A Week in Nigeria: 20 March
Highlights from Reuters coverage of Nigeria over the last seven days
In this week’s round-up: Nigeria’s government disappointed by acquittals in $1.3bn oil corruption trial, stagflation takes hold as prices and unemployment soar, Flutterwave teams up with PayPal.
- Nigeria’s government said it was surprised and disappointed after a Milan court acquitted energy company Eni, its chief executive and Royal Dutch Shell in the oil industry’s biggest corruption case revolving around the $1.3 billion acquisition of a Nigerian oilfield a decade ago. The sentence, read out in court by judge Marco Tremolada, came more than three years after the trial first began and after 74 hearings. Tremolada said the companies and defendants had been acquitted as there was no case to answer. The Nigerian government said it would consider whether to appeal once its lawyers had read the written judgment. Rulings in Italy can be appealed and only become enforceable once they are final. Tremolada said the judges would use all the 90 days permitted by law to compile their written judgement. The long-running case revolved around a deal in which Eni and Shell acquired the OPL 245 offshore oilfield in Nigeria. Under a 2011 agreement, Malabu Oil and Gas, owned by former Nigerian oil minister Dan Etete, handed OPL 245 back to Nigeria while in parallel Shell and Eni paid Nigeria $1.3 billion to settle a long-standing dispute over the oilfield’s ownership. Prosecutors alleged that just under $1.1 billion of that amount was siphoned off to politicians and middlemen, including Etete, a convicted money launderer who acquired the field in 1998 when he was oil minister under military ruler Sani Abacha. Prosecutors had called for Eni and Shell to be fined, for a number of past and present managers from both firms, including Eni Chief Executive Claudio Descalzi, to be jailed and for $1.1 billion to be confiscated from the defendants. The prosecutors declined to comment on the verdict. The defendants had all denied any wrongdoing. We published a timeline charting the many twists and turns in the case.
- Nigerian inflation hit a four-year peak in February as food prices jumped more than 20%, heaping financial pressure on households already faced with a shrinking labour market and a stagnant economy at a time of mounting insecurity. Inflation, in double digits since 2016, reached 17.33%, driven by the impact of a coronavirus epidemic that has also induced a drop in the price of oil, Nigeria’s main export, and weakened the naira currency. Tuesday’s inflation reading was the highest since the 17.78% touched in February 2017. The economy was in a slump then and is teetering on the brink of recession now, having expanded just 0.11% in the fourth quarter. Food prices, which make up the bulk of the inflation basket, rose 21.79% in February, a jump of 1.22 percentage point on January, the National Bureau of Statistics (NBS) said. In a country plagued by insecurity following a wave of kidnappings of schoolchildren in its increasingly lawless north, there are concerns that the “stagflation” combination of rising unemployment and prices and low growth could trigger significant social unrest. “Straining households will be compounded by increasing reports of insecurity in some regions, fuelling the risk of broader social discontent,” said Jacques Nel, head of macroeconomic research at NKC African economics in South Africa. Staples including bread, cereals, potatoes, fruits and oil drove the increase in the food price index, the NBS said in its report. Inflation pressures would probably remain high in coming months, Nel predicted, adding that just 30.6 million Nigerians of a population of around 210 million were considered fully employed. Bismark Rewane, managing director at Lagos-based Financial Derivatives, said the “stagflation crisis” would take a long time to resolve, with inflation eating up economic gains to the point where any government stimulus might be too weak to generate jobs. President Muhammadu Buhari has made investment in rail and road a focus of his administration’s drive to kick-start growth, but falls in public revenue linked to the lower oil price have checked his ambitions. Given the low-growth and high-inflation backdrop, few analysts expect the central bank to either raise or lower its base rate of 11.5% next Tuesday, when it holds a policy meeting. “They should be thinking of tightening to encourage savings and investment which could help employment but I think we may have reached the limit of (what can be achieved with changes to)monetary policy,” Rewane said. Meanwhile the International Monetary Fund, which said in February the bank might need to tighten policy if inflation got out of control, has urged it to phase out financing of the government deficit to help check price pressures, and to allow the naira to float more freely. The central bank has tried to manage pressure on the currency by restricting access to dollars for certain imports to boost local production, and set up a multiple currency rates. Such “subsidised credit” had clearly failed to prevent a rise in near-term inflation, said Razia Khan, chief economist for Africa and the Middle East at Standard Chartered.
- The inflation figures were published a day after the statistics office released data showing that a third of Nigeria’s workers were out of a job in the fourth quarter. The unemployment rate stood at 33.3% in the fourth quarter, the National Bureau of Statistics (NBS) said, up from 27.1% in the second quarter, when the data was last published. Unemployment of 23.1% was first reported for the third quarter of 2018. Unemployment among young people aged 15–34 was the highest at 42.5% in the fourth quarter. The data showed that in total, 46.48 million people were employed during the period, 30.57 million of them full time. The fourth-quarter figure was 20.6% less than the number employed in the second quarter, the NBS said, adding that more than 12 million people did not do any work in the seven days preceding the survey.
- Gunmen on motorbikes stormed a primary school in the northwestern Nigerian state of Kaduna and kidnapped three teachers but no children, a state official said on Monday after the fifth school abduction in three months. It was the first attack on an elementary school in a wave of such attacks in which more than 700 people have been abducted since December. Samuel Aruwan, Kaduna state’s commissioner for internal security, said in a press briefing that Rema Primary School, in the Birnin Gwari Local Government Area, was attacked at around 8:50am (0750 GMT) on Monday. He said children fled as gunmen, referred to locally as bandits, entered the compound shortly after pupils arrived. “This led to two pupils going missing. We are happy to inform you that the two missing pupils have been found,” Aruwan said. “We can also confirm that no single pupil was kidnapped from the school. “The government can confirm that three teachers… have been kidnapped.” Nigeria’s kidnapping scourge began with the seizure of 270 girls from a school in the northeastern town of Chibok by the Islamist insurgent group Boko Haram in 2014. Around 100 of the schoolgirls have never been found. Armed criminal gangs in Nigeria’s widely lawless north have since carried out many copycat attacks seeking ransom. The presidency said late in February that President Muhammadu Buhari had urged state governments to “review their policy of rewarding bandits with money and vehicles, warning that the policy might boomerang disastrously”. Attempts by the military and police to tackle the gangs have had little success, while many worry that state authorities are making the situation worse by letting kidnappers go unpunished, paying them off or providing incentives. Nigeria’s federal government has said it will “take out” abductors after criticising local deals to free victims. A presidency spokesman said he did not have the details of Monday’s kidnapping. Armed men attempted to kidnap more students in Kaduna state overnight on Sunday, as 39 others from an earlier attack in the state remain missing. The rampant banditry has become a political problem for Buhari, a retired general and former military ruler who has faced mounting criticism over the rise in violent crime, and replaced his long-standing military chiefs earlier this year. Buhari held talks with security officials and regional elders last week about Nigeria’s multiple security challenges. Afterwards, national security adviser Babagana Monguno said the government would take a tough stance against criminal gangs.
- The World Trade Organization director-general said the WTO was concerned about Nigeria’s foreign exchange management and how it had been used to support manufacturing, exports and imports. Ngozi Okonjo-Iweala, a former Nigerian finance minister who was appointed director-general of the global trade body this month, said some WTO members had raised complaints. She said Nigeria needed to explain its foreign exchange regime to the WTO and those members. She said Nigeria had invoked WTO’s agreement on balance of payment to conserve foreign exchange. “It invoked this article but some other members have brought a complaint against us that we shouldn’t have used this article in that way,” Okonjo-Iweala told reporters after meeting with President Muhammadu Buhari. “So, yes, the WTO is concerned about foreign exchange, the way we manage it and how we use it to support manufacturing, export and import in our economy.” Nigeria’s central bank, seeking to conserve its dollar reserves, curbed access to the interbank market for importers bringing in a wide range of goods to boost local production and set up a multiple currency regime to manage pressure on the naira. Okonjo-Iweala said she would meet the central bank governor to discuss some of the issues. Nigeria’s central bank has favoured a strong naira, a policy backed by President Muhammadu Buhari, who see it as a national pride. The bank has argued that a weaker naira will stoke inflation which has been in double digit since 2016. The central bank has rejected calls for a more flexible currency, which the International Monetary Fund and the World Bank has said will help Nigeria absorb future shocks.
- The WTO chief met the central bank governor on Tuesday, a day after referring to the complaints around the country’s foreign exchange regime. Nigeria needs to be given a chance to reset and diversify its economy, the central bank said after their meeting. “Godwin Emefiele says Nigeria needs to be given a chance to reset and diversify its economy, just as he reiterated the determination of the CBN (Central Bank of Nigeria) to address identified deficiencies in the Nigerian economy,” the bank said in a statement. Nigeria relies on crude oil sales for around 90% of foreign exchange earnings. “Mr Emefiele said Nigeria’s position on trade was necessitated by the drive to protect local industries to create jobs and employment,” the central bank added. It said Emefiele had cited stimulus packages and the restructuring of loans as measures used to reduce the impact of the coronavirus pandemic.
- Fintech company Flutterwave has teamed up with PayPal to enable the U.S. payments giant’s customers to pay African merchants through its platform, the Africa-focused fintech firm said. The collaboration will connect small and medium enterprises with the more than 377 million PayPal account holders globally, Flutterwave said, eliminating the barrier to cross-border commerce. Flutterwave’s integration with PayPal will be operational across 50 African countries and worldwide, it said in a statement. Online payments got a boost with the COVID-19 pandemic as people rely on mobile apps for shopping and paying bills. Like other companies in the digital payments sector, San Jose, California-based PayPal has profited from the boom in online transactions that pushed more business into the virtual realm. Flutterwave has said it is positioning to be an African payment platform for multinationals entering new markets. Founded in 2016 by Nigerians and headquartered in San Francisco, the firm has processed over 140 million transactions. CEO and co-founder Olugbenga Agboola told Reuters last week that Flutterwave could consider a New York listing after it raised $170 million from investors to expand its customer base, pushing its valuation up to more than $1 billion.
- And, finally, Nigerian regulators set a flat fee for financial transactions carried out via mobile phones, replacing a billing system that caused disagreements between telecoms firms and lenders. The Nigerian Communications Commission and central bank said they had agreed a flat fee of 6.98 naira ($0.0183) per transaction to ensure financial inclusion and lower costs. Nigeria wants to open up its digital financial services sector, which will help millions of Nigerians who do not have bank accounts. But regulation has been caught up with intense lobbying from lenders seeking to protect their turf amid stiff competition and a rise in borrowers renegotiating loans. The country has more than 20 lenders. MTN Nigeria, majority-owned by South Africa’s MTN Group, runs Nigeria’s biggest mobile phone network, serving around 76.5 million people. A quick code, or unstructured supplementary service data (USSD), sent by mobile phone for transactions is critical for delivering services to Nigeria’s underbanked population in a cost-effective manner, the regulators said in a statement. But disputes over fees and who is responsible for paying have often led mobile phone operators to withdraw services. The regulators said payments to mobile operators for providing the USSD service would be billed to bank customers and that lenders would not impose additional charges. They did not disclose how much money was owed to mobile operators for the service under the old system but said a settlement plan was being worked out. Mobile operators had threatened to suspend lenders from using the quick code service.