The week ahead – Bite the bullet

A count of media reports by the Nigerian daily Punch indicates that there have been at least nine incidents of miscalculated airstrikes by the Nigerian Air Force between September 2021 and January 2023. No fewer than 147 civilians, including children, were killed in those attacks, with at least 72 injuries. Kaduna, Katsina, Niger, Yobe and Zamfara are some states where incidents have occurred. The most recent occurred in Nasarawa, where at least 47 people, mainly Fulani pastoralists, were confirmed killed, according to reporting by Peoples Gazette. A day before the Nasarawa incident, an Air Force strike in Niger killed some hunters and residents, rendering another 8,000 residents homeless, according to the Niger State government.

Nigeria’s well-documented affair with impunity shows up in every facet of national life, including politics and governance. An absence of will to tackle the air force’s impunity has led to more mishaps involving human lives than necessary. The first major incident of air force mishaps in recent years was the Rann bombing in January 2017 which killed over a hundred internally displaced persons in Borno. The air force was pressured to acknowledge that mistake but nothing more. Since then, the service appears to have construed that pressure as bullying and stopped responding to what the military establishment and its patronage systems have always termed “foreign meddling” or “interference.” Those terms have also served as a useful euphemism for the military when it criticises civil society groups baying for accountability. Failing to acknowledge this problem when it cared to respond, it often blamed incidents on faulty intelligence. The army has found itself in the firing line sometimes. In April 2021, a military source said that an Air Force fighter jet on a mission against Boko Haram extremists mistakenly bombed men of the Nigerian Army, killing over 20 officers. The soldiers who were reinforced from Ngandu village were said to be on their way to Mainok, headquarters of the Kaga Local Government Area of Borno State which was under attack by Islamic State West Africa Province (ISWAP) terrorists. This particular incident heightened the rivalry between the air force and the army, with the latter intensifying efforts to get its own air wing. In all of these incidents, the government has not mandated the air force to investigate. Even when NAF’s leadership promised one, it never materialised, at least not publicly. With more international attention on last week’s incident in Nasarawa, it will be hard for the military and the air force to secure international material support in its fight against terrorism. Despite assurances made in 2021 by the Chief of Air Staff to the US that jets will be used against terrorists in the North West, the air force has not exactly lived up to that promise, and with each incident, it digs itself into a corner that it should never have been in the first place.

The House of Representatives has asked the National Universities Commission, National Board for Technical Education, National Commission for Colleges of Education, and the Federal Ministry of Education to “direct all tertiary institutions to suspend academic activities during the period of elections.” The House, sitting in plenary last Thursday, also urged the Independent National Electoral Commission to make special arrangements for the students to collect their Permanent Voter Cards (PVCs). The lawmakers also mandated the House committees on tertiary education and electoral matters to liaise with the agencies to facilitate the process and report to the chamber within one week for further legislative action.

The Continuous Voter Registration (CVR) exercise was conducted while Nigerian students were at home due to strike action by the Academic Staff Union of Universities (ASUU), and therefore would have registered to vote at home (for students who are not resident in or close to the tertiary institution campuses). Students make up 26.02 million or 27% of the 93 million registered voters for the 2023 general elections. Students are the largest occupational ‘bloc’ of voters, farmers/fishers coming a distant second at about 15% of the voters register. This is enough to swing any election outcome, and there has never been a candidate who has won by this margin. The Labour Party candidate, Peter Obi, is sufficiently spooked at the possibility of losing a decent chunk of his likely voting demographic that he publicly raised concerns about this in a meeting with observers from the European Union Election Observation Mission. A consortium of Abuja-based civil society organisations have also advocated for the participation of students as voters, In a recent statement, “We also note the concern of the students who registered at home while tertiary institutions were shut down for over eight months. According to INEC, 40% of the 9,518,188 newly registered voters are students. If they registered at home and are now at school, INEC must ensure they can pick up their cards in the least expensive way possible.” On the National Assembly’s part, this is all talk from the green chamber, an effort by lawmakers to appear to be advocates for Nigerian students while they have refused to enact legislative provisions that would empower INEC to ease PVC collections and polling unit transfers. The reality is that many Nigerian students, who are already back at school and catching up on more than a year’s worth of lost learning, do not have the financial wherewithal to consider a quick trip home for the vote due to rising transportation costs, elevated security threats and unsafe highways, among others. A workaround (unfortunately too late in the day to be trialled in this election cycle) would be to ditch the suspension of school activities and make it easier for Nigerians to vote at a polling unit irrespective of registration location for the presidential elections, while only residents of a Nigerian state can vote during state-level contests. For the time being, it remains unclear if it is the responsibility of a plethora of federal agencies, from the National Universities Commission to the Federal Ministry of Education or the Academic Staff Union of Universities (ASUU) and the Academic Staff Union of Polytechnics (ASUP) or even Colleges Of Education Academic Staff Union (COEASU) to “suspend academic activities during the period of elections.” What is clear, however, is that this situation could potentially disenfranchise the single largest pool of voters in a closely-fought election if concrete actions are not taken. That would be a shame.

The United Kingdom will eliminate tariffs on more than 3,000 products it imports from Nigeria to boost trade with one of its most important partners in Africa, UK Deputy High Commissioner Ben Llewellyn-Jones said. Nigerian exporters of cocoa, cotton, plantain, flowers, fertilisers, tomatoes, frozen shrimp and sesame seed will benefit from the new tariff regime, which targets 65 countries. A report from the UK’s international trade department published last week said that the total trade volume between the UK and Nigeria stood at £5.5 billion ($6.8 billion) in Q2 2022. The average existing tariff on the 3,000 goods covered by the program is 7%.

The Developing Countries Trading Scheme (DCTS) is an outcome of Britain’s promise to reform its buying and selling relationship with developing countries after it left the European Union. Under the economic bloc, the UK was subject to the General System of Preferences, which it has now replaced with DCTS. The UK’s total imports from DCTS beneficiaries in 2021 was £37 billion or 5.4% of total UK imports. The DCTS is a three-tier system. The juiciest level is reserved for the least-developed countries. Economies under these categories will enjoy 100% duty and quota-free exports to the UK. The next is the ‘enhanced preference’ category. Countries in this tier will enjoy 85% duty-free export to the UK. The driest category is the ‘standard preference’ level. Under this grade, countries will enjoy 33% duty-free exports and a partial reduction of tariffs on a similar percentage of products. Nigeria falls under the enhanced preference tier. The DCTS will benefit 65 countries, 37 of which are African. In scale, it will rival the American African Growth and Opportunity Act (AGOA) which provides duty-free treatment to goods of designated sub-Saharan African countries. Under the terms of the UK-EU Trade and Cooperation Agreement (TCA), the UK no longer belongs to the European Union single market and customs union. However, the provisions of the TCA do not apply to trade in goods between the EU and Northern Ireland. While the EU remains the UK’s largest and closest trading partner, reports suggest that trade volumes have been dropping, making it critical for the UK to foster new global partnerships. Since it left the EU, the UK has had the freedom to pursue its independent trade deals and has signed several deals with the likes of Australia, Japan and New Zealand, although it is yet to conclude trade deals with India and US. For clarification, custom duties differ from tariffs. Customs duties are imposed based on the value of an imported product to raise revenue and protect the manufacture of similar products in the imposing country. Tariffs are levied on a specific product from a specific country at a specific time. Many products usually have concurrent customs and tariff duties. The key beneficiaries of the DCTS are Bangladesh and Cambodia, which supply the UK with much of its apparel. These two countries will continue to enjoy preferential trade relationships, even when their economies graduate from the least developed category (LDC). One projection estimates that more than 95% of Bangladeshi trade would still be able to claim duty-free access to the UK market when it is no longer considered an LDC state in 2026. Unsurprisingly, the trade deal has at least two father-son components. Under the DCTS, the UK will monitor benefiting countries for compliance with certain moral codes such as human rights, anti-corruption, climate change and the environment. The UK has free-trade relationships with several countries, including Japan and Australia. While London and Tokyo have a commitment to human rights in their free trade agreement, there is no monitoring mechanism. With the DCTS, the UK has the unilateral right to suspend a beneficiary for violating its moral code, ironic considering the current debate in Westminster around illegal migration. For Nigeria, the DCTS is an opportunity for manufacturers to take advantage of the UK market. The UK has been doing so in the country, in more recent times, with its export finance programme. Under the scheme, Britain provides loans and credit guarantees for Nigerian companies looking to import from the UK. In 2018 and 2019 alone, the UK government provided £1.25 billion for this initiative through Nigeria’s Export-Import Bank. Still, Nigeria has not moved up the ladder in UK import rankings. In 2019, Nigeria was 38th; in Q2 2022, it was 39th. In the UK’s latest international trade update, two-way trade between Q3 2021 and Q3 2022 was £6.7 billion. Of that figure, £3.8 billion or 56.72% of trade flows were exports to Nigeria, creating a trade deficit of £2.9 billion for Nigeria. If production costs, delays at Lagos’s ports and the Nigerian government being a faithful child at policy implementation will permit, Nigerian manufacturers could make a valiant effort at closing that trade deficit. As we have opined in the past, one of the effects of Brexit and the exit of the UK from the EU, and its attendant trade losses, is that it will see the UK seeking new trade partnerships. And the first port of call is Commonwealth countries. While the first thing London has taken from countries like Nigeria is its human resources, it was inevitable that it would expand trade with Nigeria, the third largest English-speaking country in the world, after India and the United States. Nigerian policymakers and businesses must position themselves and structure to take advantage of this geopolitical opportunity as the UK navigates Brexit over the next decade in the minimum.

Ghana’s balance of payments further deteriorated to a deficit of $3.64 billion in December from a $3.4 billion deficit the previous quarter, central bank data showed on Saturday. Recent balance of payments woes have been largely driven by a sharp reversal in capital flows, with Ghana’s capital account deficit worsening to $2.18 billion in December from $1.64 billion in September. At the same time last year, Ghana had a capital account surplus of more than $3.3 billion.

At the end of the 2022 fiscal year, Ghana’s current account deficit, together with its net capital and financial account outflow, resulted in an overall balance of payments deficit of US$3.6 billion, compared to a surplus of US$510.1 million in 2021; the stock of gross international reserves stood at US$6.2 billion (equivalent to 2.7 months of import cover) from a stock position of US$9.7 billion (equivalent to 4.4 months of import cover) at the end of December 2021. The net international reserve position stood at US$2.4 billion, from US$6.1 billion over a comparative period. The state of the global economy in 2022 impacted the external sector’s performance. The improvement in the merchandise trade account significantly reduced the current account deficit from 3.2% of GDP in 2021 to 2.3% of GDP the following year. However, these gains were offset by sizable net capital and financial account outflows, mostly because of external factors that led to portfolio reversals and a decline in foreign direct investments, which led to a general balance of payments deficit and a reduction in reserves. Africa’s Black Star continues to depend heavily on inflows from the commodity. Still, in 2022, Ghana’s key export commodities prices, such as gold, cocoa and crude oil, remained volatile on the global markets. For instance, cocoa futures traded largely in the negative during most parts of 2022. Prices peaked at US$2,681.11 per tonne in February on the back of lower production volumes and, after that, eased to a low of US$2,333.33 per tonne in July 2022, owing to weak grind data. Gold prices rose to historical highs of US$1,949.4 per ounce in March as a result of increased global uncertainties but then dropped as a result of rising interest rates and a stronger US currency to finish the year at US$1,796.2 per ounce, an 8.7% increase over the previous year. The cost of all imports into the country rose 7.0% in 2022 to US$14.65 billion due to increasing expenditures for oil and gas imports. Oil and gas imports, consisting primarily of refined petroleum, increased annually by 71.3%, from US$2.7 billion in 2021 to US$4.7 billion in 2018, predominantly due to increased pricing. Nevertheless, the steep depreciation in the currency rate caused non-oil imports to contract by 8.4% to US$10.0 billion, mostly due to imports of capital and consumer items. Last year saw significant pressure on Ghana’s local currency due to portfolio reversals, a decline in foreign direct investment inflows, and rising demand pressures. The Ghana cedi lost more than 30.0% of its value versus the US dollar in the year under review (4.1% in 2021), despite some losses being reversed at the dying embers of the year. Just like last year, the cumulative depreciation of the Ghana cedi for January 2023 was 19.5%. The IMF bailout may be needed sooner than later. While the government waits to obtain the green light for an IMF programme, it has already taken several steps, including the gold-for-oil policy, to bring Accra’s balance of payment back to surplus status. According to the country’s Vice President, the policy is meant to tackle dwindling foreign currency reserves and the demand for dollars by oil importers, weakening the currency and increasing living costs. It was inevitable that capital flows would reverse as investors found ways to get their monies out or stop their money from going into Ghana. The Ghanaian government’s initial unilateral pronouncements on debt restructuring did much to damage trust, and the long-term effects are only beginning to emerge. This is a classic example of making a bad situation worse. Policymakers must weigh their actions and consider the systemic impact of such actions.