A Week in Nigeria: 30 May

Highlights from Reuters coverage of Nigeria over the last seven days

Central Bank Governor Godwin Emefiele said seven of the 10 members of the monetary policy committee voted to cut the main lending rate by 100 basis points

In this week’s round-up: Nigeria’s central bank announces biggest interest rate cut in five years, GDP grows 1.87% in Q1, President Buhari sends revised budget to parliament, and Nollywood left reeling by coronavirus-related safety measures.

• Nigeria’s central bank unexpectedly cut its benchmark lending rate to 12.5% from 13.5%, in a bid to stimulate growth in Africa’s largest economy in the face of the coronavirus pandemic. It is the first rate cut since March 2019 and the largest since 2015. Seven of the 10 members of the bank’s monetary policy committee backed a 100 basis point cut, two voted for 150 basis points and one for 200 basis points, said the governor, Godwin Emefiele. Africa’s top oil exporter faces economic distress from the coronavirus outbreak and sharp falls in crude prices, which have triggered a steep decline in growth. Emefiele said the lower rate would “stimulate credit expansion to critically important sectors”, which in turn would also stimulate employment and revive economic activity for a quick recovery in economic growth. Nigeria’s government expects the economy to contract by as much as 8.9% this year, but Emefiele said the country could avoid a recession. The decision surprised analysts. The central bank has kept interest rates tight for the last two years to curb inflation, support the naira and attract foreign investors to its debt market. As usual, members of the Twitterati weren’t backwards in coming forwards with their opinions.

• Nigeria’s five-year bond yield dropped more than 200 basis points on Friday, the day after the rate cut, as yields fell across maturities. The yield on the most liquid 5-year paper fell 201 basis points to 6.5% while the 2026 paper, a seven-year bond, with six years to maturity, fell 120 basis points to yield 8.8%. Traders said the rate cut spurred buying interest from domestic funds battling with excess liquidity on the money market which worsened after foreign investors dumped local treasuries due to a plunge in oil prices that was exacerbated by the coronavirus pandemic.
• Nigeria’s economy grew 1.87% in the first three months of 2020 from a year earlier, said the statistics office, shrinking from the previous quarter as oil prices and international trade fell due to the coronavirus pandemic.It is the slowest quarterly growth rate in one-and-a-half years, and comes as Nigeria has still not recovered from a 2016 recession that sent more than 13 million people into unemployment. The slowdown reflects “the earliest effects of the disruption” from the global outbreak, said Nigeria’s National Bureau of Statistics. Nigeria’s crude production was 2.07 million barrels a day, the statistics office said, the country’s highest level in more than four years. But a global oil price crash due to reduced demand from the pandemic threatens to offset those gains, with annual growth in the oil sector contracting 1.3% from the previous quarter to 5.06%. The non-oil sector was also hit: growing by just 1.55%, which was down 0.72% from the last three months of 2019, the statistics office said. The World Bank expects the coming recession to be “much more pronounced” than in 2016 and potentially Nigeria’s worst financial crisis in four decades.
• President Buhari submitted a revised 2020 budget of 10.51 trillion naira ($29.19 billion) to parliament for approval. The pandemic and low oil prices triggered a decline in growth and large financing needs as well as weakening the naira currency. The government has said since March that the budget passed in December would be revised down. It must be approved by lawmakers, who can make changes, before being sent back to the president to pass into law after he has agreed to any revisions. Amid the steep fall in global oil prices, the government previously said this year’s budget would shrink by about 15%. But the proposal sent to both chambers of parliament on Thursday is only marginally lower than the record 10.59 trillion naira budget approved in December by Buhari. It follows the inclusion of new items, much of which is related to healthcare as part of the country’s response to the coronavirus pandemic. The revised budget includes local and foreign borrowing, including $5.51 billion from multilateral lenders.
• The Nigerian military are unlawfully detaining boys and men at a rehabilitation centre for alleged members of the Islamist militant group Boko Haram, Amnesty International said in a report. In the latest allegations of rights abuses since Boko Haram began its insurgency in Nigeria’s northeast, Amnesty criticised Operation Safe Corridor, a programme that receives financial and technical support from the European Union, Britain, the United States and the U.N. International Organization for Migration. Nigeria’s military did not immediately respond to requests for comment. It has repeatedly denied any wrongdoing in response to such accusations during a decade of conflict. “For almost everyone held (at Safe Corridor) to date, it amounts to unlawful detention,” Amnesty said of the programme which is based in Gombe state and aims at reintegrating former militants into their communities. “Many people there are not former fighters who committed crimes, much less were charged or convicted of any crime,” it said in a report that also listed alleged rights abuses by Boko Haram and criticised conditions at other military detention centres.
• Nigeria’s Bonga crude oil export terminal has begun routine maintenance, its operator Shell told Reuters on Tuesday, adding it aimed to have the work done in “record time”. The Shell Nigeria Exploration and Production Company (SNEPCo) said in an email that maintenance on the Bonga floating production storage and offloading unit (FPSO) began on May 21.

• And Nigeria’s film industry is creeping back to work after lockdown. Our team visited the set of one of the first productions to resume — a new television series about a highly infectious disease that has ravaged the world. Cameras stopped rolling in Nigeria’s film industry weeks ago due to the coronavirus pandemic, which has killed more than 300,000 people worldwide, including 200 in the West African country. Better known as Nollywood, the multibillion-dollar industry churns out movies and TV shows at a rate second only to India’s Bollywood and employs one million people. But productions have had to be stripped right back. Filming for the TV series Meadows, shot in the capital Abuja, restarted in mid-May after being halted for two months. Its production team, excluding actors, has been cut back to around seven people — around a quarter of the people in a regular Nollywood crew. “I have to do lots of things myself,” said director Samuel Idiagbonya, who is now also in charge lighting. The crew wear face masks, actors keep their distance from one another as they deliver their lines and undergo regular temperature checks. The global pandemic has left Nollywood in deep trouble, according to industry executives. Cinema closures across Nigeria due to the lockdown have been catastrophic for the industry, which gets half of its revenue from ticket sales. Cinemas in Nigeria are still shut indefinitely and the consultancy predicts that up to 250,000 people employed in Nollywood, from designers to box office attendants, could lose their jobs. Moses Babatope, managing director of Film One Entertainment, believes that the pandemic has caused Nollywood losses of around 3 billion naira ($8.33 million) since mid-February. An increase in home viewing has boosted sales to streaming platforms including Netflix, but meanwhile revenue from other clients such as airlines has dried up, said Babatope, who is secretary of a film industry body. The shuttering of the cinema chain he co-founded and which accounts for 60% of his distribution revenue, has forced him to furlough around two-thirds of his staff. “If this goes on much longer, a lot of cinema businesses will struggle to come back, including ours,” said Babatope. In a similar vein, we also heard from workers in Lagos, including a “hype man” and nightclub manager, who lamented the impact of coronavirus-related safety measures on the megacity’s usually bustling nightlife.