Nigeria’s economy contracted for the first time in three years after its exit from the 2016 recession in the second quarter of 2020 as the crash in oil prices and the global fallout from Covid-19 hit output. The country’s gross domestic product (GDP) shrunk by 6% in the period, according to a report by the National Bureau of Statistics (NBS). The report released Monday showed that Oil GDP contracted by -6.63% from 5.06% in the first quarter and 5.15% in the second of 2019. Non-oil GDP was also reported to have contracted by -6.05% from 1.55% in Q1’20 and 1.64% in Q2′ 19. The decline, the report said, was largely attributable to significantly lower levels of both domestic and international economic activities during the quarter, which resulted from nationwide shutdown efforts aimed at containing the COVID-19 pandemic. Restrictions on vehicular movement saw sectors like transport and storage declined by nearly 50%, accommodation declined by 40%, and trade by 16.59%. In economy-related developments, higher crude oil sales and tax receipts boosted Nigeria’s gross revenues to ₦676.41 billion in July 2020, the Accountant-General Ahmed Idris said, compared to ₦653.35 billion recorded in June. The government said revenues from oil, Nigeria’s main export, and sales tax increased in the month of July, while corporate taxes and import duty decreased. The balance on its oil surplus savings account stood at $72.41 million as at August 2019, the FG said as income from crude sales and value-added tax made up the bulk of its gross revenues. The FG, at the Federation Accounts Allocation Committee (FAAC) virtual meeting, Wednesday, received ₦273.189 billion, the states received ₦190.849 billion, the Local Government councils got ₦142.761 billion, while the oil-producing states received ₦42.851 billion as derivation or 13% of mineral revenue, and Cost of Collection/Transfer and Refund got ₦26.757 billion.

The Comptroller General of the Nigeria Customs Service (NSC), Hameed Ali, says the World Trade Organisation (WTO) treaty and the African Continental Free Trade Area (AfCFTA) agreement recently signed by Nigeria will adversely affect the country’s revenue generation drive in the coming years. Mr Ali made the remarks during the continuation of an interactive session organized by the Senate joint committees in finance and national planning on the 2021-2023 MTEF/FSP. He stressed that the two agreements will allow goods to come into Nigeria at zero tariffs. However, he said despite this situation, the Customs Service has generated N837 billion as of July. He added that the Service is projecting total revenue of ₦1.465 trillion for 2021, ₦1.704 trillion for 2022 and ₦1.758 trillion for 2023.

The Department of State Services (DSS) said two of its men died on Sunday when a patrol team was attacked by the members of the outlawed Indigenous People of Biafra in the Emene area of Enugu. The service did not provide details of the attack but said a comprehensive investigation had commenced into the incident. The DSS Public Relations Officer, Peter Afunanya, said in a statement that the secret police “lost two personnel in what was clearly an unprovoked violent attack launched by IPOB on the team.” The service “condoled with the families of the departed officers and also prayed for the repose of their souls.” It said all measures had been put in place to ensure that their killers and everyone involved in the dastardly act were promptly apprehended and brought to justice.

Mali’s military junta and regional mediators on Monday discussed the make-up and goals of an interim administration following an 18 August 2020 coup. The junta wants the transitional body to rule for three years and has agreed to release the ousted president, detained along with other political leaders since the coup on Tuesday. The deposed president would be able to return to his home in the capital Bamako, a source in a visiting West African delegation and the rebel soldiers said Sunday. An official in the Junta told AFP that “the three-year transition would have a military president and a government mostly composed of soldiers”. Prime Minister Boubou Cisse, who has been held with Keita at a military base outside the capital where the coup began, would be moved to a secure residence in the city. While the coup was met with international condemnation, thousands of opposition supporters celebrated the president’s ouster in the streets of Bamako. The junta has said it “completed the work” of the protesters and has vowed to stage elections “within a reasonable time”. Last week’s coup — Mali’s second in eight years — followed months of protests calling for Ibrahim Boubacar Keita to resign as public discontent with the government grew over the collapsing economy and a brutal Islamist insurgency. Nigeria’s ex-president Goodluck Jonathan, head of the delegation, told reporters as Sunday’s discussions drew to a close, that the parties have reached a number of agreements “but we have not reached agreement on all the issues”. Both the regional delegation and the military officers “want the country to move on” after the coup, he said. “We are just discussing the way forward.” Jonathan met Keita on Saturday and said that he seemed “very fine”. Keita won an election in a landslide in 2013, presenting himself as a unifying figure in a fractured country, and was re-elected in 2018 for another five-year term.

Commentary

  • The report reveals a few things. First is the outsize influence of Lagos and Abuja in Nigeria’s economy. Nigeria recorded its first COVID-19 case on 28 February and went into lockdown to slow down the spread of the coronavirus in March. The lockdown was only really enforced in Lagos and Abuja and for some time in Kano, Kaduna and parts of Rivers. In spite of this, the impact on GDP has been significant, because of the concentration of economic activity in these states. Second, whilst the oil sector directly contributes less than 10% to Nigeria’s GDP, it accounts for about 90% of foreign-exchange earnings and half of government revenue, thus dealing the country’s economy a huge body blow. Third, the non-oil sector shrank by 6.05%, the first drop in non-oil GDP since the third quarter of 2017. Nigerian states desperately need to increase their productivity. The GDP report also shows a clear link between the informal and formal economy. While more Nigerians are in the informal economy, much of the spending in the informal economy is tied to activity in the formal economy. Therefore, a shutdown that impacted on formal economic centres ultimately caused the informal economy to slow down as well. A combination of four pieces of information – inflation, trade, unemployment and GDP released by the NBS over the past few weeks paints a dire socio-economic picture. The President is yet to directly address Nigerians on any of these issues. We believe it is expedient he does so and spells out what his government is doing – not just promises and platitudes but what it is actually doing – to reverse these trends.
  • A paradigm shift is needed in the way the Nigeria Customs Service measures its success. While revenue is important, it is more important that it facilitates trade. An NCS focused in this manner will see these continental agreements as opportunities as opposed to adversity. The main objectives of the AfCFTA are to create a single continental market for goods and services, with free movement of business persons and investments, and thus pave the way for accelerating the establishment of the Customs Union. As currently incentivised, the NCS is first acclaimed for revenue generation before its trade facilitation function. This has to change and quickly as well or Nigeria will not take full advantage of the AfCFTA. Mr Ali is obviously concerned that the organisation he oversees may not be able to make its set targets. However, the long term effect of AfCFTA on Nigeria remains unclear. Whilst the agreement opens up the African market to Nigerian businesses, the fear is that its implementation will open Nigeria’s market to cheap imported goods from Asia transiting through other African countries which can have an adverse effect on Nigeria’s weak manufacturing industry, a legitimate concern. Economic protectionism, however, is not the answer.
  • The accounts of the incident from the DSS differ significantly from local accounts which say that a combined team of the DSS, soldiers and police officers raided a meeting of unarmed men in the area, which killed 21 people or IPOB members in the words of the DSS. Eye witness accounts say the school where the alleged IPOB members were having their meeting was filled with other groups engaged in sporting activities. As always, it will take a while before the true picture of events, if ever, emerges. The difference in narratives is a clear attempt by each side to justify its actions. The raid by the security forces was said to have caused pandemonium even for others going about their businesses, and it interrupted religious activities going on in the adjacent compounds. Sadly, the IPOB is not a stranger to such attacks by the Nigerian state; although it calls for a secessionist republic of Biafra, it has remained a largely non-violent organisation. Its leader, Nnamdi Kanu, continues to operate in exile, and an absence of structure and political engagement has prevented the group from evolving to a more potent organisation. It is unlikely that they will cause large-scale disruption in the South-East or beyond, but that has not stopped a heavy security clampdown on them by the government and security agencies as the goal of the movement, toothless as they may be, evokes unpleasant memories of the Nigerian Civil War caused by an attempt by the old Eastern region to break away. It is unlikely that this incident will change the tides regarding this issue, by either making IPOB more militant or the government to soft-pedal on them.
  • While the coup enjoyed and continues to enjoy the popular support of Malians, this is a mistake that shows a big failing in the practice of democracy in West Africa. Governments come in via the popular vote, go on to alienate a significant portion of their population, and then rig the polls to remain in office, creating a loop of voter apathy, which in turn builds support for illegal military interventions as has happened in Mali. There are multiple risks involved in permitting military interventions. There is the risk of the junta shrinking the civic and democratic space if allowed to stay in office without a definite timeline for returning the country to democratic rule. In addition, there is the risk that it is unlikely to honour the timeline if one is eventually reached. There is also the risk of contagion. Burkina Faso, Guinea, and the Ivory Coast all have imminent elections and possess similar political dynamics as Mali did before the unpopular vote that saw Mr Keita retain power. The success of the junta in Mali could encourage the militaries or other non-state actors in these countries to have ideas. This is why ECOWAS is applying regional pressure on the junta to commit itself to a short transition period during which fresh elections will be held. This pressure is important as the junta is aware that it will need international support to sustain itself and cannot afford to make itself a pariah nation within the region or the wider international community. It will be expected that the engagement between the junta and mediators will continue considering how fragile Mali’s security is at the moment. There are risks that its collapse poses to the wider region, with a worsening Islamist insurgency in the North and East and with ISIL & Al-Qaeda expanding and strengthening their networks in the region. Unless the security of the country is restored, it will become a base to launch attacks into countries across the region and push for neighbours like Burkina Faso and the Niger Republic to fall as well.