(Updates bonds, stocks in 15th paragraph.)
Feb. 2 (Bloomberg) -- Goodluck Jonathan won Nigeria’s presidency in 2011 pledging to transform the economy of Africa’s biggest oil producer by cutting waste and wooing investment. Now, he’s fighting for his political survival.
A week-long general strike last month mobilized millions against his decision to remove fuel subsidies that cost about $8 billion a year, forcing him into a partial climbdown. That was followed by a series of attacks by Islamist militants that killed as many as 256 people in the northern city of Kano.
Less than a year into his first full term, Jonathan is looking less and less able to deliver what he promised, said Sebastian Spio-Garbrah, managing director of DaMina Advisors LLP in New York. Among those measures: improving regulation of the oil industry and fighting corruption while attracting foreign investment to build power plants, refurbish oil refineries and fix roads, bridges and railways.
“Jonathan is fighting political battles on all fronts, and at the moment he seems to be losing all of them,” Spio-Garbrah said by phone from Accra, Ghana’s capital.
Jonathan, a 54-year-old southern Christian from the oil- rich Niger River delta, assumed office when his predecessor Umaru Yar’Adua, a northern Muslim, died on May 5, 2010. The following April, he won an election that international and Nigerian observers said was the fairest since the end of military rule in 1999.
“We were all very excited because he was different from leaders in the past, he had a different background, he was younger; this man could do something,” said Fatima Ali, a 33- year-old owner of a garment factory in Kano. “Things have gone from zero to minus 10.”
The attacks by militants loyal to Boko Haram, whose name means “western education is a sin,” have killed 935 people since the start of the campaign in 2009, more than a quarter of them this year, according to New York-based Human Rights Watch.
Companies are feeling the effects. PZ Cussons Plc, the Manchester, U.K.-based maker of Imperial Leather soaps, fell 4.8 percent to 296 pence, the lowest close since June 10, 2010, on Jan. 24. The company had expressed concern over the political stability of Nigeria, its largest market.
“Continued social instability in the north together with ongoing fiscal reforms may create further unrest in the balance of the year,” the company said in a statement.
State of Emergency
Jonathan has declared a state of emergency in parts of the north and sacked his police chief, Hafiz Ringim, on Jan. 25. He says the militants pose a worse threat to the West African nation than did the 1967-1970 Biafra civil war.
“My administration is taking every measure necessary to speedily tackle this problem,” Jonathan said in a speech to the Jan. 29-30 African Union summit in Addis Ababa.
Security forces arrested Boko Haram’s alleged spokesman, Abu Qaqa, the director of the State Security Service in the northeastern city of Maiduguri, Ahmed Abdullahi, said yesterday by phone.
The violence persuaded a New York-based client of DaMina Advisors to postpone plans to meet senior government officials to discuss investments, Spio-Garbrah said, declining to name the business.
Capital Flows Steady
Still, Central Bank Governor Lamido Sanusi said Jan. 31 that there are no signs the security and political concerns have sparked “any massive movement of capital out of the country.”
Yields on Nigeria’s international dollar bonds due 2021 have fallen 33 basis points, or 0.33 percentage point, this year to 5.815 percent as of 9:45 a.m. in London, according to data compiled by Bloomberg. The Nigerian Stock Exchange All-Share Index has risen 0.7 percent to 20,879.31.
The naira has gained 0.8 percent this year to 161.06 per dollar on the interbank market, according to data compiled by Bloomberg.
The effect of the attacks is visible in Abuja, the capital, where bombings killed 24 people at the United Nations office on Aug. 26, and 43 more at a nearby church on Christmas Day. Cars line up outside offices and hotels as army and police officers search trunks, and pedestrians entering buildings undergo security checks.
Once a little-known movement inspired by Afghanistan’s Taliban, Boko Haram exploded onto the scene in 2009 when then- President Yar’Adua ordered the security forces to disarm the group. That provoked clashes that killed more than 700 people, including its leader, Mohammed Yusuf.
Christians Should Leave
Since then, the group, whose formal name is Jama’atu Ahlus Sunnah Lidda’awati Wal Jihad, or Congregation of Followers of the Prophet for the Call to Islam and Religious Struggle, has attacked police stations, government offices and churches across the north. It has told Christians to leave the region.
So far the violence in the north hasn’t hurt oil production or touched Lagos, the commercial capital.
“In practical terms, it has done little damage to the country’s commercial base,” said Samir Gadio, a London-based emerging markets strategist at Standard Bank Plc.
Nigeria pumped about 2.1 million barrels of oil a day in January, unchanged from the previous year, according to data compiled by Bloomberg. About 90 percent of Nigeria’s crude is produced by Royal Dutch Shell Plc, based in The Hague; Exxon Mobil Corp.; San Ramon, California-based Chevron Corp.; Total SA and Eni SpA in joint ventures with the state-owned Nigerian National Petroleum Corp.
The most serious danger to crude production came during the Jan. 9-16 strike, when oil workers threatened to shut it down, and thus choke off almost all of Nigeria’s export income.
Jonathan had argued that by cutting the subsidies and letting domestic fuel prices rise, the refineries would attract enough investment so that Nigeria would no longer have to import about 70 percent of its gasoline and diesel.
The decision more than doubled prices at the pump and sparked outrage among Nigeria’s 164 million people, 64 percent of whom live on less than $1.25 a day, according to the UN.
While the lower house of the National Assembly voted to demand that he rescind the subsidy, civil-society groups that once supported Jonathan deserted him, especially after he deployed army troops to quell the protests. At least eight people died in the demonstrations.
“The more he loses public support by pursuing unpopular policies or not acting on issues he should be tackling, the more his ability to get the legislature to give him support for his agenda will be weakened,” said Clement Nwankwo, executive director of the Abuja-based Policy and Legal Advocacy Centre.
Jonathan Backs Down
The strike ended after Jonathan agreed to limit gasoline- price increases to 97 naira (60 cents) a liter (0.26 gallon). It cost sub-Saharan Africa’s second-largest economy more than $1 billion, according to the National Bureau of Statistics.
While gross domestic product is expected to expand 6.6 percent this year from an estimated 6.9 percent in 2011, according to the International Monetary Fund, Nigerians believe corruption and waste will sap the benefit of growth, said Ashley Elliot, a Nigeria analyst at Control Risks in London.
“Tensions on the narrow issue of fuel subsidies have unleashed broader popular anger over corruption and inequality,” Elliot said. “After decades of shattered promises, today’s generation have difficulty believing in the Nigerian state as an agent of development.”
Activists copied the tactics of protesters in the Arab world and on Wall Street, using social media such as Facebook and Twitter to organize an Occupy Nigeria movement.
“Nigeria is never going to be the same again,” factory owner Ali said. “I grew up with no power, the security challenges in our country, corruption every day. A lot of us have been talking for a while and we’re all really tired with the issues our country is facing.”
--With assistance from Dulue Mbachu and Elisha Bala-Gbogbo in Abuja and Emele Onu in Lagos. Editors: Karl Maier, Anne Swardson
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