A Week in Nigeria: 1 December

It was a bad week for the naira as it weakened on the black market to the lowest level since August 2017

In this week’s round-up: The naira’s sharp fall on the black market prompts central bank plans to boost dollar sales, Atiku’s hunt for voters in the southeast and Buhari breaks his silence on dead soldiers.

  • The naira was hit by its biggest bout of volatility in more than a year, falling sharply to its weakest level on the black market since August 2017. The Nigerian naira weakened by 1 percent on the black market on Thursday to 370 per dollar. Traders said some black market outlets were hoarding dollars, fearing a recent sharp fall in oil prices could lead to a shortage of the U.S. currency. “There’s no new investment coming in and oil prices have been dropping so investors are watching while some are exiting,” said one trader. Global prices of oil, Nigeria’s chief export, have dropped more than 20 percent this month. Traders now fear that the Nigerian central bank may not have enough reserves to defend the currency against a possible further weakening of oil prices as foreign investors have been pulling money out of Nigerian assets.
  • After the naira weakened, the central bank announced plans to boost its dollar sales to exchange bureaus. It said it would introduce a special forex intervention to meet demand from individuals with dollar expenses by increasing its auction days to four from three starting on 6 December. Dollar shortages could worsen, traders say, as investors close their books for the year unless the central bank increases its intervention in the foreign exchange market.
  • With much of the naira situation hinges on oil prices, it was fitting that Saudi Arabian Energy Minister Khalid al-Falih held a joint media briefing with Nigerian oil minister Emmanuel Ibe Kachikwu. Falih revealed that Saudi Arabia will not cut oil output on its own to stabilise the market, as Nigeria and Russia said it was too early to signal whether they would join any production curbs. The Saudi minister said signals from fellow OPEC members Iraq, Nigeria and Libya were positive ahead of the group’s 6 December talks because all ministers want to restore oil market stability. “We are going to … do whatever is necessary, but only if we act together as a group of 25,” Falih told reporters, referring to OPEC and its allies. “As Saudi Arabia we cannot do it alone, we will not do it alone. Everybody is longing (to) reach a decision that brings stability back to the market.”
  • President Buhari, at the end of last week, ended days of silence regarding attacks by Islamists which security sources said killed around 100 soldiers in the northeastern state of Borno. “President Muhammadu Buhari has expressed deep shock over the killing of military personnel,” the presidency said in an emailed statement issued by Buhari’s spokesman, Garba Shehu. “Immediate measures are being taken to ensure that the loopholes which led to the fatalities are blocked once and for all,” it said. Militants attacked a military base on 18 November in the village of Metele in Borno, the epicentre of an insurgency by Boko Haram and its splinter group, Islamic State in West Africa (ISWA).
  • Once Buhari had broken his silence, there were was a steady stream of social media messages on the hitherto contentious issue of the struggle to overcome Islamists in the northeast. Given the government’s insistence since December 2015 that Boko Haram had been defeated, the presidency had seemed reluctant to comment on the fight against insurgents, particularly where deaths were concerned. But, faced with an opposition that has sought to undermine Buhari’s security credentials by turning the deaths of soldiers into a political weapon less than three months ahead of February’s election, it seems the presidency this week sought to communicate more on this subject.
  • We reported from the cities of Onitsha and Enugu to focus on efforts by opposition presidential candidate Atiku Abubakar to outflank Buhari by picking up votes in large numbers across the southeast where the president is unpopular. Atiku is targeting regional voters — who are mostly members of the Igbo ethnic group — through his choice of a local running mate and policies designed to meet calls for autonomy. The numbers are tempting: there were 7.5 million registered voters in the five states of the southeast out of 67.4 million nationwide at the last election, in 2015. And millions of Igbos can be found nationwide in key areas, such as the Lagos. The opposition will still need to overcome voter apathy in the southeast, where people have long felt there is little point in voting since presidents tend to be northerners from the Hausa ethnic group or Yoruba people from the southwest. While presidential elections in Nigeria are usually cast as a fight between the mainly Muslim north and the predominantly Christian south, this election will be different: both men are Muslim, from the north and from the Fulani ethnic group. Victory could hinge on a candidate attracting votes from outside his ethnic and religious base.
  • The World Bank said it expects Nigeria’s economy to grow slightly less than 2 percent this year, largely driven by the non-oil industry and services sectors, as the approach of elections keeps foreign investors away. Nigeria emerged from a recession last year but growth remains fragile, with the government borrowing both at home and abroad to help fund its budget. It has raised almost $9 billion from the Eurobond market since 2017 to boost growth. The World Bank said non-oil industry and services, which make up more than half of Nigeria’s economy, had been boosted by growth in construction, transport and communication technology. But it said investment in human capital, which the government has been seeking to boost, remained low compared with other countries.
  • Nigeria has awarded a mining contract to ten exploration and consulting companies as part of the country’s efforts to develop the sector, the mining and steel development minister said. Abubakar Bawa Bwari did not say how much the contracts were worth but in July he had said eight firms would be awarded a government contract to the tune of 12.7 billion naira ($41.5 million). He said Nigeria had offered mining companies a three to five year “tax holiday”, duty and tax-free importing of equipment, full ownership of their businesses and the ability to take profits out of the country.
  • Nigeria’s Diamond Bank said it plans to pay off a $200 million Eurobond due in May with dollars generated from operations and has no plan to refinance the debt. The mid-tier lender also said it has received approval from the central bank to operate only in Nigeria, in a move to lower capital requirements after selling its international units.

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Alexis Akwagyiram

Alexis Akwagyiram

Nigeria bureau chief for Reuters. Ghanaian family, British accent. Ex-BBC, before that newspapers.