Thursday, 24 December 2015

Big social social spending and big borrowing in Buhari's maiden budget

In a final splurge of news before the new year, Nigeria's President Muhammadu Buhari presents a mega-budget and Burkina Faso's new government issues an arrest warrant for ousted President Blaise Compaoré. And there is electoral competition in Uganda and Djibouti, both of which face polls early next year. But in Rwanda, which has just seen a referendum offering President Paul Kagame the change to stay in power for another two decades, there is an eerie absence of political competition. Finally, a heartening story from northern Kenya where Muslim passengers protected their Christian compatriots from a terrorist attack.

NIGERIA: Big social spending and big borrowing in Buhari's maiden budget
Allocations for health and education topped planned spending on defence in the 6.08 trillion naira (US$30.8 billion) budget – the country's biggest ever – announced by President Muhammadu Buhari on 22 December. Buhari's budget for 2016 is heavily expansionist despite the country's tough financial and security conditions.

Central bank officials said an economic stimulus was necessary to stop the economy from slipping into recession. Buhari's budget statement forecast 4.4% economic growth in 2016 on the basis of the planned spending on jobs and infrastructure. The economy still takes its lead from the state sector although Buhari announced plans such as tax breaks to help small to medium scale companies.
Education gets N396 bn. which provides for the hiring of 500,000 new teachers to address the crises in the schools and colleges; health gets N296 bn.; and defence gets N294 bn. or well under a third of the defence budget in President Goodluck Jonathan's last year in power. Those defence allocations are now the subject of a sweeping anti-corruption investigation which has already resulted in charges against Colonel Sambo Dasuki, the former National Security Advisor.

The uptick in social spending and infrastructure (at least 30% of the budget will be capital spending) means a doubling of the budget deficit to N2.2 tn. or about 2.16% of gross domestic product. To fund the deficit the government will borrow some $5 bn. for international markets and slightly more from the local market. We hear there are continuing discussions with Qatar about a multi-year loan programme and some project finance.

Just as the final touches were put to the budgetary calculations this week, the government's economic team decided to base revenue estimates on an oil price of $38 a barrel. By the time Buhari read the speech, the spot market oil price had fallen to $34 a barrel. Yet Buhari insisted that his government was determined to end Nigeria's dependence on crude oil exports which still account for about 95% of the country's foreign exchange revenues.

Buhari also hinted that the government would be more flexible on exchange rate policy in 2016 which prompted some bankers to suggest that there could be a managed devaluation of the naira next year. Yet insiders insist that Buhari wants to block what he considers to be the wasteful use of foreign exchange to import items that Nigeria could be manufacturing.

There are also signs that the government might take advantage of low international oil prices to phase out national fuel subsidies. Given this is one of the most sensitive issues in Nigerian politics, the government is likely to tread very carefully before announcing any policy shift. In another change of style from his days as military leader in the 1980s, President Buhari apologised to Nigerians for the shortages of gasoline, telling the National Assembly that the latest reforms to the oil sector should put an end to all that.

BURKINA FASO: Arrest warrant issued for ousted President Compaoré
Less than a month after his election victory, President Roch Marc Christian Kaboré has shown his differences with the ancien régime and laid down a challenge to neighbouring Côte d'Ivoire. On 21 December, Kaboré's government issued an international arrest warrant for Blaise Compaoré, the ousted Burkinabe President, who is now living in Côte d'Ivoire.

The arrest warrant was issued in connection with the murder in 1987 of Thomas Sankara, Compaoré's popular and radical predecessor. Sankara's body was found to have multiple bullet wounds when it was exhumed last May as a part of a new investigation into the circumstances of his death. Already General Gilbert Diendere, Compaoré's security chief, has been charged with complicity in Sankara's murder.

Given Compaoré's closeness to senior figures in President Alassane Ouattara's government in Côte d'Ivoire, it is uncertain whether the former Burkinabe leader will be handed over to Ouagadougou. Failure of Côte d'Ivoire to comply could lead to a rapid worsening of relations with the new government in Burkina.

DJIBOUTI: Clashes as Guelleh prepares to stand again
Accounts differ about the latest confrontations in Djibouti ahead of the Presidential elections due in April 2016. Having insisted he had no interest in standing again, President Ismail Omar Guelleh, now seems set to run in the election at a time of heightening security tensions in the region.
Government sources insist that just nine people were wounded when 'dozens of armed' oppositionists attacked a state security facility in the Buldhoqo area. But opposition groups say at least 19 people were killed as government forces tried to suppress a demonstration.

By hosting French and United States armed forces and now a Chinese military base, Guelleh may reckon that these security deals could shield his government from serious foreign criticism over his political tactics. That calculation will be tested over the next few months as electoral tensions grow.

RWANDA/UGANDA: From third term to endless terms
Those two old comrades, Uganda's Yoweri Museveni and Rwanda's Paul Kagame are showing a clean pair of heels to other would-be long stay leaders in the region. Museveni, in power for 30 years, has serially orchestrated constitutional changes to allow him to extend his tenure but shows no signs of mellowing as one of his former lieutenants, Amama Mbabazi, challenges him in Presidential elections due in February 2016.

On 21 December, police raided Mbabazi's political headquarters and arrested 20 people, raising fears of worsening violence ahead of the poll. Yet Museveni is tipped to win, given a combination of the government's incumbency, some political crookery as well as the fact that the other two main candidates, Mbabazi and Kizza Besigye, are likely to split the opposition vote.

And also on 21 December, President Kagame thanked Rwandans for voting in a national referendum over the weekend to allow him to run for another seven year term, and then two more terms of five years each. On paper this means Kagame could extend his tenure until 2034.

Although 98% of those casting ballots backed Kagame in the referendum, opposition activists complained they were given very short notice of the vote and were not allowed to campaign. The United States, which has generally supported Kagame, said he could best serve his nation by stepping down in 2017 and upholding the constitution's term limits.

KENYA: True bravery on the road
The courage of some Muslims in Mandera, north west Kenya, saved the lives of many of their Christian compatriots on a bus when ten heavily armed Al Shabaab militants sprayed it with bullets and killed two passengers.

The militants ordered the Christians and the Muslims on the bus to separate. A year ago, Al Shabaab attacked in the same area and killed all the non-Muslims on a bus bound for Nairobi. But this time the Muslims refused to cooperate with the Al Shabaab fighters, some even gave Muslim attire to the Christian passengers.

Apparently surprised by this show of community solidarity, the Al Shabaab fighters left the scene but threatened to return. Accounts of the Muslim passengers' bravery have been reported on many national and international news outlets and contradict claims of a religious polarisation in Kenya, following a wave of terrorist attacks over the past five years.

And for 2016… The team at Africa Confidential want to take this opportunity to send you all our best wishes for the new year. We will be back in the first week of January with a special edition of Africa Confidential full of detailed political and economic forecasts for developments in 2016.

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