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Nigeria Strategy Report H1 2017 (6) - Back and Forth on a Political Tight-Rope

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Monday, January 16, 2017 39:18 PM / ARM Research

Key Developments in Domestic Economic and Policy Environment 
We continue our series of excerpts from our core strategy document—the Nigeria Strategy Report, but direct our focus towards developments on the domestic policy front. We start with a review of the socio-political landscape over the last six months and delineate our outlook for 2017.

Over H2 16, the Niger Delta militancy again catapulted to global importance after OPEC, in its November general meeting, elected to leave Nigeria out of its oil production cut deal. In response to the militant attacks, FGN launched a special military operation dubbed “Crocodile Smile” in August. However, as with prior military incursions, limited geographical understanding by the Army and adoption of guerilla tactics by militants limited the operation to an ornate game of cat-and-mouse. Faced with the stalemate, the FG switched to a more conciliatory approach to the insurrection in the subsequent months by opening talks with traditional rulers and reaching out to the main antagonists -the Niger Delta avengers. Elsewhere, the FG continued to record marked gains in the 7-year battle against Boko Harm with announcement in December by the military that it had cleared the Sambisa Forest base. However, with greater population displacement and disruptions along trade routes, food insecurity remained rife across the North-East region with the threat of famine now hanging over large parts of Borno, Adamawa and Yobe.

Away from the various physical battlefronts, the political landscape continued to change as the ruling party further cemented its footprint across the federation with two gubernatorial election victories in Edo and Ondo states in September and November respectively. In addition, the fight against corruption took an unprecedented turn in October as the DSS executed simultaneous nationwide raids on homes of senior members of the judiciary including two supreme court judges. To be clear, while circumvention of due process could be viewed in terms of expediency—in light of the reported illicit proceeds found in the judges’ possession—the move served to reinforce concerns over a perceived gung ho approach which has characterized most of FGN’s anti-corruption crusade and raised doubts over the commitment of the Buhari administration to democratic practices.

Going forward, we see enough in current FG efforts to suggest that further security gains in the Niger Delta and the North-East may not be farfetched. For the former, sustained declines in the number of pipeline attacks appear to be the clearest indicator of progress. In addition, having increased amnesty allocation by over three-fold YoY to N65 billion for 2017, FG looks set to expand its conciliatory efforts with the president announcing a new charm offensive by the Vice President towards peace in the region. On the political front, though there are still two years to 2019, on-goings within the ruling party suggests more sizable political tussles in the coming year as forces across the major parties seek to re-align. More insight about these machinations should become clear as the Buhari administration looks towards a cabinet re-shuffle in January even as talks of creation of a new opposition alliance gain ground. On the gubernatorial front, with neither of the two major parties having control over Anambra, the stage looks set for a feisty battle for footprint extension during the state elections in 2017. Overall, as the last year before sizable pre-2019 politicking commences, we expect to see more behind the scene moves across political parties.

After the stick fails, FG goes for the carrot in the creeks
Over H2 16, the Niger Delta militancy again catapulted to global importance after OPEC, in its November general meeting, elected to leave Nigeria out of its oil production cut deal. Indeed, intensified militancy had resulted in delayed re-opening of major oil export terminals, which left crude production at a 20-year nadir of 1.63mbpd—a situation which necessitated the sympathetic treatment from OPEC—and pushed Africa’s largest economy at a first economic recession since 2004. In response to the militant attacks, FGN launched a special military operation dubbed “Crocodile Smile” in August, with the protection of people and oil facilities within the Niger-delta region earmarked as its prime objectives. In the wake of the military campaign, suspected militant hideouts were razed while several individuals were detained, albeit without follow-up trials. However, as with prior military incursions, limited geographical understanding by the Army and adoption of guerilla tactics by militants limited the operation to an ornate game of cat-and-mouse.

Though the activities of “Crocodile Smile” corresponded with a 29% decline in reported pipeline vandalization in August, the operation’s gains ultimately failed to remove the threat of insecurity of pipelines which resulted in persisting force majeure on oil export terminals.

Faced with the stalemate, the FG switched to a more conciliatory approach to the insurrection in the subsequent months by opening talks with traditional rulers and reaching out to the main antagonists -the Niger Delta avengers. According to NNPC, the blend of both approaches underpinned substantial improvements in the industry.

Specifically, the corporation highlighted a 44% MoM drop in the number of pipeline vandalized points to 101 in October. Besides representing the sharpest contraction in 2016, the current cut-back in pipeline attacks is the third of its kind in the last three months.

Figure 1: Historical changes in pipeline vandalized points


Elsewhere, FG also continued to record marked gains in the 7-year battle against Boko Harm with announcement in December by the military that it had cleared the Sambisa Forest base. As in H1 2016, the Nigerian military victories continued to result in declining casualty numbers (Q3 16: -52% YoY to 1,377) even as the army secured release of 21 Chibok girls. However, the sects’ territorial battles have fast degenerated into guerilla attacks on unsuspecting communities with FEWSNET reports indicating a 64% rise in the number of displaced persons to 1.8 million on a year ago, basis.

Thus, with greater population displacement and disruptions along trade routes, food insecurity remained rife across the North-East region with the threat of famine now hanging over large parts of Borno, Adamawa and Yobe.

Ruling party widens footprint at guber polls using incumbency power
Away from the various physical battlefronts, the political landscape continued to change as the ruling party further cemented its footprint across the federation with two gubernatorial election victories in Edo and Ondo states in September and November respectively. Whilst the former was continuity within the ruling party’s frame, victory in Ondo state represented an incursion into opposition terrain.

Unsurprisingly therefore, on-goings in Ondo was fraught with more political tussles and strife as the two major parties sought for dominance within the sunshine state.

For a start, intra-party crisis brewed within the APC over choice of candidate right from the primaries with the situation deteriorating into calls for the removal of the national president. At the other end, the ruling party in the state (PDP) struggled through court cases following a sustained crisis over candidature that even led to an appeal for an extension of the elections. In no small measure, these challenges may have weakened the ruling party, undermined its “power of incumbency”, and eventually contributed to its loss at the polls. As is now customary in the country though, the PDP heatedly contested the results of the election, accusing INEC of conspiring with APC to rig the outcome of the polls. Elsewhere, after court rulings invalidated the outcome of the 2015 legislative election in Rivers state, the re-run was again marred with significant violence, professional misconduct, and intimidation which prompted a further postponement of the elections. This was despite the 28,000 policemen, aside, military personnel and DSS, that were deployed to the state to counter violence. Though the PDP still carried the day, it lost its supermajority in the state which tilts the balance of power towards APC.

Anti-corruption crusade moves to the Judiciary
The fight against corruption took an unprecedented turn in October as the DSS executed simultaneous nationwide raids on homes of senior members of the judiciary including two supreme court judges. In the operation, the DSS allegedly recovered huge sums of cash and documents linking the judges to luxury properties and suspected corrupt practices. Expectedly, the actions against the judges divided public opinion as while the action appeared consistent with the Buhari administration’s anticorruption mantra, the raids frayed nerves in the legal community as they were conducted without clearance from the National Judicial Council (NJC).

Though the DSS claimed to have executed their search/arrest warrant as empowered under the Administration of Criminal Justice Act 2015, the move raised concerns over a constitutional overreach as the Nigerian Bar Association claimed that the DSS went beyond its regulatory purview to exercise functions restricted to a law enforcement agency. The NJC itself insisted that it was not subject to the supervision of any authority or individual. To be clear, while circumvention of due process could be viewed in terms of expediency—in light of the reported illicit proceeds found in the judges’ possession—the move served to reinforce concerns over a perceived gung ho which has reportedly characterized most of the FGN’s anti-corruption crusade and raised doubts over the commitment of the Buhari administration to democratic practices. 

2017 promises to be a testy year
Going forward, we see enough in current FG efforts to suggest that further security gains in the Niger Delta and the North-East may not be farfetched. For the former, sustained declines in the number of pipeline attacks appear to be the clearest indicator of progress. In addition, having increased amnesty allocation by over three-fold YoY to N65 billion for 2017, FG looks set to expand its conciliatory efforts with the president announcing a new charm offensive by the Vice President towards peace in the region.

That said, the conciliatory approach and raised amnesty payments could incentivize copy-cat moves with reports of fresh attacks by another militant group the Niger Delta Greenland Justice Mandate on NPDC 32-inch crude oil delivery line at Effurun, Delta State in Q4 16. Evidently, the FG would need to move with haste in rounding off peace arrangements with key stakeholders in the region while the present lull in attacks persists to provide a basis for oil companies to resume production activities. More importantly, with onshore and shallow water assets, where FG stake is high, still within purview of militant attacks, the Niger Delta terrain looks set to remain clouded by uncertainty in the near term.

On a positive note, current security gains in the North East are noteworthy with efforts to alleviate fall-out food shortage expected to gain traction with increasing intervention from foreign agencies.

On the political front, though there are still two years to 2019, on-goings within the ruling party suggests more sizable political tussles in the coming year as forces across the major parties seek to re-align. More insight about these machinations should become clear as the Buhari administration looks towards a cabinet re-shuffle in January even as talks of creation of a new opposition alliance gain ground.

On the gubernatorial front, with neither of the two major parties having control over Anambra, the stage looks set for a feisty battle for footprint extension during the state elections in 2017. Though APGA has carried Anambra state in the last three elections, a fall-out between the incumbent governor and his predecessor could provide an opening for either the APC or the PDP. Given the relatively unpopular stance of the APC in the South East, the campaign looks set to follow vigorous path as the ruling party looks to set the ground work for a possible retention of central power in 2019. Overall, as the last year before sizable pre-2019 politicking commences, we expect to see more behind the scene moves across political parties.

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