate which saw the oil sector once again contract for the 13th consecutive quarter. Gross Domestic Product grew to 2.5% in the 2nd Quarter up from 2.3% three months earlier. This is yet another area Tinubu must attend to urgently. He needs to aim for double digit expansion, something not seen in his country since 2010. Annual inflation soared to an 18 year high in July reaching the dizzying heights of 24.1%. The average daily oil production declined to 1.22 million barrels per day in Q2 compared to 1.43mbpd in the same quarter of 2022.
Reserves. In previous months, during Buhari’s tenure, we reported that Nigeria’s reserves had been severely depleted. We anticipate that an asset sale is on the horizon to release much needed funds – likely including some of the state’s share of its oil & gas interests. Investigations also need to be launched into where the funds have gone and how they disappeared so quickly. If Tinubu wants his anti-corruption stance to be taken seriously it would be in his best interests to order an investigation as soon as possible.
Beer. Nigerian Breweries announced an increase in the price of beer in August. The company blamed rising production costs stemming from the removal of the fuel subsidy. The price hike comes despite the company reporting revenue of NGN 277 billion for the first six months of this year. NGN 274 billion was recorded in the corresponding period in 2022. We anticipate other manufacturers will follow with pricing changes.
Boko Haram. On 22nd August, 49 women were kidnapped by Boko Haram fighters in Shuwaei Kawuri village on the outskirts of Maiduguri. The victims were taken from farms. A ransom of NGN 3 million was demanded. State representatives intervened and negotiated that amount down to NGN 1 million which secured their release three days after they were taken. There has been no decrease in violence in the region. In late July, BH fighters beheaded at least ten farmers in Borno State. A week before that, militants killed at least 25 people and wounded dozens more in the Konduga area of the state. The killing of farmers and the disruption caused by attacks is damaging food production and agricultural output which ultimately will lead to further price hikes for produce – pushing inflation even higher. The precedent now set of paying ransoms will also do nothing to diminish that risk and may actually have increased it. At least 12 people were kidnapped in two separate incidents on 26th August. A village chief and three farmers were abducted in Zamfara state. Eight farmers were taken in a separate attack in Borno. Ransom demands have been received in both cases. ‘If you can’t get a job get a hostage’ is now a joke made often but in truth it really isn’t funny at all. Kidnappings, armed robberies, and other violent crimes will continue with alarming regularity across most of the country. Should troops be deployed to Niger we anticipate incident numbers will increase accordingly.
Protests. Several political and civil society groups have announced plans to protest the recent general election results. We anticipate that any gatherings will be near electoral commission buildings and tribunals during on-going election tribunals. Kano State has already announced a ban on all forms of street protests as political tensions rise. It is unclear how long the restriction will be in place, but other cities and states may follow Kano’s lead.
Nigeria will continue to battle multiple security challenges while delicately dealing with fragile political stability. Tinubu’s aggressive reforms have shaken more than just his nerve; they have shaken markets, exchange rates and investments too. The Naira now trades at a record low against USD and shows no signs of strengthening without decisive direction from the government. Investors need to see where the Nigeria ship is sailing and the route is yet undefined. Tinubu needs to chart a clear course and stick to it. If not his country is in very real danger of sinking. As the summer break draws to a close and government business gets back to normal, Tinubu must now urgently get himself and his team to work and keep the nation afloat.