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Wednesday, 11 February 2015

The Economic Impact of the Postponement: Stability Deferred

Image: BBC

On Saturday, 7th of January, the Independent National Electoral Commission (INEC) announced that after careful deliberation it was acceding to the demands of the National Security Adviser (NSA) and the Service Chiefs to postpone the General Elections for six weeks. The new dates the Commission’s Chairman announced were now to be March 28 (Presidential and Federal Legislative elections) and April 11 (Gubernatorial and State Legislative elections). Much has already been written about the wide-spread suspicion which has greeted the postponement. Remi Adekoya’s article in The Guardian, Karen Attiah’s article in The Washington Post, and Tolu Ogunlesi’s article in the Financial Times, give a good sense of this general scepticism – much of which I share.

In this article I instead highlight the implications and impact of the postponement on the country’s economic stability. 

Stability Deferred

The ebullient glow that once permeated perceptions of Nigeria’s economic health has given way to an undercurrent of uncertainty. As the curtain dropped on 2014, plunging oil prices unleashed a trifecta of woes – reduced government revenues, foreshadowing a period of austerity; looming currency crisis, due to downward pressures on the Naira; and dwindling foreign reserves, as the Central Bank throws dollars into the market to stem the Naira’s slide – that are now weighing down the economy. Data now suggests that last year foreign investors reportedly pulled out N846.5bn ($4.5bn) from the stock market – 65% more than in 2013; a sign of waning investor confidence. And the Nigerian Stock Exchange (NSE) was billed as the worst performer among the major African exchanges in 2014 as investors stayed back and major multinationals whittled down their investments pending a clearer sense of the government’s fiscal policy direction in this changed economic landscape.

The proposed 2015 “transition” budget unveiled in December last year only deepened the uncertainty. Rather than charting a realistic path out of austerity, its thrust seemed geared towards attracting votes with populist, but inconsequential, measures like the “luxury tax”. Four of its key assumptions – oil production, 2.278m barrels/day; oil price, $65/barrel; exchange rate, N165/$; oil revenue, N1.92tr ($9.6bn) – were quickly dismissed as unrealistic by analysts as soon as the budget was presented.

 Industrial scale oil theft has left production lagging below 2m barrels/day since 2012. With little signs of oil theft abating, reaching the production target is probably unlikely. There is no need to dwell on the unrealistic oil price and exchange rate set. Both were already on a precipitous downward trend even before the budget was unveiled. As for the oil revenue target of N1.92tr, I’ll just charitably call it overly optimistic. In 2013 when the price of oil averaged $100+, oil revenue was reportedly N1.99tr. Now that oil prices have fallen by 50%, and with production sagging below expectation, how government arrived at such an optimistic revenue forecast is anyone’s guess.

Postponing the elections to March and April now means tackling these pressing problems have also been effectively deferred till the middle of this year when the almost inevitable unrest that will follow the elections (whoever wins) subsides. It also means that the tough measures for stabilising the economy that the political class need to start debating have been postponed till election fever dies down. After all, in election season, who wants to start discussing such unpopular measures as retrenchment of government employees/slashing government wages, removal/reduction of subsidies, capital controls to stem the flight of investor funds, accepting a devalued Naira rather than depleting the foreign reserves to vainly defend it etc.

Unsurprisingly, the Monday after the election postponement saw the Naira plummet to historic lows against the dollar – a declining trend that has continued – as investors sold off their holdings in the bond and equities market. Of the 30 markets tracked by the “World Market Indices”, the NSE, on the day after the postponement, was one of the worst performers – second only to Greece’s stock exchange.

More than a vote postponed therefore, by extending the election season for a further six weeks, government has also deferred the critical time when tough decisions will have to be made to stabilise the economy. And as we know: The longer a crisis persists, the narrower the range of options become, and the harder it becomes to manage.

Thursday, 5 February 2015

Understanding Chad's Intervention in Nigeria

The Lesson of History and the Influence of Geography

Chadian soldiers gathered near the Nigerian town of Gamboru after retaking the town, 1 February 2015. (AFP)
On Thursday morning, January the 29th, news broke that Chadian forces, with the tacit consent of the Nigerian government, had crossed the international frontier and recaptured Malam Fatori – a north-eastern Nigerian town that had been captured by Boko Haram in October last year. This was a watershed moment. For the first time in Nigeria’s 54 years as an independent country, foreign troops are conducting major military operations inside the country. Similarly, with Chad’s intervention, the war against Boko Haram has entered a new phase; and possibly presages a wider regional intervention – the balance sheet of which can only be properly assessed in the fullness of time.
So why did Idriss Deby send Chadian troops into Nigeria? How are we to make sense of this bold gambit?

N’Djamena’s Paramount Ruler: The Enduring Quest for Security

The desire for security often drives state behaviour in international politics. For autocratic states like Chad this drive is often subsumed under the all-consuming quest for regime security. Threats to political stability in dictatorships produce a clarity of action that is frequently lacking in other spheres of governance. Thus the deteriorating security environment around the Lake Chad area, and the long-term threat this poses to the Deby regime’s stability and survival, is probably the most salient and perhaps the main trigger for Chad’s intervention.

The Lesson of History 

Chadian troops on patrol after beating back the February 2008 rebel assault on N’Djamena in three days of brutal fighting. In the background, the smouldering ruins of the central market; a silent testament to the perils of insecurity confronting Chad’s rulers. (Benedicte Kurzen/New York Times)

The abode of rest (English translation of N’Djamena) has historically been anything but for Chad’s paramount rulers. The immense challenges of “broadcasting state power” to the periphery and achieving internal primacy over a country that is vast, “desperately poor and locked in perpetual strife” has often concentrated their efforts – and in many cases consumed them. Francois Tombalbaye, the first President, was killed in a coup d'état in April 1975; after close to a decade-and-a-half of one-man rule, punctuated by rebellions and the onset of what became a 14 year Civil War. Jérémie Ngansop, a Cameroonian journalist, famously gave this gripping account of his demise:

Tombalbaye … died weapon in hand. He had, in effect, fought to the last cartridge against his attackers, aided by only a few faithful members of his praetorian guard. Everyone had let him down.

Whilst Tombalbaye’s successors have so far been spared his grisly end, none have however so far left power under auspicious circumstances. They were either forced out in a coup, or resigned under the pressure of events.

Idriss Deby himself, the current incumbent and Chad’s longest lasting President so far, ascended power in December 1990 on the crest of a rebellion against his predecessor. And in his two-and-a-half decades in power, he has faced his fair share of unrests and revolts. In the last decade alone Deby has survived coup plots in March 2006 and May 2013, and the attempts of Sudan-backed rebels to unseat him by storming the capital in April 2006 and February 2008 – the second attempt precipitating French military intervention to beat back the rebel offensive.

This tumultuous past forms the historical backdrop and “lifeworld” that shapes Deby’s political outlook. But this doesn’t tell us much about why Chad’s political leadership decided to move decisively against Boko Haram. For that, we must turn our gaze to geography.

 The Influence of Geography

Boko Haram’s unwavering determination to carve out a transnational Shari’ah governed state in the region, its expanding reach, and Nigeria’s floundering efforts to contain the spill over from this growing regional threat has obviously unnerved Nigeria’s neighbours – none more so than Chad.
Two charts made by the author. Source for the figures: Google Map
One look at a map of the Lake Chad region and some geographical realities quickly become evident. N’Djamena is much closer to Nigeria’s Borno state, the locus of Boko Haram’s insurgency, than Nigeria’s own capital, Abuja. N’Djamena is about 200 miles away, as opposed to Abuja which is just under three times that distance. In fact, of the four countries abutting Lake Chad (Cameroon, Chad, Niger, Nigeria), Chad’s capital is the closest to the insurgency’s epicentre. The same is true for the Mandara mountain range, often referred to as Boko Haram’s stronghold.
Unlike Abuja, which only serves as Nigeria’s seat of political power, N’Djamena is also Chad’s major economic and commercial nerve-centre. With a limited road network – much of it unusable during the rainy season – and no railways to stitch such a massive land-locked country into a unified economic and political space, parts of Chad often have stronger links to neighbouring countries than to other parts of the country. Thus the capital city and its surrounding region are oriented towards Nigeria and Cameroon due to Chad’s reliance on those two countries for its access to the Atlantic Ocean. This dependence on Nigeria and Cameroon for Chad’s vital access to the ocean, and Nigeria’s economic weight in the region, has made the two countries Chad’s “main commercial partners”. Consequently, Boko Haram’s growing insurgency and the group’s plundering of trade routes in Nigeria and Cameroon has badly affected Chad’s commerce.

An added factor in trying to understand the gravity of the threat posed by Boko Haram to Chad is the proximity of the group’s growing operational reach to the $4 billion Chad-Cameroon pipeline project which ships oil from Chad’s Doba basin in the south of the country to the port of Kribi on Cameroon’s Atlantic coast. Whilst the Doba basin oil fields and much of the pipeline infrastructure are closer to Chad and Cameroon’s eastern borders with the Central African Republic (CAR) than they are to their western borders with Nigeria; if left to grow unchecked, it is not implausible that Boko Haram could eventually set its sights on such a strategically vital infrastructure to Chad’s economic security.

Yet another added layer are the dangers of an “arc of instability linking Nigeria’s restive north-east to the two Sudans via Cameroon and CAR – all troubled neighbours of Chad – through which insurgents, jihadists and weapons can move at will igniting, supporting, and reinforcing rebellions across the Sahel, West Africa and Central Africa. A nightmarish vision for any political leadership; especially one for whom the perils of insecurity are a near-permanent presence. The “Islamic State” group’s incipient polity in the Levant – Boko Haram’s ideological and operational model – is a searing reminder of the capacity of determined insurgents to break open and reorder fragile state systems; much like the one in which Chad is nested.
These are perilous geographical realities which to my mind Idriss Deby could not ignore. For a country with an enduring history of rebellions and instability – often stoked and inflamed by external troubles – it is rational that the “perfect Machiavellian Prince”, as he has been described, has perhaps decided that it’s better to fight abroad than wait for the conflagration to reach home.