The week ahead – One small step for one, but a giant leap backward for all

MTN and Telkom have held discussions regarding a possible merger, according to a report in South Africa’s Sunday Times. The report follows big setbacks at both MTN and Telkom in recent weeks. The Central Bank of Nigeria has demanded that MTN return $8.2 billion which it says MTN illegally moved out of the country. Soon after this, the Attorney General of Nigeria made its own demands of the mobile operator, stating that it owed $2 billion in back taxes on foreign imports into the country. This resulted in MTN’s share-price hitting multi-year lows. Telkom is in the process of offering its SA staff voluntary retrenchment packages, which it attributed to the fact that it has subsidised the South African mobile industry by about R70 billion through asymmetric call termination rates. MTN is also reviewing its operating footprint across Africa and abroad, due to regulatory burdens in many countries.

The Nigeria Labour Congress proceeded on a nationwide warning strike with effect from Thursday. This followed the delay in negotiations for a new minimum wage by the Federal Government. The General Secretary of the Nigeria Labour Congress, Dr Peter Ozo-Eson, in a statement in Abuja on Tuesday, directed all industrial unions in the country and state councils to immediately begin the mobilisation of their members in readiness for the warning strike. President Muhammadu Buhari had in November 2017, inaugurated a tripartite committee to negotiate a new national minimum wage and along with the Labour and Employment minister, promised that the committee, which began sitting in March 2018 would conclude its work and a new wage will be agreed by the end of the third quarter of 2018, later announced that the committee had yet to finalise its work. The unions subsequently accused the government of delaying the process and issued a two-week ultimatum.

Bus passengers abducted by gunmen on their way to Lagos from Enugu aboard a vehicle operated by the God Is Good Motors company have secured their freedom, the transport company said in a statement on 24 September. Premium Times had reported that the armed men had blocked the passengers at Ore in Ondo State and whisked them away to an unknown destination, citing some of the victims who were released after their families had paid a ransom. It was the transport company’s first public statement about the incident which happened on 13 September; relatives of the abducted passengers had criticised the company’s initial silence when news first broke of the incident.

Observers dismissed yesterday’s re-run election in Osun state as fraudulent and anti-democratic, and at least one major election monitoring group, the Centre for Democracy and Development, called for an immediate investigation into the roles of the government institutions that took part in the re-run election. The American, British and European observer teams in live television interviews also expressed similar views. Despite these complaints, and multiple reports of irregularities and voter intimidation, the Independent National Electoral Commission declared the candidate of the ruling APC, Gboyega Oyetola, as the winner of the elections.

Suggestions

• On 25 September, the CBN governor, Godwin Emefiele, said that he was optimistic the regulator would resolve the dispute in a way that will ensure that “everybody will be happy.” We think this is a belated attempt at reassuring waning investor sentiment towards the country. A day earlier, Standard Bank, one of four banks the CBN alleged helped MTN illegally repatriate $8.1 billion, said the regulator may review a decision to penalise its West African unit. Serious countries do not publicly drag one of their biggest private sector employers – the company reportedly supports 500,000 direct and indirect Nigerian jobs – in the mud. A Business Day report suggested that at least three big deals involving foreign investors have been put on hold and some Nigerian companies may already be finding it difficult to raise foreign capital in the wake of MTN’s travails. It might be speculation at this point, but it is understandable that some within MTN Nigeria would be pushing for the telco to re-evaluate its position in what is its biggest market and a source of a third of its annual profit. The primary lesson the government might have to learn (and possibly relearn) is that when it comes to foreign capital, nothing is set in stone, or cement.
• From the NLC’s perspective, the strike action comes perfectly timed to apply maximum pressure on the federal government just months to an election year. For a government that prides itself on its populist instincts and its ability to effect crowd-pleasing measures, the strike action and the prospects of a backlash by the unions carries unavoidable electoral and political significance. The danger is that the federal government will be prodded into taking a populist, yet imprudent decision, that defuses working class rage at the expense of sound economics. The fundamentals of the Nigerian economy at this time, given the indebtedness of states, and their inability to fulfil their obligations to civil servants in their employ, simply cannot sustain an upward review of the minimum wage. The current wage bill at federal and state levels is simply unsustainable, an increase would be disastrous. Shrinking and mismanaged resources means that the capacity to fund high profile investments to, for example, radically address Nigeria’s infrastructure deficit or any other national deficiency has been severely depleted. The cost of governance has exceeded any reasonable threshold and most of Nigeria’s states are now effectively bankrupt. The danger is that today’s political elites are entirely willing to ordain policies that secure short term political gains while endangering Nigeria’s medium and long term prospects through a return to debt peonage. At this point, the burden of sustaining the bubble of heedless rent-seeking patronage has been placed on the next generation. Their future has been mortgaged.
• The kidnap incident with God is Good Motors is another indicator of a mounting escalation in insecurity on federal highways. Highway banditry is raising the risk profile of interstate and intercity travel, and has the potential to inflict severe losses on the inter-state transport industry, and on trade. Without a clear identification of highway banditry as a specific manifestation of violent crime and strategic investments in securing inter-state motorways, Nigeria’s highways will become increasingly unsafe with a corresponding impact on the internal economy. The inter-state transport industry is a critical facilitator of the internal exchange of goods and services and any disruptions due to insecurity will have adverse effects on rural and urban economies. Securing these highways will require political will, and collaboration between federal and state authorities, the police, and the transport industry. In addition to pre-emptive and preventive measures, authorities must work together with transport operators to develop protocols that can be initialised in the event that such incidents take place. The fact that God is Good Motors, one of the most trusted inter-state transport services in the country, only issued a public statement a full ten days after the abductions was an egregious dereliction of the company’s duty of care to its customers and to their families. Adequate regulatory oversight is required to bring transport operators into alignment with their obligations to their clients.
• In 2007, observers from the European Union described the general elections as “the worst they had ever seen anywhere in the world”. An embarrassed Umaru Yar’Adua, the winner of those elections, committed to making Nigeria’s elections better, and in 2010, at the expiration of his tenure, the INEC chair, Maurice Iwu, who had overseen that farce, was replaced by Attahiru Jega. Under Jega’s watch, INEC incrementally improved on elections, culminating in the 2015 general elections, which met the “continental and regional principles of democratic elections” according to the UN. Yesterday’s statement by the CDD was very detailed, and contained accounts of incidents in which the elections were violated, and every media organisation present described irregularities. Foreign observer groups concurred, and even an early INEC statement expressed concern, although the organiser later claimed that all issues had been resolved. While Nigerian politicians have always made efforts to subvert the electoral process, following the sham in 2007, the process had generally improved. Since the expiration of Prof. Jega’s term of office however, we have seen a steady deterioration in the gains recorded under him, and the brazen violations of electoral norms as seen in Ekiti in July, and in yesterday’s re-run in Osun are a huge step backwards for the electoral process in Nigeria. INEC has no safety net left to improve on its processes before next year’s elections. That is a huge worry.