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Op-Ed

What Brexit means for Africa

Dele Ogun

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Photo: FT

The politically prudish will tell you that the British left Africa in the late fifties and the sixties, beginning with the grant of independence to Ghana on 6thMarch 1957, when they rolled up their flags, packed up their belongings and boarded what was then the British Overseas Airways Corporation airplanes. Rabid anti-imperialists will say they never left and in one sense, at least, the latter group are right because one thing the British left behind in Africa is the English language. 

This item of left luggage, combined with the penetrating influence of modern social media, has produced a situation in which, across the length and breadth of Africa, people are following the Brexit crisis in Britain as if it was their own country’s independence in issue. This is not as misconceived as it might at first appear because, though few may have appreciated it, the fundamental issues underlying the principle, and process, of the British exit from the European Union are directly relevant to the future of all African countries, and not just the Anglophone ones.

That underlying principle is the desirability and practicalities of political union between ethnic groups who have historically coexisted within a geographical area and run their own affairs separately from one another. Britain, France, Germany, Belgium, Spain, Portugal and Italy  have always been “Europeans” in the sense of peoples living in the land area known as Europe,  in the same way as the 371 ethnic groups who have historically coexisted in the geographical space in the surrounds of the River Niger who are now popularly known as “Nigerians”.  The game changer in Europe was the Treaty of Rome which was signed by France, Germany, Belgium, Italy, Luxembourg and the Netherlands, on 25thMarch 1957, just weeks after Ghana left the British Empire. That treaty created the European Economic Community (EEC). It was stressed to the people of Europe that this was an economic union only to secure economies of scale of a more populous market and not political union which offers no economies from upscaling. 

There are important lessons in this detail for Africa when it is remembered that it was these same European countries that sat around the table in 1884 at the Berlin Conference and imposed political union on disparate ethnic groups across Africa who had previously coexisted as neighbours: Thus was fashioned the 54 countries that make up the member states of what was the Organisation for African Unity, now renamed the African Union in imitation of the European Union. The internal political crises created by these European-imposed political unions amongst the thousand-plus ethnic groups of Africa, thus compressed into 54 European-designed States, has historically been put down to what was said to be a singularly African predisposition to tribalism and an inability to put differences aside and unite. It is clear now from the European experience that the sauce of political union that had been served to the geese was viewed as potentially poisonous for the ganders. 

The other important difference between the European and the African experience of political union is that accession to the European one was voluntary. This comes across clearly from the history of Britain’s dalliance with the project. At first they elected to stay out of the union by not signing the Treaty of Rome. Then, in 1963, the Harold Macmillan Conservative Government decided to apply for membership, only for the application to be vetoed by President Charles de Gaulle of France. Undeterred, the British renewed their application for membership in 1967, under the Labour administration of Harold Wilson, only for de Gaulle to strike the application down again. It was at the third time of applying under the Conservative Government of Edward Heath (and with de Gaulle now safely out of the way from the French political stage), that the British were finally granted their wish in January 1972, and were admitted to membership with effect from 1 January 1973. 

However, no sooner had they been admitted than the campaign to leave began in earnest on a claim that the Heath government had deceived the people into voting for membership believing that it was only economic union that had been committed to. When the Maastricht Treaty of 1992 removed the word ‘economic’ from the title of the Treaty of Rome so that what had been the ‘European Economic Community’ became just the ‘European Community’. With this, the objective of political union became an open agenda in Europe and an open sore within the British Conservative party.

After the Conservative Party had endured decades of internal strife over the issue, in 2013, Prime Minister David Cameron announced that his party wanted to allow the British people to have their say on the matter. The referendum called for 23rdJune 2016 was the party’s manoeuvre to export the issue so as to ensure that the Labour Party would carry its own share of the poisoned chalice. 

The question that was put to the people was“Should the United Kingdom remain a member of the European Union or leave the European Union”. This seemingly simple question produced the current political chaos, which Prime Minister Theresa May is trying desperately to manage, where, following a marginal victory for the Leave camp, the country is divided from top to bottom and the Leavers themselves are divided on the terms of exit even as the exit date of 30 March 2019 looms near.

The current crisis over the goal of political union in Europe which is tearing the peoples of Europe, and most especially the people of Britain, apart is a great irony for the peoples of Africa on whom the Europeans imposed political union more than 100 years ago. The British do at least have the consolation that their union was not imposed on them by outsiders and that they have the opportunity to negotiate their way out of the union they voluntarily signed up to. In contrast, ethnic groups in African States who have wanted to leave their imposed-unions have found that the gates have been firmly locked behind them: The only way out for those who, like the Leavers in Britain, have desired to be free to run their own affairs, as in the case of the Igbo people and their struggle for the independent state of Biafra, has been to attempt to fight their way out resulting in vicious and bloody conflicts.

Conclusion

The British decision to stand back from the European Union project at its onset in 1957 was influenced greatly by its then relationship with Africa. They believed, as they stood (alone amongst the nations of Europe) victorious at the end of the Second World War with their special relationship with America and their colonies intact, membership of a European union offered them nothing. Their decision now to leave the European Union is predicated on the continuance of the special relationship with America and with their former colonies in Africa now called the ‘Commonwealth’.  This is a momentous decision not just for the people of Britain and Europe but also for the peoples of Africa. For one thing Africans now understand that the desire of peoples to “take back control” of their affairs, pejoratively called “tribalism”, is not at all a uniquely African condition. Further, as a consequence of the English language that was left behind, a new generation of Africans are watching closely the solutions that the British and the Europeans are prescribing for themselves as they tackle the problems of political union which States in Africa have been left by the European architects to deal with. From hereon in, a different sauce for the geese and the ganders is unlikely to be acceptable.

The views expressed in this article are the author’s own views and do not necessarily reflect News Central’s editorial stance.


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Op-Ed

Gold: Positioned to thrive in low-interest-rate environment

Rising concerns surrounding the health of the global economy is another one of the engines that will help drive Gold prices

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Gold: Positioned to thrive in low-interest-rate environment

The investment case for Gold is set to remain robust as speculation mounts that major central banks will ease monetary policy in an effort to counter a global economic downturn.

The yellow metal shone with extreme intensity during the second quarter of 2019, rallying roughly 9 per cent to levels not seen above $1,435 in over six years, thanks to an environment that included ongoing global growth concerns, geo-politics, trade tensions and Dollar weakness.

Weak macro data, which reflects downward revisions in global growth over the past 12 months, is prompting a handful of central banks including the European Central Bank (ECB), Federal Reserve (Fed) and Reserve Bank of Australia (RBA) to signal a willingness to ease monetary policy and increase economic stimulus to support growth.

In a low-interest-rate environment filled with chronic uncertainty, Gold can climb another 5 per cent over the course of Q3 – claiming the title as one of the high flyers among safe-haven assets, in competition with the Yen. 

Will Gold’s fortunes hang on the Fed’s actions?

Will Gold’s fortunes hang on the Fed’s actions?

What investors need to watch as the second half of the trading year gets underway are the actions of the Federal Reserve. Will the US central bank confirm market expectations and cut interest rates as early as July? If it fails to do so, Gold risks rapidly surrendering its second-quarter surge.

Essentially, if the Fed sits on its hands beyond July, profits will be taken from the table on the $120+ rally that transpired in Gold throughout June. 

Unfavourable global conditions to keep Gold in fashion

Rising concerns surrounding the health of the global economy is another one of the engines that will help drive Gold prices.

Although a sense of optimism has returned after the Trump-Xi Jinping meeting at G20 ended in a trade truce on tariffs, it does not change the reality that global growth is decelerating.

The World Bank recently downgraded it’s 2019 world growth forecast to 2.6 per cent from 2.9 per cent and if the recent disappointing PMI releases across the manufacturing sectors in Europe, China and the United States are anything to go by, global growth is moving towards the lower bound of 2 per cent as the decade draws to a close.

Warning signals over potential cracks in the largest economy in the world, indications of tepid growth in the EU, disappointing data from China’s manufacturing sector and lacklustre growth in the United Kingdom amid Brexit-induced uncertainties are likely to sweeten appetite for safe-haven assets. 

It’s all about central bank stimulus and lower yields 

In the longer term, Gold should also find support from lower treasury yields, especially if the 10-year treasury dips below 2 per cent again as persistent growth fears and trade developments result in lower interest rates across the globe.

While the outlook for the precious metal points to the upside, potential roadblocks on the horizon include easing trade tensions and signs of global growth stabilizing. Both outcomes would pose a challenge to buyers.

What do higher Gold prices mean for African markets?

What do higher Gold prices mean for African markets?

Gold-producing nations on the continent, like South Africa and Ghana will certainly benefit from higher prices.

Economic conditions in Africa’s most industrialised economy remain unfavourable thanks to a tornado of domestic and external risks. Economic growth contracted by 3.2 per cent during the first quarter of 2019 thanks to a sharp decline in manufacturing, agriculture and mining.

Given how Gold remains one of South Africa’s most valuable exports, rising Gold prices have the potential to stimulate growth – especially when factoring in how exports account for roughly 30 per cent of GDP.

Economic growth in Ghana remains robust with GDP expanding 6.7 per cent during the first quarter of 2019. With Ghana claiming the title of Africa’s top Gold producer, higher prices will be supportive of the mining sector which expanded 20.9 per cent in Q1.

When adding to the fact that roughly 5.7 per cent of Ghana’s GDP and 40 per cent of gross foreign earnings are acquired from the mining sector, Gold’s bullish outlook brightens Ghana’s growth prospects.

Gold bulls to dream big and reach for the stars 

Taking a look at the technical picture, Gold remains firmly bullish on the monthly charts as there have been consistent higher highs and higher lows.

Prices have scope to push higher on the monthly charts should $1360 prove to be reliable support.

For as long as bulls are able to defend $1360, there should be enough confidence to challenge $1430 and $1500 – a level not seen since April 2013. Alternatively, a decline back below $1360 will most likely swing open the doors towards $1324 and $1300, respectively.

This bullish setup becomes invalidated if prices find comfort below $1300.

The views expressed in this piece are the author’s own and do not necessarily reflect News Central TV’s editorial stance.

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Op-Ed

Remembering Abdirahman Osman: Reformer and Friend

People close to Mogadishu’s slain mayor said he never complained about the huge burden of getting the city back on its feet.

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Abdirahman Omar Osman, spokesperson of the President of Somalia addresses the Somali media during a visit by the African Union's Peace and Security Council (PSC), on it's first visit to the Somali capital Mogadishu, with the President of Somalia in 2013.

Abdirahman left his family in London to answer the call to rebuild Somalia several years ago. He did so at great personal risk and in spite of the fact that he was leaving a comfortable life and a good job to take on a position in Mogadishu with no salary and immense danger.

He told me that he did so because he believed that there was hope for Somalia, that there was work to be done and that the biggest chunk of that work had to be done by Somalis themselves.

Everyone knew Abdirahman by his nickname, Engineer Yarisow. In Somalia, virtually everyone has a nickname; it’s an affectionate way that Somalis relate to each other. Never mind the nicknames can be as rude as they are hilarious: they are often based on one’s physical shortcomings. If you have a big nose, for instance, your nickname in Somalia will likely be ‘fat nose’ or something along those lines.

Abdirahman was a great man of summary stature, his nickname, therefore, was naturally ‘short man’ – Yarisow. He was an important man whose door was always open to those who came looking for him, particularly those in the media industry. He was kind, committed and deeply respectful to everyone. He was our friend.

We last met while he was still the Minister for Information, Culture and Tourism. We had coffee in his office and we talked about the editorial I penned on his behalf for the EU-AMISOM Special Edition Magazine. We joked about having arosto at a Somali restaurant in Harrow, near where his family lived and where I had some relatives.

He went on to become the Mayor of Mogadishu and the Governor of the Banadiir region. It was in this capacity that he breathed his last, having been targeted by religious extremists. Eng Yarisow always knew that the rebuilding of Somalia would require sacrifice and would come at great cost to many. He knew that the toll for a new Somalia would be high. He has paid it at the highest price: with his life.

Rest well aboowe. Your work and your name is indelibly carved in the hearts of your people, your family, friends, colleagues and all who knew you. May Allah grant you the highest place in Janna. Amin.

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Op-Ed

Will oil prices help or harm Nigeria’s economy in Q3?

Global Oil prices looked tired, exhausted and ready for an early summer break during the second quarter of 2019

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Will oil prices help or harm Nigeria’s economy in Q3?

Global Oil prices looked tired, exhausted and ready for an early summer break during the second quarter of 2019 as global growth fears overshadowed supply disruptions and ongoing OPEC supply cuts. At the time of writing, Oil prices remain shaky and vulnerable despite OPEC+ latest decision to extend production cuts until March 2020.

The crucial question is whether Oil prices will ever recover and trade back towards the $70+ levels. That depends less on geopolitical tensions in the Middle East and more on whether the US and China can reach a trade deal, settling disputes over tariffs and opening the door to continued global growth.

In this case, it’s likely that Oil prices will be injected with a renewed sense of confidence on the back of boosted global growth expectations and demand for Oil. But what if the current circumstances persist and the US-China trade disputes continue throughout the second half of 2019? 

Taking each scenario one-by-one, starting with the upside for Oil prices, Nigeria’s economy could benefit considerably if a US-China trade deal is reached and global growth expectations become brighter. The manufacturing sectors in the US and China are the Oil-gobbling engines which drive demand for international Oil suppliers.

China is the world’s top crude Oil consumer, importing more than 50 per cent of its consumption, part of which comes from Nigeria. In the fourth quarter of 2018, Nigeria exported ₦23.5 billion worth of crude Oil to China and remains a major trading partner to the Asian giant. It’s likely that if China’s economy roars back to life, Nigeria’s growth would see more long-term support, benefiting foreign exchange reserves and the naira.

Although unlikely, if a trade deal were to be announced early in the quarter, it’s possible the nation’s 2019 budget would also see ample support from increased Oil revenues from China. This argument doesn’t apply to the US which has considerably reduced its crude Oil imports from Nigeria as it heads towards energy independence, relying instead on domestic production to meet its own needs.  

If you take the negative outlook on Oil, it’s more likely the rise in Oil prices is a temporary result of supply shortage fears and the prevalent trend in Q3 will be downward pressure from concerns over a global recession. In this unfavorable scenario, the world’s two largest economies do not reach a trade deal in the third quarter and aggregate demand for Oil continues falling as it tracks economic weaknesses in China and the US.

As demand for Oil is whittled away, Nigeria’s foreign exchange reserves may be negatively impacted, along with the Naira, the 2019 budget, and most importantly GDP growth.

In terms of the national budget sheet, expenses like the petrol subsidy may take the limelight as they drag on revenues, overshadowing growth and threatening fiscal stability. 

There’s another factor we haven’t talked about so far but it’s significant in terms of Oil market economics. Oil sales are denominated in US Dollars. Recently, the currency has weakened against its rivals, meaning that Oil is more affordable and possibly giving traders an incentive to snap up contracts at current levels before they rise further.

If the Dollar bears have their way and the currency keeps declining, Oil price benchmarks could see further support in the third quarter. The impact of a weaker USD might not be as strong as a US-China trade deal, but it could feed positively into Nigeria’s Oil revenues and go some way to counter possible losses from ongoing global recession fears. 

To sum up, Nigeria’s foreign exchange reserves, currency, growth, and budget will face headwinds should trade disputes persist.

However, provided the USD keeps weakening, there’s scope for support from higher Oil prices based on bargain hunting. There’s always the possibility that the US and China could decide on a trade deal, if this happens sooner than later, Nigeria’s economy would benefit accordingly. 

The views expressed in this piece are the author’s own and do not necessarily reflect News Central TV’s editorial stance.

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