A Week in Nigeria: 20 April

Many Nigerians see cheap pump prices as the only benefit they derive from living in an oil-rich country

In this week’s round-up: no changes on fuel subsidy and FX policies, Malabu oil deal arrest warrants and minimum wage rises.

  • This week there were answers to questions over the extent to which President Muhammadu Buhari’s government will change course at the start of his second term. Two cabinet ministers signalled that there were no plans for the government’s stance to shift on two issues: the fuel subsidy and the foreign exchange environment. Finance Minister Zainab Ahmed said Nigeria has no intention of removing the subsidy on petroleum products after the International Monetary Fund (IMF) advised eliminating it to protect public finances. Meanwhile, Lia Mohammed — the information minister — said the system of multiple exchange rates for the naira currency is working well and the central bank is unlikely to change it in the near future.
  • On the fuel issue, by way of context, Africa’s top oil producer and biggest economy heavily subsidises gasoline and relies on imports for the bulk of its domestic demand due to an underperforming refining system. Many Nigerians see cheap pump prices as the only benefit they derive from living in an oil-rich country. Buhari’s predecessor, Goodluck Jonathan, attempted to end the subsidy in 2012 to cut government spending, doubling the price of a litre of petrol overnight. The move led to widespread anger and eight days of nationwide strikes. His government later reinstated part of the subsidy to end the strikes. Buhari was advised to remove the subsidy when he first took office in 2015. Now, with a fresh mandate following his February election victory, his government has another chance to tackle a thorny issue. But finance minister Ahmed ruled out such a move, at least in the short term. “It’s still work in progress … there is no intention to remove the fuel subsidy at this time,” she said. The IMF, which earlier this month published its Article IV assessment of the country, advised Nigeria to remove the subsidy on petrol and channel the saved funds into building hospitals, roads and schools. Ahmed said she agreed with the IMF’s advice but the country first needed to take steps to cushion the effect of subsidy removal on the population. “We have to find a formula that will work for Nigeria. And until we do that, we should not be contemplating removing the subsidy,” she said. Many shared their views on social media.
  • The IMF has for some time also called on Nigeria to scrap its multiple rates. The central bank is independent but its governor has steadfastly backed Buhari’s insistence that the naira’s value should remain fixed. Nigeria has maintained multiple exchange rates since currency controls were introduced in 2015 to counter the impact of falling prices for crude oil, which provides 90 percent of the country’s foreign exchange earnings. The controls restricted access to U.S. dollars and choked off investment. The information minister, in an interview with Reuters in London, said the current system, which involves at least three exchange rates with the official rate held at 306 to the dollar, was working well. “Right now, the currency is converging naturally at about 360 naira to the dollar. Three years ago, the same … was about 525. I don’t think the central bank is in a hurry” to change this, he said.
  • A Reuters poll of economists found widespread agreement that economic disruption from uneven currency trading in Nigeria and continued electricity shortages in South Africa are set to hold back overall growth across sub-Saharan Africa this year. The survey, taken in the past week, shows Nigeria, Africa’s most populous country and largest economy, is expected to grow 2.4 percent this year and 2.8 percent next year. South Africa, the number two economy on the continent, will grow 1.3 percent this year and 1.7 percent in 2020. The 2019 forecasts for the two countries, which together drive around half of the wider region’s growth, are both 0.1 percentage points lower compared to the last survey for Nigeria in January and March’s poll for South Africa. Since commodity prices collapsed four years ago, the region has largely missed out on the global economic recovery, with growth failing to return to rates seen in previous years and set to remain subdued.
  • President Buhari signed into law a bill to increase Nigeria’s minimum wage with immediate effect. The change means the minimum monthly wage will rise to 30,000 naira (around $80/$90 depending on the exchange rate you use) from 18,000. Unions went on strike last year over the minimum wage, initially demanding a rise to 50,000 naira a month. The cost of living has become a key issue for many in a country where most people live on less than $2 a day. On social media, numbers were crunched and shared — along with opinions.
  • And, still on the cost of living, the National Bureau of Statistics said consumer inflation stood at 11.25 percent in March, compared with 11.31 percent in February. A separate food price index showed inflation at 13.45 percent in March, compared with 13.47 percent in February.
  • A Nigerian judge issued arrest warrants for two former ministers and an Eni manager over the sale of offshore oilfield OPL 245 by Malabu Oil and Gas in 2011, the Economic and Financial Crimes Commission (EFCC) said. Dan Etete, former petroleum minister, ex-attorney general Mohammed Adoke and Eni manager Roberto Casula “are to be arrested anywhere they are found”, the EFCC said in a statement. It said it followed a ruling by a judge in the capital, Abuja. Eni called the move “disproportionate and detrimental” to the rights of its manager. The $1.3 billion deal has spawned legal cases spanning several countries and involving Nigerian government officials and senior Eni and Shell executives. Eni and Shell jointly acquired the field from Malabu, which was owned by Etete. An ongoing case in Milan alleges that roughly $1.1 billion of the total was siphoned to agents and middlemen.
  • Nigeria’s most senior judge was sacked by a tribunal that convicted him of falsely declaring his assets. Chief Justice Walter Onnoghen was controversially suspended by President Buhari in January, weeks before the presidential election. The move triggered accusations of interference in judicial matters. Nigeria’s judiciary has helped resolve electoral disputes after past votes, some of which have been marred by violence and vote-rigging. And the chief justice is at times called on to rule on elections where the outcome has been disputed (just as the opposition has disputed the outcome of February’s election). Back in January, the EU, U.S. and Britain all issued statements expressing concern at both the suspension and the timing of the move, coming less than a month before the election. Sitting this week, the Code of Conduct Tribunal (CCT), which rules on allegations of false asset declaration, said it had found Onnoghen guilty of hiding the extent of his wealth and removed him from office. The CCT said it had also banned Onnoghen from holding public office for 10 years and ordered any assets he could not account for to be forfeited to the state.
  • And, finally, Islamic State (IS) said it had recorded 69 casualties from the Nigerian Army and troops from an African anti-militant force in attacks over the past week. The Jihadist group made the claim about Islamic State West Africa Province (ISWAP) in its weekly paper, Al-Nabaa.

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