macroafricaintel Weekly | 18 Dec

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

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Date Data / Event Period Forecast Previous
18 Dec Uganda Policy Rate, % 9.0 9.5
18 Dec Botswana Policy Rate, % 5.0 5.0
South Africa M3, % yy Nov 2017 6.0 5.0
South Africa PSCE, % yy Nov 2017 5.5 5.4
Nigeria CPI, % yy (mm) Nov 2017 15.8 (0.7) 15.9 (0.8)

*Uganda MPC view changed; now expect a rate cut.

macroafricaintel Weekly | 11 Dec

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

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Date Data / Event Period Forecast Previous
12 Dec South Africa Manufacturing Production, % yy Oct 2017 -0.7 -1.6
13 Dec Uganda Policy Rate, % 9.5 9.5
13 Dec South Africa CPI, % yy (mm) Nov 2017 4.9 (0.4) 4.8 (0.3)
14 Dec South Africa Retail Sales, % yy Oct 2017 5.3 5.4
14 Dec South Africa Current Account, % GDP Q3 2017 -2.5 -2.4
14 Dec South Africa PPI, % yy (mm) Nov 2017 5.2 (0.6) 5.0 (0.7)
Tanzania CPI, % yy (mm) Nov 2017 4.0 (0.1) 5.1 (-0.1)
Botswana CPI, % yy (mm) Nov 2017 2.9 (0.1) 3.0 (0.0)
Namibia CPI, % yy (mm) Nov 2017 5.1 (0.2) 5.2 (0.1)
Nigeria CPI, % yy (mm) Nov 2017 15.8 (0.7) 15.9 (0.8)
Ghana CPI, % yy (mm) Nov 2017 11.6 (0.7) 11.6 (0.9)
Ethiopia CPI, % yy (mm) Nov 2017 13.4 (0.4) 12.2 (0.3)

macroafricaintel | MainaGate: We must be fair

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

I have followed the “MainaGate” saga with great interest. (It refers to the furtive reinstatement into the public service of Abdul-Rasheed Maina, the former head of a presidential task force on pension reforms, who to the knowledge of the public had been declared wanted for myriad corruption allegations but was purportedly at large.) My views are mixed. After watching a 2-hour video recording of the investigative hearing by a committee of the lower house of the Nigerian legislature, what is clear to me is that Mr Maina has the sympathies of some people in the current government. He returned to a post at the interior ministry without any fear it seems. And the country’s chief spy, Lawal Daura, acknowledges action on a request on behalf of Mr Maina of a threat to his life. Mr Daura says since Mr Maina is a Nigerian and that they indeed found his fears to be credible, they had no choice but to take action. Nigerians likely find this interesting: You could not get past the gate of the premises of the spy agency if you were not “special”, talk less have the ears and heart of the agency’s chief. Besides, why would any agency help someone who everyone in the public domain thought to be a fugitive from justice? It could be that they are privy to a truth; but which would be injurious to the state if made public. Mr Daura also revealed without the slightest equivocation that Mr Maina is not on his agency’s watch list; hence why he has not been arrested. Furthermore, is it possible that Mr Maina would make incorrect claims about helping the authorities to recover assets in the knowledge that should these be found to be untrue, it would not help his already unfortunate circumstances? There are just too many questions. And many remain unanswered.

Passing the buck
My primary concern is really just about fairness. I am usually very wary when a narrative dominates the airwaves to the point that people become reluctant to espouse anything different. And in my experience, narratives with such prominence tend to contain some untruths. In time, the real state of affairs tends to unfold; but by then, it is usually not that useful for the victims of the earlier falsehood. But in this case, the lives of a man and his family are at stake. And the matter has been so publicised to the point that anything short of a proper resolution would be a great injustice. And the potential victims are not just Mr Maina and his relatives. A senior civil servant has accepted full responsibility for Mr Maina’s supposedly illegal reinstatement. I doubt very much he is as culpable as he claims. But there is a culture amongst the people from the part of the country he comes from about keeping to pacts and acting courageously. So should push come to shove, those he is likely protecting can sleep quite restfully in the knowledge that he would not change his tune later. To be clear, I am not taking sides here. But if murderers can be allowed the presumption of innocence until proven guilty, a purportedly corrupt former public servant can surely be allowed some accommodation.

Truth at all times
I think President Muhammadu Buhari was likely privy to at least some elements of the events that led to Mr Maina’s now supposed illegal reinstatement and promotion. When he became aware is the part one cannot objectively infer. To be fair, the president is procedurally apprised of only high-level details of issues. It is only when he prompts further that he is made aware of more. And even when a president does this, the details are still watered down. It is not the practice, however, for any president to probe too much; at least, not if his principal staffer, the chief of staff, Abba Kyari or any person in the position, has his full confidence. But when Mr Maina started gracing the full cover of newspapers, it would certainly have been impossible for Mr Buhari, who is well-known for his love of the papers, not to have become fully aware of the controversy and the injury it was causing his administration. Predictably, he directed that Mr Maina be immediately disengaged from the civil service and asked for a full report on the great matter. That said, Mr Maina’s issue has become so controversial that even when he receives the fairest hearing, it would be unwise to allow him back into the civil service. Besides, the matter could be left to the court which Mr Maina’s lawyers claim ordered his reinstatement in the first place; albeit he would probably be better off collecting his emoluments and retiring into a quiet life should he emerge victorious. Even so, some pragmatism could be applied to make the matter a win-win for all concerned. If his claim that he could help the authorities recover about three trillion naira in stolen public funds and assets – more than a third of planned public spending next year – is found to be credible, for instance, it should be pursued in exchange for some plea bargain deal (if applicable). But there is a broader issue about how public pension funds have been perennially misappropriated by public officials; ironically, the raison d’etre of Mr Maina’s task force. My advocacy is to Mr Buhari and not his underlings. No matter how villainous Mr Maina may have become and the potential costs to his government if he chooses to be fair, Mr Buhari must stick to the path of truth. Mr Maina should be given fair hearing, full protection by the security services whilst this lasts, and the judgements and resolutions by competent bodies on the matter should be implemented to the letter.

Also published in my BusinessDay Nigeria newspaper column (Tuesdays). See link viz. http://www.businessdayonline.com/mainagate-must-fair/

macroafricaintel | Africa FX Monthly – Dec-17

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

Click here for the PDF version

Currency   1 month

(29 Dec 2017)

3 month

(28 Feb 2018)

6 month

(31 May 2018)

12 month

(30 Nov 2018)

South African Rand (USD:ZAR) 14.0 13.6 13.3 13.1
Nigerian Naira (USD:NGN) 361.0 365.0 350.0 315.0
Ghanaian Cedi (USD:GHS) 4.5 4.6 4.1 3.7
Kenyan Shilling (USD:KES) 103.0 103.5 103.1 102.5
Ugandan Shilling (USD:UGX) 3,637 3,631 3,630 3,640
Tanzanian Shilling (USD:TZS) 2,237 2,231 2,235 2,230
Ethiopian Birr (USD:ETB) 27.5 27.8 28.1 28.6
Mauritian Rupee (USD:MUR) 33.7 33.1 33.3 33.5
Namibian Dollar (USD:NAD) 14.0 13.6 13.3 13.1
Botswanan Pula (USD:BWP) 10.5 10.3 10.1 10.0
Zambian Kwacha (USD:ZMW) 10.1 9.9 9.7 9.5
US Dollar Index (DXY) 93.0 92.7 94.1 93.3

macroafricaintel Weekly | 4 Dec

By Rafiq Raji, PhD
Twitter: @DrRafiqRaji

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Date Data / Event Period Forecast Previous
5 Dec South Africa GDP, % qq saa Q3 2017 0.6 2.5
6 Dec Namibia Policy Rate, % 6.75 6.75
7 Dec South Africa Gross Gold & FX Reserves, US$bn Nov 2017 49.1 48.9
7 Dec South Africa Mining Production, % yy Oct 2017 5.8 -0.9
Mauritius CPI, % yy (mm) Nov 2017 3.3 (0.1) 3.5 (-0.4)
Seychelles CPI, % yy (mm) Nov 2017 3.6 (0.1) 3.5 (0.0)
Tanzania CPI, % yy (mm) Nov 2017 4.0 (0.1) 5.1 (-0.1)
Botswana CPI, % yy (mm) Nov 2017 2.9 (0.1) 3.0 (0.0)
Namibia CPI, % yy (mm) Nov 2017 5.1 (0.2) 5.2 (0.1)
Nigeria CPI, % yy (mm) Nov 2017 15.8 (0.7) 15.9 (0.8)
Ghana CPI, % yy (mm) Nov 2017 11.6 (0.7) 11.6 (0.9)
South Africa CPI, % yy (mm) Nov 2017 4.9 (0.4) 4.8 (0.3)
Ethiopia CPI, % yy (mm) Nov 2017 13.4 (0.4) 12.2 (0.3)

 

macroafricaintel | 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/

macroafricaintel | 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/