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Friday, March 24, 2023

The Week Ahead – Sugar, Spice and Little Nice

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Federal versus state bickering, the rise of digital rights restrictions, continued forex remittance challenges, indifference to the plight of displaced persons, middling revenue growth mixed with important movement on electoral reform and a chastening of South Africa’s symbol of political freedom to make this a week where the hot, spicy and saucy coexisted in one unsettled brew.

A more direct politics
The Senate has approved the conference committee report on the Electoral Act Amendment Bill. The approval was a sequel to the presentation and consideration of the report by the Senate Leader, Abdullahi Yahaya, on Tuesday. The Senate and House of Representatives had passed different versions of the bill in July and some provisions of the legislation had generated controversies. One of such was clause 62 which deals with the use of modern technology in voting and transmission of results. The Senate initially empowered the Nigerian Communications Commission and the National Assembly to determine the use of electronic transmission of results in an election while the House allowed electoral umpire, INEC, to transmit results of elections by electronic means where and when practicable. A conference committee was thereafter set up to harmonise the differences. However, three months later, the Senate rescinded its decision on the clause and approved that INEC will determine the use of electronic voting and transfer of results. The Senate also amended clause 87 of the bill to mandate political parties to hold only direct primaries for candidates seeking elective positions – against what was passed earlier. A direct primary election is the mode of an election where all members of a political party participate in the choice of its candidates to stand in the main election. In the conference committee report, both chambers of the National Assembly have agreed to empower INEC to determine the best mode to transmit election results. This means the commission will decide how to transmit election results — either electronically or manually. The committee also approved that all political parties must use the direct primary mode in picking candidates. The House is expected to approve the report after which a copy will be transmitted to the president for assent.

The use of electronic transmission of results in Nigeria’s elections, while not new, has been fraught with challenges, and the erstwhile absence of constitutional backing complicated the 2019 presidential elections which severely hampered the chances of the opposition PDP in the electoral tribunal hearing, where APC’s argument was hinged on the fact that there was no constitutional provision for it, and at such, electronic servers by INEC was not an admissible evidence. The previous decision to leave electronic transmission to INEC’s discretion was problematic as it showed a lack of policy coherence, and set up the electoral umpire for legal challenges. The problem that could arise from this new development rests largely on the depth of Nigeria’s internet coverage. Access to the internet in remote areas has remained a huge challenge for residents, and could thus impede INEC’s ability to effectively collate results devoid of malpractice. It also depends on the capacity of INEC to effectively deploy technological devices for elections and train personnel intended to make use of such devices. Meanwhile, the imposition of direct primaries on political parties is a welcome development, as it reduces the incidents of  rancour that have coloured internal party politics in Nigeria. We, however, are doubtful that the parties and even INEC are capable of implementing it at the moment. This is because it will mean that the parties would have to improve their capacity to maintain accurate and up-to-date membership rolls, while INEC’s capacity to monitor primaries has to scale up quickly. This is important to note because where direct primaries have been used by political parties, the numbers claimed to have voted are often way more from those who vote in the general elections, clearly indicating a gap. In order not to appear too ravenous in their internal politics, consensus candidacy and indirect primaries have largely been favoured over direct primaries but that has had its own well documented issues: violence, mass defections and parallel conventions have been the order of the day. This new legislation is important on account of the stability it could potentially bring to the political process. But we do not expect the major political parties to accept this legislation without a fight.

Drawn swords
The Nigeria Governors’ Forum (NGF) has accused Abubakar Malami, Attorney-General of the Federation (AGF), over alleged involvement in the controversial $418 million request by consultants regarding the Paris Club refund. The NGF’s spokesman, Abdulrazaque Bello-Barkindo, said the decision of the AGF to throw his weight behind the consultants who have been battling desperately to grab $418 million from the accounts of states and local governments “raises questions of propriety and the spirit of justice.” The controversial payment of $418 million to consultants had become a contending issue between the three tiers of government. Last Friday, the Federal High Court in Abuja stopped the FG from deducting $418 million from the bank accounts of the 36 states. The court, in a ruling that was delivered by Inyang Ekwo, ordered FG to suspend the planned action, pending the determination of a suit brought before it by governments of the 36 states. Jibrin Okutepa, who led the legal team of the states, told Ekwo that the 36 states would be completely crippled if the FG deduct the huge amount from the bank accounts of the states. Okutepa said the FG had revealed the plan to deduct the $418 million from the accounts of states every month as part of debts for contracts allegedly executed for the states. He, however, said that the 36 states’ attorneys-general have read the purported judgement displayed by the FG and found that the states were not parties to the court action which resulted in the judgement debt. After listening to the arguments of the 36 states, Ekwo restrained  the FG from deducting from the states in respect of the purported court judgement until all issues relating to it were fully determined. Defendants in the matter include the Attorney-General of the Federation, Minister of Finance, Accountant-General of the Federation, and all banks in Nigeria. While adjourning the matter till 30 November, Ekwo ordered the plaintiffs to serve all the relevant court processes on the defendants. The controversial payment of $418 million to consultants over the Paris Club refund had become a contentious issue between the three tiers of government. Consultants had claimed the amount as a percentage for the payment of services rendered to the states and local government councils. But the amount did not go down well with the governors who requested a forensic audit over the claim made by consultants. Bello-Barkindo argues that Malami’s claim that he intervened to pay the contractors to avoid execution of the judgements against the federal government resources is false and advised Malami to remain neutral and protect scarce public resources.

In the battle between the central government and the states for resource control, battle stations have been set up and both sides have firmly taken up polar sides of the same debate. On the one hand, the federal government has made it clear that it will surrender no inch or room to calls for more accountability by subnational units for revenue which hitherto they paid little heed to. On the other end of the pale, fiscally pressured states are now politically motivated to ask for more and they are mostly on the right side of the argument, if only for self interested reasons. The argument bears some analysis. The move by Mr Malami to pay the consultants beggars belief considering that there is a pending suit in court on the deductions from states and local governments to pay them. It raises questions on why the AGF is treating the repayment with haste rather than wait for the determination of the suit which will give the all-clear or otherwise regarding the matter. Not only that, the AGF wrongly claimed that he is intervening to pay the contractors in order to safeguard the assets of the federal government, despite the fact that there is no order of mandamus issued by any court against any of its assets. It is important to note that this is not the first time that Mr Malami has been enmeshed in a scandal involving the payment of consultants: in 2018, he was said to have hired two lawyers to process the return of monies stolen by late dictator Sani Abacha from Switzerland, despite the fact that a Swiss lawyer who had been hired since 1999 had done the grunt of work of tracing, identifying, freezing and recovering monies looted by Abacha. The two lawyers were paid $15 million for what amounted to just writing a letter whereas the Swiss lawyer Enrico Monfrini was paid $12 million for a 19-year body of work utilised in tracing $321 million in state funds. It does appear that Mr Malami continues to use such occasions to subvert processes and act in shady circumstances to make payments to consultants that might ultimately enrich him. The political side of this conversation is that Mr Malami loves power and knows how to use it. The perceived wisdom is that Mr Malami is interested in the Kebbi governorship during the next general elections. If true, this will put him on a collision course with Atiku Badugu, the current state governor, thus it is no surprise that the NGF is being hostile. This is an important point because the governors may not necessarily be smarting due to their love of all things right, but rather for purposes of self preservation and political patronage. Going back to the issue at hand, the blatant absurdity of issues like this in Nigeria has become all too familiar. A multimillion dollar demand has been made by consultants, concerning debt forgiveness that is fast becoming a historical footnote and it is unclear how much was recovered, where those funds were housed and who it ultimately accrues to. 

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Nestlé needs a cup of tea
Switzerland-based Nestlé S.A, majority shareholders of Nestlé Nigeria Plc have bought about ₦17.5 billion worth of the Nigerian unit’s shares in the past eight months, according to a report by BusinessDay. The majority shareholders in the largest Nigerian listed fast-moving consumer goods (FCMG) company between 2 March and 2 November 2021, have bought 12,611,629 units of Nestlé Nigeria shares according to notifications of share dealings by the company’s insiders. Analysts say the continued acquisition of Nigerian unit shares by the parent company “may not be unconnected to their inability to source foreign currency to repatriate their dividends. So, it may have been a decision aimed at reinvesting the dividend to increase their equity stake, rather than losing value on the Naira amount of the dividend.” Nestlé S.A. is a Swiss multinational food and drinks processing conglomerate corporation headquartered in Vevey, Vaud, Switzerland, and has been the largest food company in the world measured by revenue and other metrics, since 2014. Nestlé Nigeria, a subsidiary of Nestlé S.A., is one of Nigeria’s largest food and beverage companies and has been in operation in the country since 1961. The company produces and markets global brands including market-leading Maggi seasoning cube, Milo, and Nestle Pure Life Water. Apart from Societe Des Produits Nestlé S.A, Switzerland, with 524,559,457 ordinary shares (representing 66.18 percent) and Stanbic IBTC Nominees Limited with 5.59 percent, no other shareholder held 5percent or more of the paid-up capital of the Company as of 30 September. At ₦1,400 per share as at close of trading on Tuesday, 2 November, its market cap stood at ₦1.109 trillion. Nestle’s stock price has decreased by 6.6 percent this year. Nestlé Nigeria announced an interim dividend of ₦25 per share which will be paid to shareholders whose names appear on the register of the member as at close of business on 19 November. The proposed interim dividend for the period ended 30 September amounts to ₦19.8 billion.

A company with the size, pedigree and history of Nestle (the Nigerian unit was founded in 1961) being unable to repatriate the returns on their investment due to currency controls is a problematic signal to investors who may be looking to bring in their hard-earned foreign exchange to invest in the Nigerian economy. Foreign Direct Investment into Nigeria has been on a dropping streak for sometime, with a 47.5% drop year-on-year in Q2 2021, its lowest mark in more than a decade. 2020 itself was a low base year, with historic FDI lows across the world due to the coronavirus pandemic but the allergic nature of the Nigerian economy to foreign investors has been going on for a while. While policymakers may be able to force the funds that are in the country already to stay, as we have seen with Nestle, Nigeria will be unable to attract new money, and that is what galvanises growth and stimulates new areas of the economy. Nigeria needs to prioritise providing economic actors with the freedom to do with their own money what they want, once they have paid requisite taxes to the state. The alternative is that investors will continue to vote with their feet, and wallets.

Same old party
Despite higher crude prices and allocation, as the Organisation of Petroleum Exporting Countries (OPEC) and its allies adjust monthly quota, Nigeria’s oil production remains below its monthly quota, according to the latest S&P Global Platts survey. According to the survey, Nigeria dropped to 1.37 million barrels a day in October, 261,000 bpd below its OPEC+ quota, due to operational setbacks and sabotage from key pipelines. The shortfalls from Nigeria and others have contributed to a tight oil market as global demand has recovered to near pre-pandemic levels, prompting intense criticism from the US and other consuming countries that have complained of high oil prices. Nigeria’s production challenges appear not to be going anytime soon, as frequent pipeline sabotage is expected to see the country’s average crude loss surpass 200,000 barrels a day. Platts’ survey showed that Bonny Light, Escravos and Forcados have all faced production issues in 2021, while the output of other key grades such as Qua Iboe, Brass River, Agbami, Akpo, and Egina have also remained consistently low this year. Though Nigeria is expected to produce 1.66 million barrels a day of crude under the new OPEC+ agreement for December, higher than the current 1.4 million barrels per day being recorded by the country, there are concerns that the country can attain the volume despite assurances by the Minister of State for Petroleum, Timipre Sylva. This comes as the National Bureau of Statistics (NBS) says the 36 states and the Federal Capital Territory (FCT) recorded ₦849.12 billion in internally generated revenue (IGR) in the first half of 2021. The figure represented a 39 percent increase year-on-year after the coronavirus pandemic impacted revenue generation in 2020. This is according to the IGR report released by the National Bureau of Statistics (NBS) on Monday. According to the report, IGR was ₦398.3 billion in Q1 and ₦450.9 billion in Q2, indicating a positive growth of 13.21 percent quarter-on-quarter. The report also noted that Lagos has the highest IGR with ₦267.2 billion, representing 31 percent of the total IGR in the first half of 2021. Lagos is followed by FCT with ₦69.1 billion; Rivers ₦57.3 billion; Ogun ₦54.8 billion; and Delta state ₦41.9 billion. Yobe, on the other hand, generated the least IGR (₦4 billion) in the first half-year of 2020, followed by Taraba with ₦4.77 billion, Gombe with ₦5.44 billion and Adamawa with ₦6.09 billion. IGR by Zones in the first half of 2021 shows that the Southwest zone recorded the highest revenue, which amounted to ₦385.4 billion, followed by the South-South zone with ₦156.2 billion, while the North-east zone recorded the least internally generated revenue with ₦42.9 billion. It also shows that Lagos generated 69 percent of the entire IGR of the Southwest. This means that Lagos’s IGR is more than what the entire northern states generated and more than South-South and Southeast put together. Among the components that make up IGR, PAYE contributed the highest which amounted to ₦488.1 billion, this was followed by revenue from ministries, departments, and agencies (MDAs) which amounted to ₦173.5 billion. The least category was road tax with a contribution of ₦16.71 billion in the first half of 2021.

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There are several layers to unpack in this. At the global macroeconomic level, oil prices have outperformed even the most optimistic estimates as major economies continue to face structural challenges in restarting their economies after more than a year of pandemic induced shocks. Unfortunately, Nigeria is not well positioned to reap the benefits due to two major reasons. Firstly, the oil infrastructure deficit makes it difficult to pump enough oil to meet the country’s OPEC+ quota, thus leaving money on the table. Secondly, the scarce resources have be allocated to paying for oil and power subsidies, which erode the productivity of the economy. With respect to the domestic picture, the skew of the IGR data to Lagos maintains a trend that shows that many states are simply unable to exploit the resources in their states, either due to short-sighted policy setting by state governments and/or a structural problem with the incentives set up by the current structure of the Nigerian state. In addition to this, every state, even Lagos, is simply benefiting from a demographic windfall – most of the IGR is PAYE, for which the states do little to nothing to stimulate beyond possessing a large enough population working in the state and compliant employers. The more creative means of stimulating IGR, which will require states to enact policies that will cause a productivity explosion which it can then take a fraction of as tax, is nearly non-existent. Virtually all of Nigeria’s favourite IGR generating methods are predatory which incentivises avoidance as well as taxation by non-state actors. This, combined with Nigeria’s ongoing structural problems such that it is unable to take advantage of a production quota in a high oil price environment speaks to a serious revenue problem, and when the expense makeup of the state is considered, a fiscal crisis. With the election around the corner, don’t expect any adventurous policy change. As for IGRs, no surprise there either. Basically, the federating units have no incentives to deploy income-generating strategies because come what may, money will be shared at the centre. Again, don’t expect any changes soon. 

Priorities displaced
The National Commission for Refugees, Migrants and Internally Displaced Persons (NCFRMI) says the humanitarian crisis in the country has displaced more than one million Nigerians within the past year. Imaan Sulaiman-Ibrahim, the federal commissioner for the NCFRMI, said this on 8 November when she appeared before the house of representatives committee on internally displaced persons (IDPs). According to Sulaiman-Ibrahim, over 500,000 Nigerians are to be repatriated from neighbouring countries. “Due to the current unprecedented humanitarian crisis in Nigeria and the alarming growth rate of displacement, the number of IDPs has increased in the past one year by about one million, causing the number of displaced persons in Nigeria to rise to a frightening three million,” she said. “Nigeria is also a host to about 73,000 refugees from 23 countries, with over 500,000 Nigerians awaiting repatriation from Chad, Cameroon, Cameroon, Libya, and other countries.” Sulaiman-Ibrahim also said the commission is working on constructing more resettlement centres in Borno, Edo, Katsina and Kano to accommodate the displaced persons. According to her, the proposed ₦1.7 billion for personnel and ₦4.5 billion for capital components in the 2022 budget is inadequate for the commission. Darlington Nwokocha (PDP: Abia, Isiala Ngwa North/South) a lawmaker from Abia, said detailed information on the displaced persons should be provided to the committee so that needed adjustments can be made to the budget. “I think it is important that you have presented the indices of this particular information because we need to verify, “he said. “We would like to have the numbers of these people, the location, and things alike because that would give us the strength and ability to track their information to ensure it is properly included cost-wise in this budget.”

The conventional definition of war is a conflict that has killed at least 1,000 combatants over a calendar year. In the past calendar year, per SBM estimates, 3,071 non-state actors and 966 soldiers and policemen have been killed in various incidents that can only be termed as part of several wars within Nigeria’s borders. Several low to mid intensity conflicts across the country especially in its border regions have led to an outflow of refugees. In August this year, the member representing Sabon Birni North constituency at Sokoto House of Assembly, Aminu Boza said attacks by armed groups have forced more than 50,000 residents of 17 communities in Sabon Birni LGA to relocate to Tudun Sunnah village in Gidn Runji, Maradi Region, which is in the neighbouring Niger Republic. The military’s offensive against the terrorists in Zamfara has also pushed these terrorists into Sokoto which has further enlarged the area of displacement. The key driver of the refugee and displacement situation is insecurity, which is itself fuelled by wider economic problems, chiefly unemployment and underemployment. Conversations on internally displaced persons in Nigeria have mostly focused on those that have been displaced by the Boko Haram insurgency and are in IDP camps; however, these conversations do not seem to take into account those displaced by other conflicts such as herder attacks and communal clashes in Benue, Nasarawa, Plateau and Taraba. These camps are either run by state governments or even private and religious organisations. While the government needs to tackle the structural drivers of this socio-economic problem, policymakers have to increase stopgap funding so that it will be able to take care of already displaced persons. Also, there is a need for the Commission to properly map all internally displaced persons in order to ensure that budgeting is enough to cater to their needs. The key concern here is that the budget cut is an indication that the Nigerian government can no longer take care of its displaced persons, evidenced by the hurry of both federal and state governments to close IDP camps over what they have termed “better security in previous conflict areas”. The fallout from this would be enormous: more people would become destitute, and as international aid and donors look to new crisis areas like Ethiopia, multiliteral funding would dry up, further exacerbating a worsening security situation.

Blackout addiction
A Sudanese court ordered the country’s three main telecommunications providers to restore internet access, as the country entered its sixteenth day of a blackout following a coup by military leaders on 25 October. While some Sudanese users have managed to find a connection, the blackout has made it difficult for most people to communicate, particularly with those outside the country. A judge ordered Zain, MTN and local provider Sudani to restore internet service immediately, according to lawyer Abdelazim Hassan, who raised a complaint on behalf of the Sudanese Consumer Protection Society. The blackout has meant further impunity for attacks in Darfur, said Adam Rojal, spokesman for the Coordinating Committee for Refugees and Displaced People, which records attacks in the region. At least four people have been killed in more than 10 militia attacks across the region, with more injured and sexually assaulted, he said. “The lack of internet is allowing them to commit so many violations without accountability. We used the internet to document and report and that would make them a little bit scared,” he said. The blackout was also affecting camp residents economically by making it impossible for them to request or receive money from family abroad, Rojal said. The coup, led by General Abdel Fattah al-Burhan, halted a power-sharing arrangement between the military and civilians. Top civilian politicians were detained and Prime Minister Abdalla Hamdok was placed under house arrest. Mediation efforts have stalled, and Burhan has said he is committed to appointing a technocratic cabinet until elections in July 2023. However, more than two weeks into the military’s rule, while interim appointments have been made, the country is still without a cabinet, head of state Sovereign Council, or key judicial bodies. Local resistance committees, which have led protests since the coup, are planning another “march of millions” on Saturday under the slogan: no negotiation, no partnership, no legitimacy.

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Across the world, a go-to tool of autocrats, dictators and flawed democrats has been to restrict or totally block access to the Internet. Too often, mobile service providers are quick to acquiesce such directives without querying the legality or otherwise, and in many cases, the blackout becomes a cover for both state and non-state violent actors to carry out atrocities under a cloud of restricted access, rumours and suspicion. In Africa, internet shutdowns are increasingly becoming a tool for despots looking to exert ever increasing and worrying levels of control. Freedom House in its 2021 Freedom on the Net report said that internet freedom declined for the 11th straight year on the continent. Ethiopia, Rwanda and Uganda are among the worst offenders in the past year. In June this year, Nigeria banned Twitter over its alleged support for secessionists in the South East, while the government has carried out such Internet blackouts in selective states in the North ostensibly to cut off the communications of terrorists and put government forces in a better stead to engage and neutralise the terrorists. However, in many cases, the attacks continue and the scrutiny that government forces were under to at least report violations of human rights in their engagement is taken away. Mostly, the citizens suffer. In another example, the Nigerian government has selectively, by executive order, declared certain websites illegal and telcos have complied without querying the legality of said directives. Nigerian courts will need to make definitive pronouncements on this matter and curb executive rascality. Rights should never be rescinded outside the judicial process by simple executive fiat. In that sense, the Sudanese court’s decision is a breather, a welcome development which translates to mean that not all state institutions are yet to crumble to authoritarian impulses. Gen. Burhan figured that the easiest way to repress protests against his power grab is to shut down communications services. The courts are showing that they will not make his life easy. On another note, it is also important to warn that judicial independence and other forms of personal freedoms would be at stake if Mr Burhan succeeds in his quest to remain in office till 2023.

Down to earth
South Africa’s governing African National Congress (ANC) is dealing with an unprecedented political headache after its worst election result, as local polls showed support for the legacy party of Nelson Mandela dipping below half for the first time. Results from 99% of polling stations in local elections gave it 46% of votes cast, suggesting anger over corruption and poor service delivery had led some voters to defect from the party of the country’s liberation hero, and others to stay away. The share of the ANC, led by President Cyril Ramaphosa, has consistently declined at local polls, often seen as a prime opportunity for the electorate to lodge protest votes. In the last municipal polls, in 2016, the ANC got 54%, and in the one before that, 62%. But rival parties have been unable to capitalise on dissatisfaction with the ANC. Its closest rival, the Democratic Alliance (DA), is still regarded by many as a party for South Africa’s economically privileged white minority. The Economic Freedom Fighters (EFF), a fledgling Marxist party, is prone to radical and sometimes violent rhetoric that doesn’t appeal to a broad range of voters. At 0930 GMT, the results from 99% of 23,000 polling stations also showed DA had won 21% of the votes, also down from 27% in 2016, and EFF was hovering around 10%, the Electoral Commission’s website showed. ANC officials on Wednesday acknowledged a message from voters that the party needs to “shape up”, after being dogged by several corruption scandals and unfulfilled promises to build roads, assure regular water supply and stop power cuts. If these results are replicated in 2024 polls, the ANC could be forced to seek coalitions to govern.

What the recent local elections clearly tell us is that the nostalgic hold that assured the ANC’s dominance in South Africa’s politics is coming to an end. Since 1994, the ANC has remained the leading party in South Africa following the critical role it played in ensuring the country gained its freedom from the apartheid regime. Even though the party was able to retain much of its hold in local politics, its governing track record in the past decade has been middling. ANC top brass have been accused of corruption and mismanagement. In fact, the suspension of its secretary-general, Ace Magashule, on corruption charges, and the jailing of former president Jacob Zuma led to infighting within the party a few months to the polls, fuelling widespread discontent and causing it its worst election performance yet. In addition, the economic climate, caused by the COVID-induced lockdown did not help the party. The country has experienced three recessions since 1994, two of which have been under current President, Cyril Ramaphosa. In this period, unemployment has reached a record high. In KwaZulu-Natal, a province still loyal to Mr Zuma, the decision to imprison the former President for failure to obey the constitutional court’s directive cost the ANC some votes. In contrast, the main opposition parties, the DA and the EFF, are also mired in their own challenges. The DA, which governs Tshwane Municipality and the Western Cape, is seen by many as exclusionary and a party seeking to consolidate the economic hold of the white minority. Not so different is the vibrant youth-styled EFF, which boasts of its economic strategies to revitalise South Africa’s economy. However, divisive rhetoric by some of the party’s leadership has made it difficult for it to attract support among non-black South Africans and the educated elites. Given the realities on the ground, the ANC will continue to occupy an important place in South Africa’s politics for some time yet as long as it addresses the bane of its declining influence – corruption and a fast failing economy. Voters have officially put it on notice.

SBM Intelligence

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