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NIGERIA | Too close for comfort

Posted on Wednesday, 19 December 2018 10:25

Twenty years after the return to civilian rule, Nigerians will be voting in national elections next February that could shape the country’s direction for decades. Without dec­isive action, Nigeria and its oil-­dominated economy risk getting stuck in a pattern of chronic underperformance, despite the formidable entrepreneurial skills of its people.

To reach anywhere near their potential, dynamic new farming and food-­processing companies, together with telecoms and creative and digital enterprises, will need heavy investment in the business environment and the wider economy. That means much higher spending on education and training, together with a herculean building programme of roads, railways and power stations.

The south west is key

Although the two main parties – and their candidates, President Muhammadu Buhari of the All Progressives Congress (APC) and Atiku Abubakar of the People’s Democratic Party (PDP) – accept this prescription, the election turns on which side people trust to raise and manage the tens of billions of ­dollars needed to jump-start this economic transition.

At the start of the year, Buhari and the APC had a commanding lead in the opinion polls, due not only to his strong support in the north but also because the opposition PDP was in disarray. A group of high level defections from the ruling party, along with backing for Atiku from some of the top northern generals, has swung things in the opposition’s favour.

Political insiders reckon that the APC will take a commanding lead in the North East and the North West; the PDP will do the same in South East and South South. In the North Central region, which has been plagued by clashes between herders and farmers that are sometimes exploited and exacerbated by politicians, the PDP could make some big gains over its 2015 performance.

But the critical swing region will be the South West, where the APC won by 2.4m votes to the PDP’s1.8m in 2015. If the PDP can put on another million votes in the North Central and South West, boost the turnout in its base regions and make inroads into the north – its candidate Atiku is from the North East – it may be on the road to victory.

After the economy went into recession in 2016 in the wake of the oil price crash, the risks of a longer slowdown are evident. In March, the Washington DC-based Brookings Institution reported that Nigeria had overtaken India as the country with the highest number of people living in extreme poverty, with 87 million, compared to India’s 73 million.

That grim trend, and how to reverse it, will be a recurring theme in the campaign. Everyone agrees that economic imperatives overwhelm all others, but differences over policy, even on the structure of government, are wider than ever. For Deji Adeyanju, convener for the Concerned Nigerians group, “the election is a referendum on poverty and hunger […] because things have never been this bad before”.

Alongside the economic pressures, Adeyanju reckons the government has failed on security and human rights, referring to an attack by the Boko Haram militia on a school in Dapchi in north-east Nigeria in February as well as its handling of the army clashes with Shia Muslims, who had been protesting against the continued detention of their leader, Ibrahim Zakzaky. Amnesty International says that more than 40 people were killed in the Zakzaky demonstrations; the Nigerian army puts the casualties at nine.

Held back by circumstance

In the face of growing criticism from civil society groups, President Buhari is doubling down on his pledges to diversify the economy, combat corruption and defeat violent extremists. Those policies gave him an overwhelming victory in the 2015 elections. Reality turned out differently after he took power with the first two years of his government held back by crashing oil prices and his own ill health.

Information minister Lai Mohammed tells The Africa Report that, despite the tough conditions, Buhari has delivered on “the pocketbook issues in the election”: supporting farmers to boost rice, maize and sugar production and stepping up spending on roads, bridges and power stations. “And the PDP still has a bad reputation on security, corruption and building infrastructure,” Mohammed says.

Rotimi Amaechi, the former governor of Rivers State who is now transport minister and director of Buhari’s re-election campaign, concedes it will be a much harder-fought election than the last but he reckons it will come down to a matter of confidence in Buhari. That, insists Amaechi, is still running high in the north and in the key swing region of the South West.

In a strange twist of ­political positioning, Abba Kyari, Buhari’s chief of staff, conjures up an ongoing struggle between the government and Nigeria’s establishment and associated vested interests. In an spiky opinion column headed ‘Nigeria is changing for the better and our failed elite has every reason to be terrified’, Kyari writes about ‘the legacy of corruption and incompetence’ of the PDP, which ruled Nigeria from 1999-2015.

Slow pace of reforms

After listing some of the government’s big transport projects, Kyari claims the government is winning the battle against vested interests: ‘Cosy cartels at our ports have been broken. Our telephone companies are no longer a law to themselves. Banks can no longer make a fortune out of sitting on government funds – your money,’ he writes.

Yet, on the ground the progress is slow. A report by the Lagos Chamber of Commerce and Industry in September said Nigeria’s economy was losing about N6.5trn ($18bn) a year in ­direct revenues and lost business due to ­bureaucratic red tape, congestion, and corruption at the ports, despite the government’s reform programme.

In agriculture, encouraging rice farmers as a means to diversify the economy is making slow progress, too. Local rice production has increased by more than 50% to 3.7m tonnes over the past six years. But that is just over half of domestic demand, which means a shortfall of 3.4m tonnes.

In the medium term, the slack will be taken up by investors such as Olam and Aliko Dangote, who is setting up plants to process more than a million tonnes of rice a year. In the short term, however, with rice imports due to be banned at the end of 2018, much of the shortfall may come from rice smuggled across the border from Benin. Speeding up that shift to local agricultural production will require still more investment in better seeds, roads, warehousing and farming and processing equipment.

The Buhari government’s other economic policy instincts have prompted deeper scrutiny, such as its ambiguous position on fuel subsidies (see page 68). Formally, the government said it would abandon universal subsidies, which have been misused in the past by local traders, and target help towards the neediest people. It also promised much greater accountability in the oil and gas industry. So the government may be embarrassed by a Senate investigation into the state oil company’s use of dividends of $1.1bn from a gas export subsidiary to finance subsidies on fuel this year.

Fuel even cheaper?

Presidential candidate Atiku Abubakar and the PDP have their own policy contradictions. In the first few days of the campaign, Atiku promised to lower fuel prices, although, thanks to the subsidy, Nigeria already has one of the lowest gasoline prices in the world. Yet, in the party’s manifesto it pledges to deregulate the downstream oil sector, implying an end to subsidies.

Atiku’s slick 63-page manifesto, premised on the slogan ‘Get Nigeria working again’, sets out his promises: market-­driven economic policies, deregulation and much more privatisation. It looks geared to attract the party’s business supporters, both to finance Atiku’s campaign and to back his government should he win power. Among its proposals is a plan to make Nigeria’s corporate taxation the lowest in Africa. That includes swingeing cuts to state expenditure, especially on recurrent items, and a near abolition of capital controls. Wooing private capital through incentives would be a key economic imperative.

The manifesto talks about ‘orderly privatisation’ – selling off the government’s four refineries and the electric power transmission system, reducing the state’s role to oversight. To that, it adds some hugely ambitious targets, such as lifting at least 50 million people out of extreme poverty by 2025 and creating at least 3m jobs annually.

Cultural revolution

But it stops short of some of the more radical policies that Atiku set out in his recent interview with The Africa Report (TAR105, Nov 2018): selling down the government stake in the country’s oil fields and allowing the states to collect 100% of oil revenue on which they would pay tax to the federal government.

The manifesto lambasts the Buhari government for allowing the naira to lose 120% of its value against the US dollar, with its complex multi-tier exchange rates. But it does not commit Atiku to implementing his preferred policy of allowing the naira to float.

In an extended section on state restructuring, the manifesto talks about a ‘sweeping cultural revolution’. Its political logic is that decision-making would move as close as possible to the point of service delivery. Yet it skirts around any precise commitment on the sharing out of the country’s wealth, mentioning ‘a new revenue allocation formula to be negotiated across the board’. Then it argues: ‘Nigerian states are poor not because they are not receiving a fair share of oil money but because they are not receiving a fair shot at true federalism.’

For activists such as Adeyanju, the constitutional reform plans play well: “[Atiku] is committed to restructuring, and I believe most of the things he is proposing are doable […]. He has shown a commitment to doing things differently.”

Information minister Mohammed is more sceptical about the centrality of constitutional reform in the election: “It’s an elite issue in the North West and the North East. There, the economy is the concern, although talk of restructuring resonates with activists in the south.”

Although Atiku and the PDP have been wooing the business vote in the south, some operators take a more judicious line on the elections. For example, Oluwaseun Smith, chief executive of Enaro Energy, has a mixture of praise, blame and recommendations for the government: “Poor fiscal policies by this administration mean it’s unable to earn enough in taxes to pay for this [electricity] subsidy. As a result, debt continues to accumulate and there’s no incentive for private capital to be invested in the industry.”

At the same time, Smith congrat­ulates the government on its policies towards companies like his, which is generating electricity off the grid. Yet he calls for more market-driven policies to raise money for public goods: “The government must change its fiscal policies to invest a lot more in education and health than it is doing now. […] Perhaps the time has come to consider imposing a federal personal income tax to raise government revenues. […] They must also allow the private sector to contribute directly to funding roads through public-private partnerships so that journey times reduce and internal trade flourishes,” he concludes.

This article first appeared in December-January 2019 print edition of The Africa Report

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