Abuja shopping centre hit

An explosion hit a busy shopping centre in Nigeria’s capital, Abuja, on 25 June, and casualties are reported. The explosion hit the Wuse district, shattering windows and causing people to flee the shops with blood on their clothes. It is not yet clear what was behind the attack.

Although most of its targets have been in the northeast, Boko Haram has hit Abuja several times before, including an attack on the UN national headquarters in 2011. In April, more than 70 people were killed in a bomb blast at a bus stop on the outskirts of the capital in an attack claimed by the extremist group. In May, a car bomb near a bus station in the suburbs killed at least 19 people and injured 60 others.

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

© 2014 Menas Associates

Iran: Boosting output at joint fields

Iran is planning to boost output at oil fields shared with neighbouring countries. An Iranian lawmaker said on 4 June that the Ministry of Petroleum has terminated contracts to develop domestic oil fields as part of a major plan to prioritise investment in joint fields.

Seyed Saeed Heidari, a member of the Majles Energy Commission, said Minister of Petroleum Bijan Namdar Zanganeh had issued an order to stop the development of domestic oil fields except for those that have already reached production and indicated that the Ministry will pay compensation for rescinded contracts.

‘Our neighbouring countries are extracting more than Iran in many shared oil and gas fields,’ Heidari explained. ‘We are markedly lagging behind.’

For more news and expert analysis about Iran, please see Iran Strategic Focus.

© 2014 Menas Associates

Mozambique: Renamo's National Council meets without Dhlakama

As expected, Renamo’s National Council is meeting this week in the central city of Beira. The agenda is primarily to discuss their electoral manifesto for October's general elections. For the first time in Renamo history, party leader Afonso Dhlakama will be absent. The party spokesman has said, however, that Dhlakama will launch his presidential election campaign by telephone from his Gorongosa mountain hideout.

Dhlakama’s absence is important because the meeting will also see the election of representatives as prospective MPs, and also appoint the party’s presidential candidate. There is no doubt that Dhlakama will be proclaimed as Renamo’s presidential candidate but the party is still very behind Frelimo and MDM.

Renamo has not officially registered a candidate for October’s elections, and its members are yet to collect the supporting signatures that Dhlakama will need for his presidential bid. The question many are asking at this stage is whether Renamo will manage - in just three months - to assemble an effective electoral arsenal to win enough seats in parliament, or whether will it opt to continue to rely on bullets instead of the ballot to change Mozambique's political system.

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

© 2014 Menas Associates

New branch of Central Asia-China gas pipeline comes online

China National Petroleum Corporation (CNPC) reported in early June that a third branch of the Central Asia–China gas pipeline, also known as line C, had been inaugurated on 31 May, with the first volumes of Turkmen gas now following a new export route across Uzbekistan to the Chinese autonomous region of Xinjiang.

The 1,830km pipeline runs parallel with lines A and B, starting at Gedaim at the Turkmen-Uzbek border and entering Chinese territory at Khorgos. Once in China, it interconnects with the third west-east gas pipeline, which was built by Beijing to take imported natural gas deeper into the country’s heartland and to the east coast where the bulk of its industrial production takes place. Construction of this additional line was started in September 2012 and welding was completed, as initially foreseen, at the end of last year.

CNPC expects that, on completion of all supporting facilities by early 2016, line C will reach its designed annual transit capacity of 25 billion cubic metres. This means that, if all goes to plan, the Central Asia–China gas pipeline will be able to deliver on an annual basis up to 55bcm of Turkmenistan-produced natural gas to Chinese customers. This will represent roughly 20% of China’s domestic gas consumption.

With this in mind, the authorities should proceed to a massive substitution of gas for coal. Reducing coal consumption by 73 million tons a year may allow China to cut its carbon dioxide and sulphur dioxide emissions by 78 million tons and 1.21 million tons respectively. If Turkmenistan delivers on its November 2011 promise to supply as much as 65bcm of gas a year, millions of Chinese will see clearer skies.

For Turkmenistan, the expansion of the Central Asia–China gas pipeline system means that its revenues from the lucrative energy sector will remain stable in decades to come. Unlike Kyrgyzstan and Tajikistan, whose political stability has been compromised by high levels of poverty and the lack of economic opportunities, Turkmenistan has all it needs to remain a deeply autocratic regime with enough gas money to silence domestic critics and secure obedience from ordinary Turkmens.

For more news and expert analysis about the Caspian region, please see Caspian Focus.

© 2014 Menas Associates

Libya's 2014 Budget is finally passed

On 22 June the long awaited 2014 Budget originally submitted to the Congress in January by the then Prime Minister, Ali Zidan, was passed. This came as a surprise to some Congress members who had expected to debate the issue in a session on the 22 June. Having waited almost all day for there to be enough members present to reach 94 - the required number of members present to be able to hold an official consultative session - the Congress was told that the budget had been passed on a technicality.

As Libya Politics & Security – 16.06.14 explained, the Al-Thanni government declared last week that the Congress had 120 days from the budget’s initial submission to debate the law, after which time the government had the right to issue a financial mandate to ratify it. Al-Thanni therefore scored a bit of a coup by getting the law passed in this way, despite the fact that certain Congress members were keen for the budget to be reduced. 

The Central Bank may, however, still object to the budget being passed in this fashion, although it is not clear whether it has a legal right to do so. The budget stands at LD56.5 billion (US$45 billion). Given the crisis in revenues caused by the disruptions at the oil ports, a significant portion of this money is expected to come from a reserve fund at the Central Bank that was set up by Colonel Qadhafi as a fund for future generations. Whether the Central Bank will agree to this fund being used also remains open to question. 

It is clear, however, that Libya cannot fund itself from oil revenues alone. The budget committee in the Congress based the 2014 budget on a projected annual oil production of 600,000 b/d but the country has clearly fallen woefully short of this. Thus drawing on this LD16 billion fund, plus some of the central bank’s foreign reserves, therefore seems to be the only solution.

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

© 2014 Menas Associates

Kenya's Eurobond success indicates improved appetite for African debt

Kenya has pushed ahead with its Eurobond while Nairobi's officials negotiated with their Nigerian counterparts on preferential pricing for oil and gas purchases. Market watchers are drawing attention to the parallels between Nigeria and Kenya in that they are politically important and dynamic economies facing growing security risks.

Kenya's Eurobond has gone ahead with outsized interest for the US$2 billion bond, apparently more than four-times over-subscribed. International investors seem prepared to accept yields of less than 6% for a five-year tranche and less than 7% for the ten-year tranche of the issuance. These rates were significantly below analyst expectations of 7.5% or more if Kenya were to raise as much as US$2 billion.

Eurobond issuances are less of a factor for Nigeria - which issued a US$1 billion Eurobond in May 2013 - than for smaller economies seeking to announce their impact on the capital markets. The low yields are, however, a notable indicator that - despite the US Federal Reserve tapering earlier this year - investor interest in emerging and frontier market (including African) debt is increasing which, in turn, may have implications for even non-sovereign African fundraising.

Africa may also be fortunate that the highest profile emerging market debt negotiations are currently in Argentina, as ruthless bondholder "vulture funds" circle. This continues the saga that once led to the 2012 impounding of an Argentinean navy training vessel at a Ghanaian port in 2012 following a pro-bondholder ruling by a US court.

Kenya, following Nigeria's lead, has also announced its revised GDP figures following its "rebasing" exercise. Its 20% revision increase is proportionally less than Nigeria's GDP rebasing announced earlier this year. The revised calculations of the Kenya National Bureau of Statistics indicates, however, that Kenya's 2009 GDP was US$37 billion rather than US$31 billion which implies that its current GDP is around US$50 billion. This is according to investor disclosures in its Eurobond prospectus.

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

© 2014 Menas Associates

Algerian army "invades Libya"

For the last two weeks we have been establishing whether or not Algerian troops have “invaded” Libya as was reported in the London Times on 30 May and in Algeria’s El Watan newspaper on 6 June. Last week, we said that we were “inclined to believe that that some, or even a large part, of these forces (5,000) have moved into Libya, possibly to secure a “cordon sanitaire” on the Libya side of the frontier by taking control of water holes and other strategic points, in order to ensure that there is no penetration of Libyan-based “terrorist” elements into Algeria.”

This week we received direct, personal confirmation from France’s former Foreign Minister, Bernard Kouchner, that “the Algerian army has invaded Libya”. We have also received confirmation from other sources. Not only have these forces, believed to be at least 5,000 strong and backed up by air power, established, as we suggested last week, a “cordon sanitaire” on the Libyan side of the frontier, but it is widely believed that they have launched strikes deep into Libya against armed groups (generally referred to as “terrorists” or “jihadists”) that have set up base in southern Libya over the last year or so.

As the Algerian constitution prohibits its forces from taking part in military action outside its own territory, the government will almost certainly continue to deny that this operation is taking place, as it has done so far. For instance, on 10 June, Prime Minister Sellal told the Senate that the army will not undertake any operation outside Algerian territory, a principle, he said, that was enshrined in the constitution.

Besides the constitutional issue, many Algerians would find it totally unacceptable that its forces were engaged in concert with those of France and the US, especially in another Muslim country.

Thus, the longer the Libyan operation goes on, the more likely we are to hear the government talking about how Algeria’s borders are being threatened by terrorists and justifying troop movements and the like in the border areas. There have been several such articles in the Algerian media this week. For example, on 18 June it was reported that terrorists in Tunisia, Libya and Mali were trying to carry out attacks on Algeria. The Echorouk daily newspaper said that “The terrorist threat doesn’t stop planning attacks to sabotage Algeria’s security. To this end, Algeria, with its combined forces, expresses its determination to clean up its territory of terrorists.”

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

© 2014 Menas Associates