• NIGERIA

Buying while there is blood on the streets

When it comes to Africa’s leading economy, balance sheets not political histories dominate the reading lists

Within the last week, Nigeria’s economy was confirmed as the biggest in Africa. At US$510 billion, it is well over $100 bn. bigger than South Africa’s. The first Nigerian oil production company to list on the London Stock Exchange, Seplat Petroleum Development Company, raised $1.9 bn. in a day and two other well-connected local oil companies, Aiteo and Talveras, are in pole position to buy the OML 29 Block from Royal Dutch Shell for about $2.85 bn. While all that economy boosting has been going on, terrorist militias have killed at least 200 people in the north-east, posed as soldiers to abduct 200 schoolgirls and bombed the capital, Abuja, for the first time in two years, killing at least 79 people at a bus station in the Nyanya suburb.

The official figures for deaths due to terrorist attacks this year are heading towards 2,000, say local human rights group. The blame has been laid on Islamist Boko Haram militia, which makes generalised threats against both soldiers and civilians but rarely claims responsibility for individual acts of terrorism. The group briefly attracted major international attention when it claimed responsibility for bombing a United Nations office in Abuja in 2011, killing 24 people.

Even without such campaigns, Nigeria’s politics are messy and complex. Dire predictions are being made about next year’s elections when for the first time a credible and nationally organised opposition coalition is taking on the governing People’s Democratic Party, in power since 1999. Here too, there are security concerns because grassroots supporters of President Goodluck Jonathan, who hails from Bayelsa State in the Niger Delta, are threatening to make the country ungovernable should he lose. By that, they mean they would intensify attacks on oil and gas installations in the Delta, which still generate over 90% of exports.

Yet the government insists that investment is booming and the latest national income upgrade will raise it further. On a visit to the victims of the Nyanya attack, President Jonathan described Boko Haram as a ‘temporary’ threat. The many banks, which are rapidly upgrading their operations in Nigeria, concur with the government: their painstaking financial analyses barely refer to political risk, let alone terror campaigns.

The figures on capital flows are half right: certainly, the new national income data will spur billions of dollars of investment in services, retail and, most importantly, in agriculture. Investment in new oil ventures has slowed to a trickle, far less than in Angola, whose oil production will overtake Nigeria’s next month. The main money being made in oil is through the shuffling around of oil blocks, the trading of cargoes and massively overpriced imports of refined petroleum products.

On the other side of the ledger, the picture is devastating. Capital flight – through deliberately mispriced trade deals, contract kickbacks and stolen oil cargoes – is at record levels: some experts say it’s well over 25% of export earnings. Jonathan’s suspension of Central Bank Governor Sanusi Lamido Aminu Sanusi in February, after he called on the state oil company to explain its failure to transfer $20 bn. to the Treasury account in the past year, led to a run on the naira, which the government has propped up by spending some $4 bn. of its reserves, now at $37.9 bn. In percentage terms, those levels of capital flight and state theft are among the highest in the world, surpassing Brazil and Indonesia where, unlike in Nigeria, the bulk of stolen money is recycled within national borders. The other difference from such countries, whose population size and resource-base match Nigeria’s, is the failure of successive Abuja governments to invest in education and health. Over 60% of Nigerians live below the international poverty line.

Government officials proudly boast that they have successfully privatised the electricity industry. Yet, with a population of some 170 million, Nigeria produces under a tenth of the 45 megawatts that South Africa generates for its 50 million people. If the new plan works – and there is $20 bn. of investment in the local gas industry to power it – it could change Nigeria’s economy from commodity exporting to processing and manufacturing within a decade.

However, the deepening divide between poverty and insecurity in the north and pockets of prosperity in the south will obstruct this. Threats from Boko Haram in the north-east reinforce a vicious circle of poverty and insecurity. As long as the government fails to produce a political strategy to counter those militia, its plans for economic transformation will lack credibility. 

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