The week ahead – Nadir

The Central Bank of Nigeria (CBN) postponed the Monetary Policy Committee meeting slated for this week (25-26 September, saying it would schedule a new meeting later. Isa Abdulmumin, Director of Corporate Communications, said a new date would be communicated in due course while regretting any inconvenience the change may cause to stakeholders and the general public. The postponement may be connected to the fact that the CBN leadership comprising the new governor and three other deputy governors nominated by President Bola Tinubu, were only just confirmed by the Senate on Tuesday. 

This is not surprising as in Nigeria, an imminent appointment triggers a period of inactivity where people seek to avoid bold possibly irreversible moves. What is important is that the pause due to no substantive CBN governor is now over and we can begin to focus on the quality of policymaking that emerges from the new leadership. Some important questions naturally arise. Will it refocus the bank on its core mandate? How politicised will it be compared to the last CBN leadership? Will it make the necessary adjustments to FX policy? Will it continue to make illegal advances to fund the federal government? These are the real issues because the new CBN governor and his team have inherited a messy and overflowing in-tray. Justling for attention include Nigeria’s depleted foreign reserves, FX revenue challenge, debt service and galloping inflation. All these issues put the country at risk of economic stagnation not to say anything of a debt default, which would have devastating long-term consequences. At the next MPC meeting, the CBN would have to rethink its approach to tackling inflation. It has now become clear that the usual hawkish monetary policy thrust is not sufficient. Governor Cardoso, unfortunately, will not have time to settle in because he needs to sort out the forward contract issues and repair Nigeria’s tattered relationship with international markets. This is not the time to lavish money on “interventions.” Spending the Naira without increasing productivity will only increase inflation. The CBN needs to focus on its core mandate of ensuring price stability as a platform for economic growth and allow the ministries to focus on their duties. Further interest rate hikes would signal that the bank still subscribes to the thinking that monetary policy alone can solve the inflation conundrum, whereas a pause would signal that they prefer to wait and better understand the wider context. Over to Mr Cardoso and crew.

Nigerian businesses reliant on imports are facing disruptions as foreign suppliers reject letters of credit (LC) and insist on cash transfers into escrow accounts due to worsening foreign currency shortages. This shift reflects diminishing confidence in Nigeria’s banking system amid the dollar scarcity. In a related development, Afrexim Bank is reportedly seeking oil traders’ support to finance a $3 billion loan to Nigeria’s state oil company (NNPCL) to bolster the country’s efforts to support the naira. The currency recently hit a record low of 1,000 to the dollar on the black market on Tuesday. 

This is a sad development for a country of Nigeria’s size and stature. It is even worse for businesses that rely on imports for inputs that are needed for manufacturing. What this basically means is that the world’s financial system does not trust that Nigeria can meet its credit obligations—a situation caused by possessing insufficient dollars to cover imports. Nigeria is heading down a slippery slope, especially when the market knows that the government has little recourse than to go to the markets to borrow. They will certainly capitalise on this and raise interest rates. This is an absolute disaster, and it is the clearest indication that the fate of Nigerian businesses is inextricably tied to that of the state. Hitherto, many business people operated under the illusion that they could build in spite of government action running the country askew. Eventually, and inevitably, policy impacts businesses and translates to real operating costs. Furthermore, international trade involves the licensed exchange of goods across borders, and LCs are germane to international trade because they help mitigate risk by protecting importers and exporters through a network of banks and agents. The 2022 Triennial Central Bank Survey from the Bank for International Settlements indicated that the US dollar was bought or sold in about 88 percent of global transactions over the past few years, indicating that countries that have FX shortages will not be trusted to settle all their trades. Positively, due to high crude oil prices, Nigeria recorded a positive trade balance of ₦1.28 trillion in the second quarter of 2023, which should theoretically improve the country’s FX position, even accounting for it importing almost all of its refined petroleum products. Notwithstanding, the new CBN governor has a difficult task ahead of him in restoring investor and international stakeholders’ confidence in the Nigerian economy and its businesses. He should try to increase Nigeria’s foreign reserves by loosening bottlenecks that limit export expansion and disincentivise foreign investment. Additionally, he should improve the efficiency of the FX market. The success or failure of his efforts will have a major impact on the Nigerian economy and the lives of Nigerians.

In Zamfara, gunmen targeted two communities, killing eight people and abducting approximately 60 individuals, Reuters reported. Islamist insurgents ambushed a convoy under military escort, killing two soldiers and four civilians, while setting five vehicles on fire and taking one truck, a police source said. Residents said an attempted assault on an army base in Magami was repelled.  The gunmen in three groups attacked the army base alongside Magami and Kabasa communities, primarily kidnapping women and children. These incidents followed the recent abduction at the Federal University, Gusau. Additionally, in Borno, Boko Haram militants killed 10 farmers and abducted several others in Mafa Local Government Area.

Banditry and insecurity in Nigeria’s North West is distinct from the security challenges blighting other geopolitical zones due to a number of (mostly) unique factors. Unlike the geographic East that is saddled primarily with security issues related to militants and separatists, the North West, particularly Zamfara, faces a different set of problems, chiefly stemming from the interplay between banditry and jihadism. Before 2022, bandits attacked mostly civilians and avoided security installations. This dynamic changed in late 2022 when the Islamic State West Africa Province (ISWAP) established camps in Mutu in Mada District, Gusau LGA, and started attacking Tsafe communities through the Danjibga-Kunchin Kalgo axis of the state. The distance between Magami where this week’s attack took place and Tsafe where the group has a base is 67 km. Since the revelation of ISIS presence in the two LGAs, not much has been done to dislodge them. They (ISWAP) have largely co-existed peacefully with the bandit groups in the locality, and it is likely that ISWAP is responsible for the attack on the base in Magami. This portends several problems for the military. The state government claims that the federal government is negotiating the release of the abducted university students without informing them, a charge Abuja firmly denies. This lack of coordination makes it difficult for the military to balance the demands of these two significant actors, whose disagreements could jeopardise any counterterrorism effort. The military’s credibility is also undermined when it announces the rescue of the girls while the federal government is ostensibly negotiating their release. The military already has its hands full with the spread of ISIS affiliates in the North West. It can only do so much when residents in its operational areas, people it is nominally called to serve, question official pronouncements.

In Accra, Ghana, hundreds of demonstrators convened for a third day of anti-government protests against the government due to economic hardships. The protesters, expressing concerns over the high cost of living and unemployment, marched under police supervision. Security forces blocked access to Jubilee House, the presidential residence, as organisers from Democracy Hub threatened to occupy it. On the initial day of protests, 49 individuals were arrested for unlawful assembly and breaching the Public Order Act. Subsequently, the situation remained relatively peaceful, with no reports of further detentions.

Ghana’s Democracy Hub, led by Mawuse Oliver Barker-Vormawor, is demanding reforms to address the high cost of living, corruption, youth unemployment, inadequate healthcare and poor infrastructure. The movement gained unprecedented attention with its #OccupyJulorbi protest initiated by a group of young Ghanaians expressing their discontent on social media. The protest, which originated on Twitter, spanned three consecutive days and featured participation from youth, top celebrities and influencers. This is not to say it is all rosy as politics has also come to the party. Barker-Vormawor is facing legal action on accusations of inciting a coup. He has also accused the National Security Minister Kan Dapaah of attempting to bribe him with $1 million and committee appointments to quell his activism. The National Security Ministry has refuted these claims and initiated legal action against Barker-Vormawor. Despite decades of practising democracy coupled with abundant natural resources, many Ghanaians struggle to afford basic necessities. Illegal mining continues to damage water bodies and forest reserves, and the cost of dialysis for kidney patients remains high and is expected to increase significantly. Ghana’s population is predominantly youthful, with over 55 percent of registered voters aged 18 to 35. This proportion is anticipated to rise in 2024. However, within the 15-35 age group, unemployment rates are high, standing at 19.7 percent, and even higher for young adults aged 15-24 at 32.8 percent. Within 24 hours of the protest, Alan Kyerematen, a prominent figure in the ruling party considered a potential successor to President Akufo-Addo, broke away from the party to announce his candidacy as an independent. He plans to lead a youth-powered movement, believing that a significant shift will enable Ghana to harness the talents of its youth for optimal performance in various institutions and organisations. Kyerematen is widely viewed as the champion of young Ghanaians and appears to be leveraging the momentum of the ongoing protest to rally the youth for change. Nevertheless, the protestors are demanding more than just the emergence of a third political force; they are seeking effective government action to alleviate the growing economic hardships they face. On that point, all the politicians, Kyerematen inclusive, have a lot of work to do in showing they have realistic answers. The long road to December 2024 continues.