The week ahead – Storms ahead

26th May 2023

The Presidential Election Petition Court declined the application by the Peoples Democratic Party for the live televising of the ongoing election petition proceedings because the judiciary administrators can only make the decision. The petitioners argued that Nigerians have the right to real-time information about the proceedings. The respondents, INEC and the All Progressives Congress opposed the application, stating the court is for serious business. Due to time constraints, the election petition tribunal has ordered the merger of the cases filed by Atiku Abubakar, Peter Obi and the Allied Peoples Movement (APM) to challenge Bola Tinubu’s victory as president-elect.

The question of the public’s accessibility to the proceedings of the election court is largely moot. With access by journalists and ordinary members of the public guaranteed and rolling live blogs, newspaper, radio and TV dispatches, as well as social media updates by the minute from the Supreme Court premises, the tribunal can hardly be said to be happening under a cloud of mystery. In a country rife with rolling power blackouts and where more people own radio sets and utilise social media than own Tv sets, cameras do not significantly enhance the public’s ability to keep up with developments from the court. This does not detract from the substance of the issue of contention—Bola Ahmed Tinubu was declared the winner in a terribly flawed election that had voter suppression leading to the lowest voter percentage turnout in Nigeria’s electoral history and him getting voted in by less than 12% of the eligible voters in the country. This poses a great threat to the legitimacy of his administration and the acceptability of the electoral process, so we would expect that there would be a willingness to support measures that allow the general public to observe the proceedings of the Presidential Election Petition Tribunal. An unwillingness to do this gives room for doubt and indifference to fester, making it much harder for people to align with the tenets associated with the democratic process.

According to the CBN governor, Godwin Emefiele, the Dangote Refinery has paid down over 70 percent of the debt, $18.5 billion, acquired to build it as the first refined products will hit the market by the end of July and early August. It was partly financed by Access and Zenith Banks’ debts and Dangote’s equity. The refinery has an outstanding debt of around $2.75 billion. Nigeria spent $23.3 billion last year on petroleum product imports and consumes around 33 million litres of petrol daily. The refinery plans to produce 53 million litres daily and has a 435-megawatt power station, deep seaport and fertiliser unit.

Recently, good news has been hard to come by, but the commissioning of Dangote Oil Refinery has been almost unanimously accepted as good news. The plant faced significant construction delays, which came at a cost, so it is positive news that the debt has already been substantially paid down. We hope the plant’s testing starts this year and production can kick off soon. Only then can we know the true impact of the plant on Nigeria’s economy. At full capacity, Dangote’s 650,000 barrels per day refinery would produce 53 million litres a day, and Nigeria’s daily consumption quantity of 33 million litres means there are 20 million litres to be exported. The combination of reduced demand for foreign exchange for the import of petroleum products and increased supply of foreign exchange from the export of petroleum products would greatly improve the foreign exchange rates that have made inflation much worse and depleted the economy. If Nigeria can sort out its power supply situation, it could free up 1.5 billion litres of diesel and petrol for generators annually. This is because 75% of Nigeria’s electricity supply is estimated to come from fuel-powered generators that consume an average of 4.1 million litres daily, which would be freed for exports if Nigeria works out its electricity situation. There have been speculations that the Dangote refinery will have products in the market by July, which is an extremely optimistic prediction considering the number of steps the refinery has to go through to ship products. What is likelier is sometime in early 2024; we believe it will commence production and then ramp up to capacity over the course of the year. Nevertheless, it is positive that the refinery is finally nearing completion. The Central Bank of Nigeria (CBN) governor’s announcement concerning the debt repayment is puzzling—the refinery is yet to make revenues, yet much of its debt is already paid down. This would suggest that other sources of repayment have been explored, perhaps with the equity the Nigeria National Petroleum Corporation (NNPC) has taken and/or the claims that the refinery has been granted preferential Foreign Exchange (FX) access in a market where FX is restricted for many. As we have consistently pointed out, the refinery will largely provide the capacity for Nigeria to solve its supply problems that lead to periodic scarcities finally. However, it will have little impact on the price of the products, meaning it will not remove the need to remove the humongous petrol subsidies and the urgent need to liberalise the FX market.

Terrorists killed nine and four local vigilante members at the Sabon Layi community, Birnin Gwari Local Government Area of Kaduna State. The terrorists patrolled the affected community, but there were no security operatives to stop them. Meanwhile, two persons were killed and six others abducted by gunmen in Yangoji town in the Kwali Area Council of the Federal Capital Territory (FCT). The death toll in the Mangu Local Government Area (LGA) of Plateau State has risen to 85. Several communities were attacked by suspected herdsmen, leading to the destruction of houses and farmlands.

In a teeming majority of unprovoked attacks by militant herders, reports from residents have had security forces arriving hours or days after incidents. Sometimes attacks happen even with the presence of security forces. This leads to burning questions concerning the security services’ ability to stop the violence and the federal government’s interest in maintaining peace. Over the past decade, the tide of unbridled vigilanteism has been growing across the country. While some are self-help mechanisms which have largely failed, some others are government-backed, which have also failed to live up to expectations and are incentivised to exist with arms, which are often no match for the firepower of militant Fulani militias, whose activities in Benue, Kaduna and Plateau are now increasingly taking the shape of an ethnic-cleansing campaign. The availability of guns and small arms, in general, is exacerbating the conflict because the equilibrium (arms) needed by state-backed vigilantes to match the firepower of the attackers is simply missing. The ability of the militant herders to access military-grade weapons (from stories of survivors in these states), among several other things, mocks several disarmament campaigns led by the police and military and certainly adds fuel to mounting allegations that interests within the Nigerian state back the attacks and their perpetrators. Additionally, it is somewhat helpful to contrast the Nigerian situation with the most important major conflict going on right now—the Ukraine war. Russia is a military superpower whose invasion of Ukraine escalated an ongoing conflict. Numbers from the Office of the United Nations High Commissioner for Human Rights (OHCHR) put the death toll in the Ukraine war from 22 April to 21 May 2023 at 1,098 civilians, including 266 children. The OHCHR also reports that 1,650 civilians have been injured over the same period. Officially, Nigeria isn’t at war; but according to the Armed Conflict Location & Event Data Project (ACLED), at least 1,000 people have been killed in terrorist attacks in Nigeria over the past two months (March and April 2023). Most of these deaths have been caused by Boko Haram and the Islamic State in West Africa (ISWAP) attacks. In March 2023, there were 644 civilian deaths in the Ukraine war, but Mangu LGA in Plateau State has just suffered an 85-person death toll in a terrorist attack. Ukraine is 65% larger than Nigeria, so it’s safe to say that pound-for-pound, the Nigerian terrorist wave is the deadliest conflict in the world. Unfortunately, it gets little attention giving strength to the argument that the lives of the people involved do not matter to the world and even the Nigerian government itself. The Buhari administration’s failure to get a handle on this crisis has simply made Nigerians desperate for food as the core of the violence is around Nigeria’s food-producing areas; the next government has a lot on its table. A President Tinubu would be from one sentimental tie that hamstrung President Buhari at least on paper – his ethnic ties to the herders. However, Nigerians, especially residents of the Middle Belt, will not be patient with the kinds of platitudes and explainers that the outgoing Buhari government was allowed to get away with.

The International Monetary Fund’s executive board approved a $3 billion, three-year loan programme for Ghana, allowing for an immediate disbursement of about $600 million. The IMF said securing timely debt restructuring agreements with external creditors would be essential to implement the Extended Credit Facility loan successfully, to help Ghana overcome immediate policy and financing challenges, mobilise additional external financing from development partners and provide a framework for completing its debt restructuring. Also, the Fund’s staff and Kenya have reached an agreement that could unlock more than $1 billion of new financing, which could help relieve pressure on the government’s finances.

In less than 11 months, Ghana has been able to wade through all necessary conditions to obtain the much-anticipated IMF $3 billion bailout support. The most difficult part in checking all the boxes had to do with debt treatment at both domestic and external levels; for now, domestic debt restructuring is a done deal—participation rate was estimated at 85% with banks, insurance companies and individual bondholders heavily involved. For now, approval from external creditors is enough to grant Accra access to the first tranche of the cake, $600 million. Beyond mere assurances, Ghana’s government must reach an agreement with all external creditors on the nature of debt restructuring. According to the Finance Minister, Ken Ofori-Atta, the magnitude of haircuts international creditors are willing to take is still unclear. Already, the IMF has indicated that Ghana’s entire 3-year programme will demand a Balance of Payment support worth over $15 billion. The Fund revealed Ghana’s payment financing gap for this year is projected to hit more than $4.2 billion. To help finance the gap, the IMF has committed to disburse about $1.2 billion with an additional $530 million from the World Bank. For Ghana to finance the remaining $2.5 billion without depleting its external reserves, it must take steps to obtain debt relief from all its international creditors. In Zambia’s case, although it received approval from the IMF executive board to start its $1.3 billion programme, it has still been unable to receive disbursement(s) due to its inability to convince external creditors, including China, to take haircuts. Unlike Ghana and Zambia, the IMF doesn’t see Kemya as a debt restructuring candidate. Kenya has a $2 billion Eurobond maturing in June 2024, and the country’s central bank governor has indicated that the government was “quite relaxed” about it. Getting an IMF programme without debt treatment as a condition is relatively easier. This makes Kenya’s IMF talks pretty cool and different. While Zambia is stuck in a debt frenzy, Ghana seeks to use the IMF bailout window to renegotiate debts towards saving about $10.5 billion. Ken Ofori-Atta looks forward to a fruitful engagement with Ghana’s bilateral and private creditors in the days ahead although he is unsure of the type of haircut they will agree to take. Meanwhile, the success of China’s Belt and Road Initiative changed international finance and economic development in the Global South in a way that has not been seen since the Marshall Plan. It has expectedly drawn criticism from China’s geopolitical rivals in the West, who accuse it of engaging in debt-trap diplomacy that, when broken down, aims to rope African and lower-income countries into China’s sphere of influence with loans that these countries have little to no capacity to pay for within a foreseeable period. However, as with others, the data and reality have painted a different picture in Ghana’s case. Among the top five external debts Ghana owes, Chinese debt ranks lowest with $1.7 billion. On the other hand, it owes Western lenders a lot more: the Paris Club: $1.9 billion; multilateral lenders: $8 billion; and the highest is Eurobonds at $13 billion. The IMF’s recently approved $3 billion loan adds to the list, whose new entrants push the Chinese debt lower the rank. In essence, the idea of the Chinese debt trap is white noise that holds little in terms of substance. When both IMF and Chinese loans are compared, the one advantage the IMF has over China is that Ghana was forced to embark on austerity measures before the loans were approved. The Chinese never bothered to venture into that sphere. In its own right, the IMF requirements are a good thing for the kind of fiscally irresponsible governments that many countries in Sub-Saharan Africa regrettably have.