Monthly Archives: November 2017

Europe could do more for Africa

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

It is a little annoying that this year’s African Union (AU) – European Union (EU) summit (29-30 November), the fifth now, has been overshadowed by recent revelations by CNN – an American news organisation much reviled by President Donald Trump – of black Africans being enslaved in Libya on their way to Europe illegally. Europe’s concerns about increasing illegal migration from African countries, often at great peril – for those who choose to make the journey, that is – would ordinarily have been the focal point at the summit regardless. European governments have committed to helping with evacuating the victims and prosecuting the culprits. Of course, it is not unlikely that the most secret bit of their ruminations wonders if the ugly phenomenon may not finally be the deterrent they so desperately seek to stop the rising illegal immigration rate of Africans to Europe. European governments have been at their wits’ end trying to stop the uncontrollable flow hitherto. Of course, the bad press that comes with many that die on the journey across the sea is not necessarily helpful. And it speaks to the motivation of the travellers if despite the dangers of the journey, more continue to embark on it. Even so, EU countries have become more stringent, as their citizens increasingly worry about losing jobs to migrants who do not mind lower pay; albeit their eyes are typically set on better skilled fellow Europeans. Upon arrival on the shores of Europe, often that of Italy, and after being rescued, the few that “made it” amongst the multitude at the beginning of the perilous journey back home, are sent to camps where they would sometimes stay for months or years. In the past, they could transition from these camps to what they eventually find to be a less than ideal “dream life” in Europe. Lately, sterner restrictions have increasingly made even this less likely: more are repartriated home these days. But these are the lucky ones. They are alive and have a chance to rebuild their lives. That said, the proportion of Africans that make this dangerous journeys pale in comparison to the many, youths mostly, who stay behind and try to make a meaning of their lives. Themed “Investing in the youth for a sustainable future”, it is this latter group that the 5th AU-EU Summit in Abidjan focuses on.

Faith and works
So at least, European governments know what the problem is. 60 percent of Africa’s 1.3 billion population is aged below 25 years. That is 761 million people. One estimate put the number of young Africans entering the labour market annually at about 10 million. Of these, only about 30 percent secure wage employment. The other 70 percent? We know some seek greener pastures abroad, for sure; and clearly in not so salubrious ways for most. Crucially, the majority are idle, thus posing a security risk not only to their countries, the African continent, but abroad as well. Trying to resolve the problem is at the core of the joint Africa-EU strategy. The advocacy here is that what has been done thus far, laudable though they are, could be much more. The European Union is quick to tout its 7-year €30 billion official development aid to 2020, for instance. It is a drop in the ocean. Compare with this: Africa needs at least $90 billion annually over at least a decade to plug its infrastructure deficit alone. There is a consensus, at least, that aid is not the solution. Better trade, could be, though. In this regard, the EU could be more forthcoming. Its Economic Partnership Agreements (EPAs) with African countries are controversial. Some African countries have reservations about them; Nigeria for instance. And there are quite a few amongst the ones that signed them which did so grudgingly. One issue is usually about the potential loss of revenue that African governments would suffer from allowing reciprocal tariff-free European access to African markets. To be fair, there has been some accommodation by the EU to compensate for this. The problem is that it pales in comparison to the potential loss. The great matter is how the EPAs in their current form might stymie Africa’s industrialization. Of course, it could be argued that automation and the so-called fourth industrial revolution are greater and more imminent threats. Even so, Europe should back its good faith with more action.

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Diversified Nigerian economy still about oil

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

Last week, I was part of a brilliant panel at the 2017 Bonds, Loans and Sukuk Nigeria Briefing event in Lagos that discussed the Nigerian economic outlook for the coming year. With the economy largely looking upward, the panel was naturally upbeat about the future; no doubt helped by the release of better than expected Q3 GDP data just about 30 minutes earlier. The forecasts one had just before the data release had to be momentarily revised upwards, for instance. Above 1 percent GDP growth rate for 2017 is beginning to look feasible certainly; from earlier projections of below 1 percent. More importantly, earlier estimates of about 2 percent for 2018 seem somewhat conservative now. With planned ramped-up public spending, because of the political cycle no less, expected lower inflation and interest rates, likely appreciation of the naira on the back of likely high for longer crude oil prices, 3 percent GDP growth next year would not be farfetched at all. One veteran company board guru in attendance agreed as much in private.

What if
Amid this optimism, however, an experienced foreign portfolio manager rightly asked a so-called disconfirming question. What if oil prices go south again? Of course, recent events suggest that scenario is not likely for another year, at least. But if one were to learn from history, sometimes all it takes for things to go awry can be no more than a single event. For example, if anyone said previously that Russia would be crucial to solving the Syrian and North Korean crises and indeed be germane to whether the oil producers’ cartel OPEC (which meets on 30 November) would be able to sustain the efficacy of its production cuts, you would have been sceptical. But that is exactly the case now. No one could have envisaged the radical anti-corruption move by Crown Prince Mohammed bin Salman (MBS) of Saudi Arabia or that his power would be formalized so quickly, for instance. Incidentally, the Saudi royal’s youthful exuberance is already becoming writ large: while the Yemeni war is still ongoing and the cold shoulder towards Qatar persists, MBS virtually held hostage the head of government of a sovereign country; and with the benefit of hindsight clearly forced him to read out a resignation letter that was intended to instigate a conflict with Iran. Otherwise there is no other explanation for why Lebanese prime minister Saad Hariri would, following summons from the Saudis, quit office in Riyadh on supposed intelligence of plans to assassinate him and then suddenly change his mind after what is believed to be an internationally brokered “release” from their watchful eye. (Upon returning to Beirut, Mr Hariri announced he would not be leaving office after all.) And since then, MBS has been unrelenting in his acerbic rhetoric towards the Iranian leadership. At this rate, it is beginning to seem like the bad blood between the Arabs and Persians might be a better trick for keeping the price of crude oil above $50 than any coordinated production cuts could ever do; albeit the Saudi and Iranian oil ministers have been largely speaking with one voice on an expected extension of the period for the production cuts. Besides, both countries need oil prices to remain high.

Political tune dictates
So what was my reply to the portfolio manager I referred to earlier? The problem with the Nigerian economy has never been about its structure. An economy that is 90 percent non-oil is not any sense of the word a mono-economy. It has always been the policy response. Unlike the popular perception, there is not so much a fixation on the exchange rate by foreign portfolio investors as there is on the crude oil price: they know to fly to safety the moment it seems like it would sustainably be below $50. Without saying so explicitly, what he really meant to ask about was the likelihood of capital controls if oil prices tanked again. And my view is that irrespective of the very nice commentary coming from the lips of officials at the central bank about the many lessons they have learnt during this most recent foreign exchange crisis, if another one comes about in the coming year, they would likely respond in a similar or worse fashion. Why? Electioneering ahead of the 2019 elections has begun in earnest. So, we are already in a political cycle. Within such a context, does anyone really think the Central Bank of Nigeria (CBN) would simply hands off if crude oil prices go back to the $30-$40 area? Bear in mind that even at the current above-$50 price levels, the CBN is believed to still participate actively in the buoyant investors’ and exporters’ (I&E) FX window; albeit on both the demand and supply sides. Thus, should crude oil prices fall again, I doubt very much the CBN would behave any differently; especially under a government that is keen on a second term and is led by a president that is very sensitive to the level of the exchange rate. To be fair, it would not be because the CBN does not know the right thing to do. And its officials were definitely not dumb in the past. They simply did not have the political space to do the smart thing. In the coming year, that space would become even smaller.

Also published in my BusinessDay Nigeria newspaper column (Tuesdays). See link viz. http://www.businessdayonline.com/diversified-nigerian-economy-still-oil/

African central banks to close year cautiously

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

Over the course of this business week (starts 20 November), central banks of the largest regional economies on the African continent would decide on interest rates. They are likely to keep them unchanged. Even as inflation has been slowing gradually in Nigeria, it remains high. And it is primarily driven by food inflation. Improved agricultural production on the back of a good harvest is expected to moderate prices over time. Besides the authorities are currently marketing a Eurobond that could be as much as $5.5 billion if everything goes well. It is not likely the Central Bank of Nigeria (CBN) would like to be seen making decisions other than ones that are data-dependent. In any case, CBN governor Godwin Emefiele has signalled the benchmark rate would stay pat at 14 percent for the remainder of 2017, with potential cuts next year when inflation would have slowed considerably.

For South Africa, the rand went into a tailspin lately, rising above the psychological 14.0 level for much of the past two weeks, as rumours persist about the desire of the Jacob Zuma-led government to make higher education free, amid well-known financial constraints. With a pliable finance minister at the helm, it is also now widely believed President Zuma has successfully ‘captured’ the Treasury. So even, as annual consumer inflation likely slowed to 4.8 percent in October, from 5.1 percent earlier, it may accelerate in November and December on the back of rand weakness and volatility. The headline would probably be no more than 5 percent by year-end, though; within the 3-6 percent inflation target band of the South African Reserve Bank (SARB). Over a 12-18 month horizon, consumer inflation would probably slow to 3-4 percent, however. Under different circumstances, this could justify a rate cut. However, the November monetary policy committee (MPC) meeting, the last this year and one just weeks before a tense leadership contest in the ruling African National Congress (ANC) party, require the SARB to exercise the utmost restraint. And even as the SARB pretends not to be perturbed by market moves, it does pay attention to the inflationary impact of rand weakness and volatility; and indeed the political noise that tends to be the trigger lately. A balanced outcome would thus be for the benchamark rate to remain unchanged at 6.75 percent.

And for Kenya, ongoing troubles related to a controversial presidential election rerun boycotted by the opposition, mean the Central Bank of Kenya (CBK) would need to continue exercising caution. It has shown much dexterity throughout the impasse thus far, though, as the shilling has remained largely stable. And inflation has been slowing; came out at 5.7 percent in October from 7.1 percent in the prior month. More importantly, inflation expectations suggest the headline would likely come out much lower in coming months; about 4.5 percent in December, say, and plausibly less than zero percent in Q2-2018 due to base effects. Even so, it would be better if it kept its benchmark rate unchanged at 10 percent at this meeting with a view to easing policy when the political situation improves.

Politics, politics, politics
The elective conference of South Africa’s ruling ANC party in December is on everyone’s minds. Mr Zuma’s rhetoric about the preferred candidate by the business community has not been comforting. The president has all but mentioned his deputy, Cyril Ramaphosa, in name when making accusations about the presence of western-backed traitors in the ANC. Judging from his countenance and body language, Mr Zuma is likely to do everything in his power to block Mr Ramaphosa from replacing him. Turns out, though, Mr Ramaphosa is leading in support from the party’s branches, whose delegates to the conference would elect the next party president. Many reckon if Mr Ramaphosa wins, he would move swiftly against Mr Zuma in a bid to replace him as head of state much sooner. Should his rival and Mr Zuma’s ex-wife, Nkosazana Dlamini-Zuma win, however, it is highly probable Mr Zuma would retain his position till it expires in 2019. To further this goal, it is believed Mr Zuma might fire Mr Ramaphosa as deputy president in the coming weeks. Ironically, this could actually boost Mr Ramaphosa’s chances.

In the Nigerian case, all indications suggest President Muhammadu Buhari would be seeking a second term in office; after ill-health hitherto increasingly made it unlikely he would do so. His recent activities point to a full campaign mode. He visited the southeastern part of the country recently; albeit to campaign for his party’s candidate at elections in one of the states there. But that only provided cover for his visit; he seemed reluctant to embrace the region hitherto. He and his aides vehemently deny this, of course. His defence rings hollow in the face of his actions, however. His inner circle is very exclusive. A recently announced ambitious N8.6 trillion budget for next year also has political coloration. Put simply, the political cycle is in full steam. There are thus risks of fiscal slippages as the administration rushes to show it has been doing well. Recently announced plans to appoint more ministers are not necessarily borne out of a desire for efficiency as they are about dishing out patronage. Such behaviour tends to cascade down to lower levels of government, with negative effects for the fiscus.

Leading opposition figure in Kenya, Raila Odinga, who recently returned from an American trip amidst police-induced chaos, has been leading the charge for secession in the western and coastal areas. Political motivations inform the recent ratcheting up of tensions in this regard. Besides, Mr Odinga is advocating the estalishment of a Peoples’ Assembly via a proclamation of parliament, where the ruling Jubilee party, which is averse to the proposal, has a majority. Continued protests and tight security measures have been stifling business activities and would definitely weigh on economic growth in the fourth quarter of this year. A ruling by the Supreme Court on 20 November on petitions about the conduct of the presidential election rerun could either ease or heighten tensions. In the past, the outcome would have been expectedly one that would not cause much disruptions. After a bold landmark ruling cancelling the first poll in August, the court’s judgement could go either way. With such political dynamics about in these key African countries, it makes sense for their central banks to be on guard.

Also published in my BusinessDay Nigeria newspaper column (Tuesdays). See link viz. http://www.businessdayonline.com/african-central-banks-close-year-cautiously/

The Russian factor

By Rafiq Raji, PhD 

In November 2014, at the G20 summit in Brisbane, Australia, Vladimir Putin was given the cold treatment by world leaders. Barack Obama, miffed by President Putin’s mischief, in Crimea months earlier no less, was particularly passive-aggressive. Not that Mr Obama was not justified; Mr Putin treated him like a school boy. And the probability that Mr Putin might be amenable to reason was very low. So if he were not going to conform, the least that could be done was to make it clear he would not be accorded the respect he so dearly craved. While the other leaders were having a chatty and hearty lunch, Mr Putin had to make do with empy chairs at his table and one other quiet partner; who simply munched her lunch. He left the summit early. At the airport, Mr Putin made sure to shake the hands of all the staff that attended to him, including those that tended to his plane; a measure of his anger. One could not help noticing a wry smile as he did this: he was already planning a revenge. Not in the sense we are used to, though. He did not go gun-blazing. Well he did that, sort of. But in an intelligent way. Probably out of spite towards Mr Obama, who chickened out from bombing Syria, even after evidence surfaced President Bashar al-Assad used chemical weapons against his own people, Mr Putin went ahead with the task. The symbolism paid off. Russia is now crucial to any potential resolution of that intractable crisis. But all of that showmanship, of which Mr Putin is never short of, paled in comparison to what is beginning to emerge. The Russians have been engaged in a systematic operation of subversion against Western democracies; top of them the United States. American intelligence agencies accuse Russia of meddling in the 2016 presidential election. Mr Putin’s point, they argue, was to make a mockery of that supposed archetypal bastion of the free world. The beneficiary, Donald Trump, a man as unconventional and insecure as they come, who it is believed would not have won otherwise, has by his actions and inactions, raise suspicions that Mr Putin may have a stranglehold on him. Because even under the most intense pressure, Mr Trump has not so much as put Mr Putin in a bad light, talk less of throwing the ever-ready insults he is wont to put at others. But that is just a bit of it.

Hands in every pie
Reports are beginning to emerge that not only was Russia meddling in the American elections, it also interfered in the British Brexit vote. It has even been suggested that the supposed illegal Catalonia independence vote in Spain had some Russian influence. And in South Africa, the much vilified Gupta brothers are beginning to seem like kids relative to the Russians. Jacob Zuma, the South African president, as if under a spell, insists on an expensive nuclear power build. Initially, it was thought this was motivated by potential pecuniary gains. However, it is beginning to seem like Mr Zuma may have little choice in the matter. The Russians want to build South Africa a nuclear power station. And what the Russians want, they would have. At least, so it is beginning to seem.

So it begs the question: what do the Russians want? That is simple. Respect. Mr Putin and his cohort of ex-spies recall an age when the former Soviet Union was great and feared. That age is long gone. But the thinking is not. What Putin’s Russia wants is to have a say in major international matters. And to be frank, before Mr Putin’s antics, Russia was increasingly sidelined. Well, not anymore. The United Kingdom is reeling from a bumbling and fractious political leadership. Brexit negotiations have been characterised by twists and turns to nowhere. Spain barely escaped a crisis as Catalonians sought to break away from the federation. And not until regional elections planned for December are concluded, the region’s governance hangs in the balance. And in America, Mr Trump is under investigation, at least his aides are, for proof or otherwise of Russian interference in the American elections. Of course, Mr Putin takes offense at even the thought he might be so idle as to even follow the American polls. No matter. Things are just the way he would have wished.

Also published in my Premium Times Nigeria column. See link viz. https://opinion.premiumtimesng.com/2017/11/16/the-russian-factor-by-rafiq-raji/

Flattered Trump achieves little in Asia

By Rafiq Raji, PhD

Donald Trump, the American president, concludes his 5-country Asian trip in The Philippines today (14 November). Heralding his arrival in Beijing a week earlier – his third stop after earlier ones in Japan and South Korea – was a reminder of China’s trade surplus with America, data for which came out at US$26.6 billion for October; about US$223 billion thus far this year. And if he thought his trip would make China buy at least as much American goods and services as go the other way, he was a tad disappointed. Of course, there was much pomp about the US$253.4 billion in deals signed between the two delegations. But much of these were not substantive. And some were actually just old deals. The extent of the divergence in the views of the Chinese president, Xi Jinping, and President Trump, would become writ large in Da Nang, Vietnam, at the Asia-Pacific Economic Cooperation (APEC) summit, where they both headed afterwards. They provided sharply contrasting visions on trade in their speeches to the gathering of Asian-Pacific leaders. While President Xi espoused multilateralism, openness, and globalisation, Mr Trump was unapologetically insular in his views. Brief incidental interactions with Russian president, Vladimir Putin, at the APEC summit, in place of a much anticipated formal meeting, did not yield much either. Because even though the Kremlin published a joint statement on the crisis in Syria, there was not much there that was new; a missed opportunity. It did not help of course that the controversy over alleged Russian meddling in the 2016 American presidential elections would not just go away; no doubt made worse by Mr Trump’s equivocation on the matter. In fact, what little progress that was made during his time in Asia was actually on matters antithetical to his agenda. A deal was reached by the 11 countries remaining in the Trans-Pacific Partnership (TPP) trade agreement he ditched, for instance; albeit there were a few hiccups here and there before that came about.

Playground rhetoric
Mr Trump came out a little bruised on the North Korean matter as well. After initially striking a somewhat conciliatory tone towards the communist regime, urging it to do a deal over its nuclear weapons programme, he adopted an aggressive posture shortly afterwards in his address to the South Korean legislature; defiantly telling the volatile man up north not to test America’s might. Unsurprisingly, the North Korean regime replied with insults, calling Mr Trump an ‘old lunatic’, ‘warmonger’ and ‘dotard.’ Not one to take such expletives lying down, the American president threw back a few of his own, suggestively referring to Kim Jong-un, the North Korean leader, as ‘short’ and ‘fat’. Even so, if there is a slight chance of some deal with the communist regime, Mr Trump’s unusual style probably makes him best-placed to make it happen. China remains crucial to any potential progress, however. Unfortunately, they did not offer more than they already had on the matter.

Flatter to naught
The Japanese were more gracious at least; they imposed additional unilateral sanctions on North Korea. Not that this could necessarily be attributed to Mr Trump’s powers of persuasion: North Korea fired missiles over Japan in mid-September. And this was despite Mr Trump’s taunts at prime minister Shinzo Abe: He went on unabashedly about how the Japanese were inferior to Americans and wondered aloud why the Japanese did not shoot down the North Korean missile, suggesting how if they had American-made weapons, they would have been able to do so easily. (The Japanese are officially pacifist but have a military for self-defense purposes.) Little wonder then his Japanese trip turned out to be a failure somewhat. He did not get much from them on trade; a major issue for him. (Like China, Japan also maintains trade surpluses with America; albeit at 9 percent of the total American trade deficit, it pales in comparison to China’s 47 percent.) As if to buttress the point, the Japanese ruled out a potential Free Trade agreement (FTA) with the Americans, Mr Trump’s preferred route to dealing with trade imbalances. Instead, Japan led the effort to ensure a deal was reached on the so-called TPP-11. The Asians were all smiles but gave him little.

Also published in my BusinessDay Nigeria newspaper column (Tuesdays). See link viz. http://www.businessdayonline.com/flattered-trump-achieves-little-asia/

What is the point of Trump’s Asian trip?

By Rafiq Raji, PhD

Donald Trump, the American president, arrived Beijing today (8 Nov), the third stop on his 5-country Asian trip, after earlier stops in Japan and penultimately, South Korea. Heralding his arrival was a reminder about China’s trade surplus with America, which came out at US$26.6 billion for October; making it a total of US$223 billion thus far this year. President Trump would like the reverse to be the case. Unfortunately, it would continue to be a source of frustration for him, and in fact any other American leader who desires that China buy at least as much (if not more) American goods and services as go the other way. Incidentally, China is already making headway in the sophisticated industries that America may have once relied upon to stay ahead; which often are in partnership with American companies in China itself. And even as Mr Trump tries to bring back American companies back home from places like China, with jobs in tandem, the economics still favours them staying abroad; albeit not necessarily in China but in cheaper Southeast Asian countries. Turns out, Mr Trump is scheduled to address the 2017 ASEAN summit on 14 November in The Philippines, where bashful and often uncouth president Rodrigo Duterte may be just the ideal host for his similarly mannered American counterpart. And such is the importance the Americans attach to it that Mr Trump’s itinerary was extended by a day to accommodate the ASEAN speech. He would not be leaving China empty-handed, though. At least US$9 billion in deals are expected to be made between chief executives of American companies on Mr Trump’s entourage and their Chinese counterparts, commerce secretary Wilbur Ross is reported by CNBC to have said. (Another official is reported to put potential deals to be signed at US$250 billion.)*

Rocket man
With a belligerent leadership at the helm and reckoning by the Russians that in two to three years, it could have missiles able to hit America, North Korea remains a thorny issue. On his first day in Seoul (7 November), Mr Trump struck a somewhat calm tone on the great matter; urging the North Korean regime to come to the negotiating table and do a deal. Next day, while addressing the South Korean legislature, it was the reverse; defiantly telling the communist regime up north not to test America’s might. These are all very well; but fact is, Mr Trump achieved nothing there. And the elements came up against him en route to the demilitarized zone between the two Koreas, as his chopper could not risk an unanticipated fog. The Japanese, who he visited (5-7 November) before the Korean leg, tried to be gracious at least; they imposed additional unilateral sanctions on North Korea. Not that this could be attributed to Mr Trump’s persuasive powers: North Korea fired a missile over Japan in a show of strenght recently. Of course, Mr Trump could not stop himself from taunting prime minister Shinzo Abe on why the Japanese did not shoot down the missile. Ever the salesman, he did not forget to make a pitch for how American weapons would be able to easily do just that, though. (The Japanese are officially pacifist but maintain a handful of troops, supposedly for self-defense purposes.)

Emperor’s new clothes
Of course, Mr Trump did not see how ill-fitting it was to boast about American might to the face of Mr Abe; going on unabashedly about how the Japanese were still second fiddle to Americans. Little wonder then his Japanese trip turned out to be a failure somewhat. He did not get much from them on trade; a major issue for him. Like China, Japan also maintains trade surpluses with America; albeit at 9 percent of the total American trade deficit, it pales in comparison to China’s 47 percent. As if to buttress the point, the Japanese ruled out a Free Trade agreement (FTA) with the Americans, Mr Trump’s preferred route to dealing with trade imbalances; as opposed to the now 11-country Trans-Pacific Partnership (TPP) trade agreement that he ditched but which the Japanese are keen on, for instance. An FTA with the Japanese would have been hailed by Mr Trump as a victory. A highly likely meeting with Russian president, Vladimir Putin, on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit in Vietnam, his next stop from China, would no doubt be overshadowed by ongoing investigations back home into Russian links of Mr Trump’s associates during his presidential campaign. In the meantime, he should enjoy some relief at his current stop: the Chinese reportedly plan to treat him like an emperor. That is not usually a compliment.

*Trump & Xi announced US$253.4B in deals on 9 Nov 2017; albeit a significant portion is not substantive, as they are simply MoUs and so on.

2018 budget should be passed before year end

By Rafiq Raji, PhD

Muhammadu Buhari, the Nigerian president, presents his 2018 budget statement to the legislature on 7 November. He reportedly wanted to do it in late October; to allow ample time for the spending proposals to be considered and passed by December. Some lawmakers have expressed reservations about this. BusinessDay, the newspaper which publishes this column, found out why. There are at least three executive proposals currently under consideration by the lawmakers. First is the 2018-2020 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP). Second is a N135.6 billion virement proposal. And third, a US$5.5 billion foreign borrowing request. My view is that the lawmakers can get them all done on or before 31 December. And they should. Considering how much they get paid, it would not be too much to ask that they go into overdrive, consider and pass them all before heading for their Christmas break.

More spending
In the MTEF, the 2018 spending estimate is put at N8.6 trillion, up by about 16 percent relative to the 2017 budget of N7.4 trillion. Oil production is assumed at 2.3 million barrels per day (mbpd), which would probably be no more than 1.8 mbpd if a likely OPEC production cap in November is sanctioned. But even this level of production may be weighed on by imminent militant attacks on oil and gas infrastructure by agitators in the Niger Delta region. Additional tax measures are planned. A 15 percent tax on luxury goods from 5 percent currently, for instance. An ongoing tax amnesty programme till March 2018 should also boost the government’s finances. Tax revenue performance this year has been quite impressive, with respect to VAT at least; N797.5 billion was realised between January and October 2017, up about 20 percent from the same period last year.

Better narrative
It is not news that the 2017 budget was only partially implemented; never mind shortfalls here and there even for the parts that were. As the authorities likely plan to issue a US$5.5 billion eurobond imminently, it would help a great deal if investors are able to see how things are beginning to indeed change for the better. There have been some positive developments lately. The World Bank recently affirmed the authorities’ ease of doing business reforms are working, raising Nigeria’s ranking 24 places to 145th out of 190 countries. Central bank governor Godwin Emefiele was also recently conferred with an award by Forbes magazine. And in late October, Nigeria kept its place in the MSCI Frontier Markets Index (country weight of 8 percent); attributed to a rebound in the foreign exchange market. So, imagine how truly positive the Nigerian investment narrative would be if the authorities are able to also demonstrate they are succeeding with fiscal policy.

Good plan
Concerns have been raised about the supposedly planned US$5.5 billion eurobond, though. The country’s historical pains with indebtedness make Nigerians naturally wary. Public debt of N19.6 trillion (US$64.2 billion) in June, about 16 percent of 2016 GDP of US$405 billion, should ordinarily not be concerning. But electioneering for the 2019 polls has started in earnest. And President Buhari, hitherto thought might not be seeking a second term in light of his fragile health, recently signalled he has decided otherwise. So there is the risk that new borrowings might not be spent wisely. In response, finance minister Kemi Adeosun is taking pains to explain the rationale behind the plan. Of the US$5.5 billion they plan to borrow, US$3 billion would be used to refinance the authorities’ current debt portfolio. The remaining US$2.5 billion, which would be new borrowing, is intended to in part fill a hole in the 2017 budget; already appropriated for. It seems like a good plan, if you ask me.

Be bold
Feelers that came out initially were that the planned foreign borrowing would be done in two parts. I do not believe this to be wise. Interest rates are rising in the developed world, with the American Federal Reserve expected to hike rates again in December. And only last week, the Bank of England raised its benchmark rate by 25 basis points to 0.5 percent, the first time since 2007. What this portends for African sovereigns looking to issue eurobonds is that potential subscribers are going to insist on higher yields; albeit they would by far still not be as dear as those in their domestic debt markets.

Also published in my BusinessDay Nigeria newspaper column (Tuesdays). See link viz. http://www.businessdayonline.com/2018-budget-passed-year-end/