How will Cameroon finance pay rises?

Minister of Finance Ousmane Alamine Mey has explained that Cameroon spends CFA820 billion (US$1.69 billion) a year on government workers’ salaries.

President Paul Biya’s 5% increase in these monthly salaries will increase government spending by CFA30 billion (US$62 million) in the second half of 2014 and increase this year’s total expenditure on civil servants’ wages CFA850 billion (US$1.75 billion).

Mey did not explain, however, how the government intends to pay for the additional CFA30 billion. This is worrying because the government’s 2014 budget has already been concluded. 

Menas Associates believes that the additional income will come from increasing oil revenues. Fortunately, Cameroon is expected to witness a surge in oil production in 2014, from 24 million to 30 million barrels as new oil fields come on stream. 

Increased oil production could, therefore, provide the necessary additional revenue to finance this year’s 5% pay increase for the civil servants.

For more news and expert analysis about Cameroon, please see Cameroon Politics & Security.

© 2014 Menas Associates

Ghana budget review comes amid ailing economy

Embattled Finance Minister Seth Terkper is expected to outline new measures to address Ghana’s economy when he presents a mid-year review of the 2014 budget.

The review, which is likely to take place before the end of this month, could see the ministry modify its macroeconomic targets for the 2014 budget, which are widely seen as being unrealistic, as well as present new policies to stabilise the economy.

As reports emerged this week that the cedi could fall even further to between GH¢3.50 and GH¢4 per dollar, there is mounting pressure on President Mahama and his Finance Minister to deal with the country’s ailing economy.

Last week the Trades Union Congress released a statement reprimanding the government for an economic situation which is “getting worse every day” and a country in which “nothing is working”. It pointed to the continuous slide in the cedi, unpaid salaries, job losses, failing businesses, rising inflation, energy shortfalls, rising utility tariffs and high taxes as factors which continue to harm hardworking Ghanaians.

The Private Enterprise Foundation (PEF), an umbrella organisation for private businesses, also said last week that the government’s “misguided” policies mean that business confidence is at its lowest in four years. This echoed the sentiment of the Association of Ghana Industries which in May called for drastic measures to improve the dwindling fortunes of Ghanaian businesspeople, as well the concerns of the Monetary Policy Committee which, in its April report, spoke of a depressed business environment. There is also considerable anger that the government is not grasping the severity of the situation. The PEF’s CEO, Nana Osei-Bonsu, said, “Government comments like ‘we are going through short-term challenges and difficulties, and this is like a hiccup’ are not helping. These are hurricanes! This is not a hiccup.”

International ratings agencies have meanwhile delivered a damning report on Ghana’s economic management. Following Fitch’s downgrade of its outlook from stable to negative, Moody’s lowered Ghana’s rating to B2 from B1, and maintained a negative outlook on the rating to signal the likelihood of a further downgrade in future; it then downgraded the ratings for the GCB.

Despite increasing pressures, the government is sticking to “home-grown” solutions for now rather than seeking financial assistance from the International Monetary Fund to help solve its problems.

For more news and expert analysis about Ghana, please see Ghana Politics & Security.

© 2014 Menas Associates

Nigeria: Finance Minister seeks to reassure international community

Minister of Finance Ngozi Okonjo-Iweala has assured the international community of the government's seriousness over the issue of financial accountability.

The political and international nature of the NNPC dispute has become increasingly clear to Ngozi Okonjo-Iweala who is not only Minister of Finance but also a former senior World Bank official and former candidate for Bank leadership. According to some analysts, her position and reputation have been damaged by the affair despite her calls, which preceded Jonathan’s authorisation, for a forensic audit of NNPC financial affairs.  

She has even been accused of instituting a public relations “campaign” to protect her international and domestic reputation. This observation has been bolstered by her alleged use of the expensive US-based Mercury LLC public relations firm which has reportedly been used by President Jonathan’s administration since August 2013. 

This perception was perhaps bolstered by an Okonjo-Iweala piece that appeared in London’s Financial Times newspaper earlier this week. It opened with an assurance that despite “consternation in the markets” following Sanusi’s suspension and foreign exchange reserves below US$40 billion, the Naira has recovered and that the fundamentals are strong.  

Okonjo-Iweala - notably echoing Jonathan and Abati’s references to Sanusi’s three different estimates of the missing oil revenues - criticised him. She observed that Sanusi had first claimed that the figure was US$49.8 billion before he “accepted“ a finance ministry estimate of an unaccounted US$10.8 billion, before he “alleged” a “new figure” of US$20 billion. Besides the details, the minister also called for passage of the much-delayed PIB. It is clear that she was staying on message – even highlighting and supporting Jonathan’s announcement of a forensic enquiry – while also appealing to the international community.

Okonjo-Iweala was not the only senior high profile Nigerian appealing to foreign interests in London earlier this week. A large Nigerian delegation - including governors Isa Yuguda (Bauchi State), Emmanuel Uduaghan (Delta State) and Adams Oshiomhole (Edo State), former president Yakubu Gowon (1966-75) and Minister of Power Chinedu Nebo held court at the Institute of Directors. There they emphasised the attractiveness and openness of Nigeria to foreign investment and the length, admittedly including colonial rule, of the relationship between Nigeria and the UK.

For more news and expert analysis about Nigeria, please see Nigeria Focus and Nigeria Politics & Security.

© 2014 Menas Associates

Ghana: Ecobank CEO sacked

Ghana's Albert Essien has been appointed as the new CEO of Ecobank Transnational Incorporated, after a special 11 March meeting of the executive board in Cameroon sacked Thierry Tanoh. This follows nine months of turmoil, with mounting criticism of the governance standards under Tanoh's management.

The board also reinstated the Finance Director Laurence do Rego, who had alerted regional regulators about the abuses at the bank. Tanoh sacked Do Rego in January but was ordered to reinstate her immediately by Nigeria's Security and Exchange Commission; he chose to ignore the directive.

Tanoh survived Ecobank shareholders’ extraordinary general meeting in Lome on 3 March. But opposition to his continuing leadership of the bank was growing, with calls from both senior Ecobank officials and major shareholders, including South Africa’s state-owned Public Investment Corporation, for Tanoh to step down. South Africa’s Nedbank said that Tanoh’s tenure has made it question whether to convert Ecobank indebtedness into Ecobank stock later this year.

Details of the high-tension board meeting aside - other than noting that Ecobank will keep a 12-member board rather than institute a seven-member interim board, and amend its articles of association to limit certain transactions exceeding a specified portion of the bank’s “book” value - the Ecobank saga is also notable because of the significant pan-African or South African influence in affairs.

The Ecobank matter illustrates how African investors can pressure major operators such as the pan-African Ecobank. As well as South African pressure, Nigeria's SEC investigated governance matters in the bank with the help of KPMG auditors and played a key role in easing out both Tanoh and his ally, the former chairman Kolapo Lawson, who resigned late last year. 

For more news and expert analysis about Ghana, please see Ghana Politics & Security.

© 2014 Menas Associates

Ghana: Markets react positively to verdict

As one might expect the Supreme Court verdict in favour of the NDC and Mahama was positively received by the financial markets, which had been perturbed by the uncertainty created by the impending decision, the risk of unrest, the impact of a full or partial election re-run, and the partial paralysis of Ghana's political system due to this uncertainty.

In financial terms as the confidence of investors in Ghana increases, yields - or the implied market-demanded effective interest rates on outstanding bonds, given bonds' market price - on Ghana's cedi denominated bonds have indeed been falling. Rates on the planned September auctions of around 600 million cedis worth of bonds have perhaps fallen by between 2%-4% to as low as 17% - a rate not to be confused with the much lower rates and yields on the dollar denominated Ghana Eurobond.

 

Cedi depreciation may well also be slowed as investors stop the shift to dollar-denominated assets due to electoral uncertainty - with Elvis Darku of Nigeria's Access Bank projecting a slight cedi appreciation versus the dollar by the end of the year. This is even if other analysts remain pessimistic and unlikely to shift from predictions of further cedi decline, even with the recent influx of Eurobond dollars and expected receipt of Cocobod financing dollars through the agreed US$1.2 billion syndicated financing facility which should both increase dollar supply and thus reduce its relative price compared to the cedi.

 

On the inflation front, despite double-digit inflation and the impact of cedi depreciation on inflation due to relatively more expensive (in cedis) imports, the most recent release from the state Ghana Statistical Service (GSS) indicates that July producer price inflation has fallen by 0.5% in month-on-month terms and by 2% points on a year on year basis, to 5% for July 2013 compared to July 2012 (whereas the June producer price level was 7% higher than that in June 2012).

 

Although this may seem like positive news, further detail revealed by GSS statistician Dr Philomena Nyarko indicates that while manufacturing inflation rose from 10.6% to 10.9% (year-on-year), mining and quarrying inflation fell significantly into the sub-zero zone partly due to lower gold prices - a factor which (broader implications for Ghana's economy aside) is unlikely to cause sustained inflation relief.

 

For more news and expert analysis about Ghana, please see Ghana Politics & Security.

© 2013 Menas Associates