2019, like any other, has been an eventful year in Nigeria with the elections dominating the news over the course of the year, and the economy forcing its way to the top of news conversations following the border closure.

As we put finishing touches to our review of 2019 and our forecast of 2020, we did a review of our key predictions from last year and how these have panned out…

  • The opposition party will be the majority in the National Assembly for the first time. This we got very wrong. Not only did the All Progressives Congress retain a majority in the National Assembly, with 58% of the Senate, and 57% of the House of Representatives, it is a few defections away from being able to push through its agenda without any resistance.

  • The Nigerian government’s already strained revenue position will become totally untenable. We got this right, and it has shown in various clearly panic-driven moves by the government. So far, Nigeria has failed to meet its revenue targets and has reacted by shutting its border.

  • Debt service to revenue ratio will reach 80%. We got the timeline on this wrong. While it is inching in that direction, the loans that would take it there have not yet been approved by the National Assembly. However, with President Buhari’s request for an additional $29.6 billion resurrecting his 2016-2018 external borrowing plan, the CEO of Cowry Asset Management Company remarked to the Vanguard newspaper that Nigeria’s government will be using about 80 percent of its revenue as interest payment on its debt. We agree with that assessment.

  • We don’t expect the exchange rate to move significantly before the elections. This was correct; however, this projection also implied that the exchange rate would rise after the elections. It largely held but at a significant cost. The Central Bank has issued expensive Open Market Operations (OMO) instruments to buy dollars from foreign investors at rates providing yields as high as 30% in USD terms in some cases. Much of this money is hot money that will flee at the slightest hint of systemic stress. We believe the rates issue is on a dangerous precipice by using extraordinarily expensive measures.

  • We expect a steep rise in the exchange rate by between 30% and 40%. Following on the previous projection, we got this wrong.

  • Nigeria’s government will try to keep a lid on the exchange rate opening arbitrage windows akin to 2016 and leading to significant capital flight. This did not happen this way, showing some lessons were learned from the disaster of 2016. What happened rather was that the CBN constrained access to forex and escalated the OMO issuance. This led to a drop in capital importation but a rise in Foreign Portfolio Investment.

  • We expect the trend of poor budget performance to continue. We predicted correctly.

  • Key investments will unfortunately not be made. We predicted correctly.

  • Unpaid salaries will remain a clear and present reality. We predicted correctly. Towards the end of the year, even beneficiaries of the government’s pet social investment programmes such as N-Power began to complain about delayed payments.

  • We expect an inability to continue to fund some of the social intervention programmes. We predicted correctly.

  • Nigeria will face another recession in 2019. We predicted wrongly. The economy grew throughout the year although some important sectors such as trade, Nigeria’s second-largest employer of labour, is in recession; however, a strong performance by the oil and telecommunications sectors has seen the economy remain in growth territory, albeit very weak.

  • The political will to face the numerous security challenges and attempt to deal with them to finally arrive as the 2019 elections approach. We predicted correctly. As the elections drew near, there were various efforts launched to curb incessant attacks around the country.

  • Banditry in Zamfara and Northern Kaduna; Boko Haram in Borno and Yobe; pastoralists in the Middle Belt and other pockets of violence will resurge with renewed vigour. We predicted correctly. The army prepared an offensive against Boko Haram in January, and more attention was given to banditry, even though the results were not flattering. Along the year, there has been a reduction of reports of these incidents, which is more a function of news fatigue and normalisation of the situation than a change of facts on the ground. Attacks have continued in various parts of the regions mentioned.

  • We expect more clashes with the Islamic Movement of Nigeria and one of these may be the spark that lights a larger tinder. We were partly correct. There were multiple clashes, which increased in violence until the leader of the IMN was allowed to go to India for treatment. But full-scale violence did not materialise.

  • There will be a change of guard at the leadership of security agencies. We predicted wrongly. Beside the Inspector General of Police, who was replaced in January, President Buhari has kept faith with the military chiefs he appointed in 2015, with Tukur Yusuf Buratai becoming the second longest-serving Chief of Army Staff after Sani Abacha.

  • There will be a clamour for the current heads of the defence services to face the “Dasuki Treatment”. We predicted wrongly. Since they have remained in office, any such clamour has failed to materialise.

  • As the 2019 elections draw nearer, the government of Buhari will increasingly resort to populist policies to shore up support. We predicted correctly. Promises were made to get the Academic Staff Union of Universities (ASUU) to end a long industrial action in January, organised labour to avert a strike, pensioners and the National Association of Nigerian Students (NANS) to support the government politically. Policies such as border closure were also carefully framed in patriotic and populist language.

  • We believe that a close result will be followed by allegations of fraud and irregularities. We were partly correct. The results were not as close as we expected, with President Buhari increasing his margin of victory, but his challenger, Atiku Abubakar refused to accept the results and went all the way to the Supreme Court.

  • While we think it that an elite consensus and popular discontent will be favourable to Atiku, Buhari’s control of the apparatus of state will be a factor, and we do not think that he will hesitate to use it, so at this point, we think that the 2019 elections are too close to call. We should have made an effort to call the results. President Buhari did use state apparatus in terms of favourable security deployments and inducements such as Trader Moni. However, in our considered opinion, his victory was won because he has retained his shine among the country’s poor, especially in the North.

  • A disputed result is very likely for the 2019 elections, raising the prospect of pre- and post-election violence. We predicted correctly. In the run-up and immediately after the general elections in 2019, at least 626 people were recorded to have been killed in acts of violence that could be linked to politics. Of concern is that there have been no arrests or prosecutions, and the fact that “violence for votes” has essentially been legitimised as seen in the subsequent gubernatorial elections in Bayelsa and Kogi states.

  • We believe that electoral violence in 2019 will be of a greater magnitude than in 2011. We predicted wrongly. While we were able to confirm the deaths of at least 626 people in the period before and after the 2019 general elections, the 2011 elections remain Nigeria’s most violent with a record of at more than 800 dead.

  • We expect the Pastoral Conflict to intensify after the 2019 elections. We predicted wrongly. The Pastoral Conflict in Nigeria’s Middle Belt has remained a slow-burning issue. Data available to SBM indicates that it has neither subsided nor intensified but has reached a sort of equilibrium.

  • ISWAP will launch an offensive when the security services get distracted by the elections. We predicted correctly. They did not even wait until 2019 to begin their attacks. However, afterwards, the group changed tact and appear to be in a phase where they are consolidating their holdings.

  • President Buhari might yield to pressure and contract a PMC to take the fight to Boko Haram. We predicted wrongly. There have been discussions for Russian aid, but nothing concrete yet.

  • We expect an increase in IDPs over the course of the year. We predicted correctly. The many security challenges facing the country has led to the country hosting the ninth highest displaced population (2.5 million according to the United Nations High Commissioner for Refugees) in the world.

  • We do not expect FDIs to storm back into the market in huge volumes as seen in previous years. We predicted correctly. Nigeria’s FDI situation is now nothing short of precarious. Ghana, with a little over 10% of Nigeria’s population and 15% of the GDP received more FDI than Nigeria.

  • Due to the current debt service to revenue ratios, the government will be cautious of borrowing costs. We predicted wrongly. The government appears set to binge on more borrowing.

  • Companies will continue to take the option of Rights Issuance. We predicted correctly. Interbrew, Wapic Insurance, C&I Leasing were examples of companies that took this option in 2019.

  • We expect that certain banks will either become acquisition candidates or require further CBN intervention. We predicted correctly. A few days after this prediction was made, Access Bank announced that it would enter into a strategic merger with Diamond Bank, and this was consummated during the year.

  • The government will find it hard to fund its capital budget. We predicted correctly. Budget performance has been inadequate at best.

  • We do not expect any big-ticket deals for the government in 2019. We predicted correctly. While there have been a couple of MOUs, the biggest of which was the Mambilla Power deal with a Chinese consortium, these have failed to take off because of various issues, most notably rule of law concerns in the case of Mambilla.

  • China will further become involved in the few infrastructure deals that will be done. True.

  • With fintech operators being required to comply with more CBN regulation, it will lead to increased costs, higher entry barriers and regulated pricing of the segment. We predicted correctly.

  • We believe that oil prices will stabilise around the $60 levels in 2019. We predicted correctly. In the 2019 calendar year thus far, the highest price of oil was $66.55 per barrel on 23 April, while the lowest price was $46.82 on 1 January when prices were recovering. The lowest dip was $50.85 on 7 August, and the yearly average to date was $58.13.

  • 2019 will be a tough year due to declining oil revenues. We predicted correctly. Despite economic growth all through the year, Nigeria’s per capita income has kept falling, and coupled with high inflation, especially food inflation, times are really hard for the average Nigerian. Oil revenue has been unable to fully fund even salary payments this year.

  • Unemployment will continue to rise, and unofficial figures will put unemployment at half the population by the end of 2019. We predicted correctly. Anecdotal evidence suggests that unemployment (and underemployment) is even higher than 2018’s 40%, alleged to be caused by banks shedding more staff in Q3. Predicatbly, the NBS has failed to release unemployment figures for 2019.

  • Continued unemployment will be seen in increased social unrest such as crime. We predicted correctly.

  • More policemen will begin to openly express dissatisfaction with the way the police is being run. We predicted correctly. While there have been a few instances of the top brass making statements seeking change; for the most part, policemen appear to be passing on their frustrations on the population.

  • More current and former policemen will also be involved in criminal activity. We were partly correct. While there was no high-profile incident involving ex-policemen such as the Offa incident of 2018, serving policemen have been busy. In December alone, at least four policemen have been arrested for taking part in armed robbery just in Lagos. Meanwhile, all over the country, complaints about the Special Anti-Robbery Squad (SARS) continue to mount.

  • Repeated failures to meet IGR targets, among others will lead to further delays in salaries and increase the agitation by workers, and the deterioration of Nigeria’s public infrastructure. We predicted correctly.

  • This will be the year that Nigeria finally begins the painful but necessary cut in civil service numbers. We predicted wrongly. Rather than be reality, the government is looking to expand borrowing and kick the can down the road.

  • Regardless of who wins the 2019 elections, the unions will be back on the battlefield in H2. We predicted correctly. The unions went on the war path despite the new minimum wage signed in April. Their concerns have been addressed on paper with a new wage structure agreed, but there are still issues over actual implementation.

  • The proposed 2019 budget has already failed. We predicted correctly.

Of the 43 projections we made at the end of 2018, 26 (61%) were correct, 11 (26%) were wrong, while 4 (14%) are partially correct.

SBM Intelligence’s forecast for 2020 will be published at noon WAT on Friday, December 20, 2019.