AFRICANGLOBE – Nigerian business leaders may bask in the nation’s inclusion (along with Mexico, Indonesia and Turkey) among the ‘Mint’ economies, predicted by Brics creator Jim O’Neill of Goldman Sachs to lead the next generation of emerging economies. That status will be confirmed if, as expected, Nigeria overtakes South Africa as Africa’s largest national economy.
Optimism has been reinforced by the promise of initiatives such as the 2013 privatisation of electricity assets, much of it funded from local capital markets. But there are still plenty of issues to give rise to concern, even when security concerns in the north and Niger Delta are discounted In this context, it is far from certain that next year’s elections will see President Goodluck Jonathan overcome a reinvigorated opposition, which now has a majority in the National Assembly, and northern elites who believe he should be no more than a one-term leader of the People’s Democratic Party (PDP).
This may mean Nigeria gets a more capable president than Jonathan, but it also suggests another period of prolonged domestic political turbulence ahead. The extent of Jonathan’s problems with the PDP will become clear if, as expected, a scheduled 15-16th January leadership meeting sees a vote of confidence in Jonathan and PDP national chairman Alhaji Bamanga Tukur. Meanwhile in the Senate, several PDP senators are expected to join five state governors and three dozen-plus National Assembly deputies by defecting to the opposition All Progressives Congress.
For only the second time since independence the president did not present the 2014 Federal Government budget. Co-ordinating minister for the economy and finance Ngozi Okonjo-Iweala officiated while Jonathan handled the fallout from a crisis triggered by criticism of his performance by former head of state Olusegun Obasanjo, and plotted to dismiss Central Bank of Nigeria governor Sanusi Lamido Sanusi, who had claimed that between January 2012 and July 2013 Nigeria National Petroleum Corporation had failed to transfer oil revenues worth around $50bn to the Federation Account. Sanusi denies leaking the letter making these claims and will only leave if two-thirds of senators vote for his dismissal, which is unlikely.
Sanusi has already said he will not seek a second term in June 2014 and has called for an ordered transition that will reassure investors. But the transition will be fought over by rival factions, at a time when politicians want to mobilise the maximum resources for election year. These tensions were reflected in delays approving the pre-election budget. Eventually the budget was based on a higher oil price than Jonathan proposed, at $77/bbl instead of $74/bbl, with production put at 2.3m b/d. As of October 2013, production was only 1.9m b/d; the 2013 budget was based on 2.5m b/d output.
Government revenue for 2014 is put at N10trn ($62.5bn), N7trn from oil and gas. Expenditure is N4.6trn, of which N2.4trn is current spending (down from N2.8trn in 2013), while capital expenditure at N1.1trn is down from N1.5trn in the 2013 budget. The fuel subsidy is put at almost N1trn, the same as in 2013. The National Assembly is expected to propose more amendments to please voters. Jonathan has a veto but a further political standoff could stymie a budget aimed at boosting jobs and manufacturing.
Success hinges on sorting out the electricity sector, which despite progress in 2013 still generates only around 4GW. Improving the transmission system is essential, but the situation is not improved by the government once again disputing Manitoba Hydro International’s management contract. With a big rise in domestic debt forecast, international bankers will be eyeing an expected Eurobond in 2014. It will come during a period of more expansionary fiscal policy ahead of the election; inflation is likely to rise. The rising political temperature may be harder still to cope with.