News Archive March 2017
IMF urges Nigeria to remove currency curbs to boost economy
Nigeria should remove currency-trading restrictions and reduce its budget deficit and debt levels to help the economy recover this year, the International Monetary Fund said.
“Under unchanged policies, the outlook remains challenging,” the Washington-based lender said in an emailed statement after an article IV consultation with Nigerian officials. “Stronger macroeconomic policies are urgently needed to rebuild confidence and foster an economic recovery.”
The West African nation will probably seek $3.5 billion abroad for its 2017 budget to plug a deficit in President Muhammadu Buhari’s spending proposals of 7.3 trillion naira ($23 billion). The government returned to international capital markets on Wednesday for an additional $500 million after raising $1 billion of Eurobonds in February. Its debt-service costs doubled to 66 percent of revenue last year from 2015, the IMF said.
“Nigeria’s debt-servicing cost is quite high, and peculiar because it’s high due to low revenue,” Yvonne Mhango, an economist at Renaissance Capital, said by phone from Johannesburg. “The government should increase revenue by raising value-added tax, expanding the tax base and improving compliance.”
Nigeria this month announced a four-year program to create 15 million jobs and boost an economy that shrunk by 1.5 percent last year, the first contraction since 1991. The blueprint also aims to boost economic growth to 7 percent by 2020 by lifting oil output, opening farmland and increasing investment in power, roads, rail and ports. Gross domestic product will probably expand 0.8 percent this year and 1.9 percent in 2018, the IMF said.
The plan aims to reduce the inflation rate to single digits from 17.8 percent in February. The central bank has kept its key rate at a record high of 14 percent since July even as price growth is at almost double the government’s 9 percent target.
Easing exchange-rate restrictions “should be supported by tighter monetary policy and fiscal consolidation to anchor inflation expectations and to limit the risk of exchange-rate overshooting,” the IMF said.
The naira lost about one third its value against the dollar when the central bank removed a currency peg in June. To keep it from further falling, the regulator continues to regularly sell dollars and Governor Godwin Emefiele has said they will enforce a managed float for the foreign-currency market.
Authorities should “remove the remaining restrictions and multiple-currency practices, thus unifying the foreign-exchange market and helping regain investor confidence,” the IMF said.
The currency-trading restrictions and multiple foreign-exchange rates have impeded capital inflows and curbed lending, according to Renaissance Capital’s Mhango.
“Nigeria has to let the market be more involved in valuing the naira, and as the IMF says, needs tight monetary policy to attract capital flows, improve liquidity and stabilize the currency,” she said.
S&P Global Ratings spared the west African nation a downgrade earlier this month, affirming its B rating with a stable outlook, and said increasing crude output and government spending will support growth.
Governments must take bold steps to promote trade – Kofi Mbiah
The Chief Executive Officer of the Ghana Shippers’ Authority (GSA), Dr Kofi Mbiah, has asked governments of the West African sub-region to take bold steps to promote economic integration among member states by removing barriers affecting trade facilitation.
He said the removal of tariff and non-tariff barriers, cutting down of delays and costs associated with the clearance of goods and also improving trade flows among others are critical for boosting trade in the sub-region with the exponential effects of improving the living conditions of the people.
Dr Mbiah made the call in his opening remarks at the launch of the 1st Borderless Alliance Ghana Conference held in Accra Wednesday March 29, 2017 under the theme “Positioning Ghana as a Gateway to West Africa – Optimizing Benefits of ETLS and TFA”.
“The African continent and its Regional Economic Communities (RECs) record less intra-regional trade than most other regions of the world. One of the major factors behind this low level of integration is the low level of Trade Facilitation implementation. Regional integration depends crucially on the facilitation of cross-border trade and, at the same time, many cross-border operations depend on cooperation among neighbouring countries,” he emphasised.
He noted that compliance with the Trade Facilitation Agreement (TFA) of the World Trade Organisation and particularly the Ecowas Trade Liberalisation Scheme (ETLS) are catalysts for inter-economic integration and growth.
The GSA boss added: “The ETLS also covers transit trade and establishes an ECOWAS Inter-State Road Transit (ISRT) scheme to ensure goods in transit flow easily without having to pay duties or other fees. A single logbook and single bond are planned to aid in these transit flows. This initiative intends to standardize axle load limits, create a regional vehicle insurance scheme, harmonize vehicle standards, and reduce road blocks along major corridors.”
Dr Mbiah commended efforts between his outfit and Borderless Alliance, a private sector-led regional advocacy group that promotes regional economic integration and free movement of goods and people in West Africa by tackling barriers to trade and transport in the region, in facilitating trade and building the capacity of shippers with the ultimate objective of making them more competitive
He mentioned the establishment of an e-platform which allows shippers to lodge complaints electronically and border Information Centres at vantage border posts of Ghana which provide real time assistance to shippers and transitors among others as part of the interventions the two institutions have collaborated to implement to boost trade.
Speaking on behalf of the minister of trade and industry, a deputy minister designate Carlos Ahenkorah, MP, stated that government has prioritized programmes to improve the business climate and regulatory reforms for industrial development and has as a result placed trade facilitation at the centre of trade reforms in Ghana.
“In this regard, trade procedures and custom processes at Ghana’s borders and ports have undergone major transformation and modernisation, particularly through the introduction of ICT and the implementation of the Single Window project,” he added .
The trades minister noted that even though there are still some challenges with the implementation of the ETLS with some reflecting in the Borderless Alliance’s perception survey report conducted on some key sections of the Tema-Ouagadougou trade corridor, the introduction of the single window project has reduced processing time of goods at the port from seven to three days and Customs have also become more responsive to phyto-sanitary inspection service.
On his part,the minister of transport, Mr Kwaku Ofori-Asiamah, emphasised on the need for Ghana to position herself well in the sub-region by addressing the barriers confronting the free movement of goods and persons with its neighbours.
He commended the Ghana Shippers’ Authority and the Borderless Alliance for their continuous collaborative efforts in promoting trade facilitation and encouraged them to do more.
The president of Borderless Alliance Ghana, Mr Ziad Hamoui, said his outfit will continue to collaborate with state agencies and the private sector in addressing the challenges inhibiting the free flow of goods and persons in a timely and cost effective manner.
Worst humanitarian crisis in 70 years hits as Trump slashes foreign aid
The world’s largest humanitarian crisis in 70 years has been declared in three African countries on the brink of famine, just as President Donald Trump’s proposed foreign aid cuts threaten to pull the United States from its historic role as the world’s top emergency donor.
If the deep cuts are approved by Congress and the U.S. does not contribute to Africa’s current crisis, experts warn that the continent’s growing drought and famine could have far-ranging effects, including a new wave of migrants heading to Europe and possibly more support for Islamic extremist groups.
The conflict-fueled hunger crises in Nigeria, Somalia and South Sudan have culminated in a trio of potential famines hitting almost simultaneously. Nearly 16 million people in the three countries are at risk of dying within months.
Famine already has been declared in two counties of South Sudan and 1 million people there are on the brink of dying from a lack of food, U.N. officials have said. Somalia has declared a state of emergency over drought and 2.9 million of its people face a food crisis that could become a famine, according to the U.N. And in northeastern Nigeria, severe malnutrition is widespread in areas affected by violence from Boko Haram extremists.
“We are facing the largest humanitarian crisis since the creation of the United Nations,” Stephen O’Brien, the U.N. humanitarian chief, told the U.N. Security Council after a visit this month to Somalia and South Sudan.
At least $4.4 billion is needed by the end of March to avert a hunger “catastrophe” in Nigeria, Somalia, South Sudan, and Yemen, U.N. Secretary-General Antonio Guterres said in late February.
But according to U.N. data, only 10 percent of the necessary funds have been received so far.
Trump’s proposed budget would “absolutely” cut programs that help some of the most vulnerable people on Earth, Mick Mulvaney, the president’s budget director, told reporters last week. The budget would “spend less money on people overseas and more money on people back home,” he said.
The United States traditionally has been the largest donor to the U.N. and gives more foreign aid to Africa than any other continent. In 2016 it gave more than $2 billion to the U.N.’s World Food Program, or almost a quarter of its total budget. That is expected to be reduced under Trump’s proposed budget, according to former and current U.S. government officials.
“I’ve never seen this kind of threat to what otherwise has been a bipartisan consensus that food aid and humanitarian assistance programs are morally essential and critical to our security,” Steven Feldstein, a former deputy assistant secretary of state in the Obama administration, told The Associated Press.
In an interview last week with the AP in Washington, Senate Majority Leader Mitch McConnell rejected the proposed cuts to foreign aid. “America being a force is a lot more than building up the Defense Department,” he said. “Diplomacy is important, extremely important, and I don’t think these reductions at the State Department are appropriate because many times diplomacy is a lot more effective – and certainly cheaper – than military engagement.”
The hunger crises in Nigeria, Somalia and South Sudan are all the more painful because they are man-made, experts said, though climate change has had some impact on Somalia and Nigeria’s situations, said J. Peter Pham, the head of the Africa Center at the Atlantic Council.
South Sudan has been entrenched in civil war since late 2013 that has killed tens of thousands and prevented widespread cultivation of food. In Nigeria and Somalia, extremist groups Boko Haram and al-Shabab have proven stubborn to defeat, and both Islamic organizations still hold territory that complicates aid efforts.
If Trump’s foreign aid cuts are approved, the humanitarian funding burden for the crises would shift to other large donors like Britain. But the U.S.’s influential role in rallying global support will slip.
“Without significant contributions from the U.S. government, it is less able to catalyze contributions from other donors and meet even minimal life-saving needs,” Nancy Lindborg, president of the United States Institute of Peace, said in prepared remarks to the Senate Foreign Relations Committee on Wednesday.
Meanwhile, neighboring African countries will feel the immediate consequences of famine, experts said. On Thursday, the U.N. refugee chief said Uganda was at a “breaking point” after more than 570,000 South Sudanese refugees had arrived since July alone.
Others fleeing hunger could aim for Europe instead.
“We are going to see pressure on neighboring countries, in some cases people joining traditional migration routes both from the Sahel into Europe, or south into various destinations in Africa,” Joseph Siegle, director of research at the Africa Center for Strategic Studies, told the AP.
“You have 19 countries facing some degree of food stress in Africa, and three of them are facing famine conditions. All three of them are facing conflict, and the vast majority of the countries facing more serious crises are non-democratic governments,” Siegle said.
He described a series of possible consequences. Most likely there will be increased flows of people migrating from Somalia and the vast Sahel region north into Libya, where trafficking routes are a valuable source of finance for the Islamic State, he said.
Closer to home, people from South Sudan and Somalia seeking food likely will strain the resources of neighboring countries where political will and goodwill to refugees can be fleeting, said Mohammed Abdiker, director of operations and emergencies with the International Organization for Migration.
The regional consequences will depend on how the international community responds, Abdiker said.
Alex De Waal, executive director of the World Peace Foundation, summed up the situation: “Famine can be prevented if we want.”
Stability in the 21st Century: Global Food Security for Peace and Prosperity
As the new administration and Congress debate the appropriate balance of US diplomacy, foreign assistance, and military strength in light of modern security challenges, the Chicago Council on Global Affairs has issued a report on how US efforts to fight food insecurity around the world can provide increased security and economic vitality at home. The report was released at the Global Food Security Symposium in Washington, D.C. on 30 March 2017.
Food security is essential to national security and economic opportunity
The world today faces enormous challenges, including the threats of rapidly increasing instability, conflict, and migration as a result of inadequate food supplies and water scarcity. To combat these threats, a commitment to global food and nutrition security is more important than ever.
The United States – together with its allies – has never been better equipped to expand its historical commitment to food and nutrition security. This commitment will not only protect America’s national security, but also open up new business opportunities and partnerships in emerging economies and bolster the livelihoods of millions of smallholder farmers and entrepreneurs around the world.
This report recommends how the US government – in partnership with national governments, the private sector, the scientific community, and civil society – can lead the way in ensuring that food systems deliver safe and nutritious food to those who need it, while enabling small farmers and rural economies to lift themselves out of poverty and thrive.
Can the relationship between Europe and Africa stand the test of time?
The European Union’s relationship with Africa is as old as the independence story.
The signing of the Treaty of Rome, which established the European Economic Community (EEC) 60 years ago in March 1957, came at a tumultuous time in relations between Europe and Africa.
Just weeks earlier Kwame Nkrumah had declared Ghana a republic, an event which was a turning point in the decolonisation of sub-Saharan Africa.
Nkrumah remarked that the treaty’s inclusion of colonial territories was to neocolonialism what the Berlin Treaty of 1885 had been to colonialism.
He had a point. Two of the six founding members of the EEC – Belgium and France – still held substantial colonial interests on the continent. Accession to the community thus posed the crucial question of what to do about them.
The question became contentious enough to threaten the collapse of the entire Treaty of Rome negotiation process. The other four members of the EEC were Germany, Italy, Luxembourg and the Netherlands.
France in particular was steadfast that its colonies be “associated” with the community. Paris envisaged that its preferential colonial terms of trade would be extended to the entire EEC. But Germany and the Netherlands were opposed, wary of being forced to share the financial and political responsibilities that came with trading with former colonies.
The French argument ultimately won, albeit with some compromises. The treaty’s association agreement would last five years and the preferences France enjoyed from its colonies would be gradually expanded to the rest of the EEC.
The agreement, inscribed into articles 131-136 of the treaty, served as the originator of Europe’s subsequent relationship with the African, Caribbean and Pacific Group of States (ACP). This was codified in the Yaoundé Agreements, the Lomé Convention and today’s Cotonou Agreement.
So this 60th anniversary is not just about Europe. The treaty created a framework for multilateral relations between Europe and Africa.
The principles of trade and aid enshrined in the treaty’s association agreement form the basis of Europe’s development agenda in Africa to this day, even though relations have expanded into many more areas in the 21st century.
A common future
The Treaty of Rome laid out the blueprint for the creation of the world’s largest single market. It also contributed to the post World War II process of cooperation and reconciliation in Europe.
The push for European unity persisted for 37 years, culminating in the creation of the European Union (EU) under the Maastricht Treaty in 1993.
The EU, for all of its troubles, has generally been a progressive partner to Africa, especially with respect to the establishment of the Joint Africa-EU Strategy and the unique programming efforts it has generated.
The EPAs in particular remain a sore point. Indeed, the preferential trade terms given to African countries by EU member states have been judged discriminatory and in contravention of World Trade Organisation rules.
Beyond the EPA debate, a number of factors have contributed to challenges facing some of the original asymmetries between the two sides.
For one, the global South, and China in particular, continues to alter global trade dynamics. African countries and regional organisations now have more trading partners to turn to.
In addition, Africa is in the middle of constructive upheaval, brought on by more than 20 years of robust growth.
The Africa of today is not the Africa of 1957. The African Union is also a more robust partner than its predecessor, the Organisation of Africa Unity.
Trade and aid
Back in 1957, the Treaty of Rome laid down the twin principles of EU-Africa relations throughout the 20th century and beyond: trade and aid. These principles were framed within the larger idea of development cooperation.
The association agreement provided reciprocal trading arrangements between 31 ‘overseas territories’ – including 18 African ones – and the ECC countries. An overseas development fund was also created, with all six EEC members contributing to it.
Controversially, the agreement served to perpetuate African dependency on Europe. Even the Lome Convention’s much touted “non-reciprocal” principle, which was supposed to nurture African industries, further attached them to Europe.
This contradictory relationship between dependency and progressive thinking has made Africans understandably circumspect.
What next for Europe and Africa?
The twin principles of trade and aid still exist. But the growth of the EU-Africa partnership since 2000 – outside of EU-ACP channels – has broadened the relationship into less traditional areas such as science and technology, higher education, private investment, infrastructure and continental integration.
But Kwame Nkurumah’s 1957 criticism is still being levied at the EU today for its alleged neocolonial promotion of the EPAs. Pundits in East and Central Africa have been vociferous in their opposition to the agreements.
However, EU officials have a dramatically different interpretation. The EU Commissioner for International Cooperation and Development, Neven Mimica, described the 2016 EPA with six Southern African Development Community (SADC) members as helping to tap the economic potential of the private sector and increase trade.
With such contrasting perceptions, it is perhaps unsurprising that SADC is the only regional body to have signed an EPA with the EU despite more than 10 years of negotiation.
What is crucial is that both sides recognise how far they have come since the Treaty of Rome. And that they accept that a more equitable partnership requires continued commitment to cooperation.
John Kotsopoulos is a Research Fellow at the Centre for the Study of Governance Innovation, University of Pretoria.