Economic Crises

When talking to Nigerians about insecurity, especially those that live in the Lagos-Ibadan corridor, Abuja, and Port Harcourt—some of the most developed parts of the country—the first thing they often raise is their fear of kidnapping specifically and crime more generally. For them, kidnapping is far more immediate than the carnage of Boko Haram, far away in the northeast, or the carnage in the middle belt over land and water use between “farmers” and “herders.” In the oil patch and Port Harcourt, kidnapping is often seen as a manifestation of the ongoing, low-level insurrection over how oil revenue is distributed. In the past, kidnapping victims tended to be the wealthy and the prominent, and so kidnappers had every interest in keeping their victims alive to extract the maximum ransom possible. In March 2020, for example, two Nigerian footballers were kidnapped and released soon after, though it is not clear if a ransom was paid. Further, hours before a world cup match in 2018, the captain of Nigeria’s national football team learned that his father had been kidnapped. But a new report [PDF] from SB Morgen, a Nigerian consulting firm, using data gathered from a variety of open sources, including the Council’s Nigeria Security Tracker, shows that, over time, the pool of potential victims has greatly expanded. Now, victims are often poor villagers, sometimes kidnapped indiscriminately, a departure from the targeted kidnapping of wealthy people. They struggle to pay ransoms quickly because of their relative poverty, and victims are much more likely to be killed. The report also presents a valuable attempt to quantify the costs of kidnapping and to map its spread. Between 2011 and 2020, it concludes that over $18 million had been paid in ransom. The amount of ransom accelerated in the latter portion of that period: between 2016 and 2020, around $11 million was paid out. It shows that kidnapping has spread from the oil patch to the entire country and that that the army is now stationed is almost every Nigerian state, essentially to keep order. (The exceptions are Kebbi state and the Federal Capital Territory of Abuja.) In many parts of the country, kidnapping appears to have become a business, especially for otherwise unemployed youth. SB Morgen expresses concern that kidnapping will increase as Nigeria falls into recession driven by the coronavirus and the fall in oil prices, putting more people out of work. Perhaps a surprise is that the total spent on ransoms—$18 million over nine years—is so low, especially compared to ransoms Sahelian kidnappers extract from European states to free their kidnaped nationals, which can reach millions of dollars per victim. It may be that current Nigerian victims are so poor that ransoms are low. The report cites an estimate that ransoms can range from $1,000 to $150,000, depending on the economic situation of the victim and their family. The SB Morgen report shows that Nigerian anxiety about kidnapping is well placed. Wealthy Nigerians and expatriates are subject to much larger ransoms than poor farmers. They live mostly in Lagos and Abuja. Though they have tight security, they are not immune from the general crime wave, of which kidnapping is just one part. In December 2019, for example, attackers attempted to extort and murder the manager of the shipping giant Maersk in Nigeria in his home. He survived his injuries, but his wife did not.

The coronavirus has cut into few industries more deeply than aviation and aerospace, putting some strategically important companies in dire financial straits.

On Tuesday, May 12, Indian Prime Minister Narendra Modi delivered a primetime address to the nation on the coronavirus (Hindi text released here, and English here). With India in a national lockdown since March 25, many awaited his word on the country’s next steps. Modi announced a much-needed second relief package of around $266 billion, which he said would bring the government’s overall stimulus to around 10 percent of the country’s GDP, including the previously released package back in March, and central bank liquidity measures. This relief, with details to be announced later by the finance minister, represents a significant expansion over the first relief package of March 26 that allocated around $23 billion, or 0.8 percent of GDP, to cash transfers and food rations for the poor. In the intervening weeks it has become painfully clear how India’s safety net—even with technological advances like Aadhaar, the national biometric ID linked to bank accounts—has gaping holes. The stories of migrant laborers with no work and no way to pay rent in big cities, trudging hundreds of kilometers back to their villages, have brought attention to issues like interstate portability of ration cards, for example. And with the first relief tranche targeted at the poor, businesses—doing their best to stay afloat in an economy that had stopped moving—found themselves adrift. As a result, the Indian government has been preparing for weeks a second package that would address relief for business owners. In his May 12 speech Modi presented this new package as one that would address the needs of businesses as well as workers, and would furthermore enable India to become more self-reliant. This new program, dubbed “Atmanirbhar Bharat Abhiyan” (Self-reliant India Scheme) would, according to Modi’s speech, cover five pillars: “economy, infrastructure, technology-driven system, vibrant demography and demand” and would involve “land, labor, liquidity, and laws.” He gave the example that India’s production of personal protective equipment (PPE) earlier in the pandemic was limited, but now more than 200,000 PPE kits and N95 masks are made in India daily. In the absence of further details—Finance Minister Nirmala Sitharaman is supposed to provide more clarity on May 13—it’s hard to assess what this plan will mean. Will it be a further boost to the Make in India scheme with more incentives? As I have written earlier, Make in India harnessed a standing Indian plan to increase the manufacturing sector’s contribution to the economy. Unfortunately, this laudable goal (one supported by successive Indian governments) has simply not resulted in significant change. In fact, manufacturing’s share has actually fallen. Modi spoke about better integration in global supply chains. This is a similarly laudable goal. Without further details, it too is hard to assess. In recent years, the Indian government’s approach to trade has become more—not less—protectionist, with tariff increases targeting imports that the Indian government sees as too competitive with domestic industry. Will the new self-reliance put up more barriers? In his speech, Modi appeared to say that was not the goal—that this version would not be “exclusionary or isolationist”—but the past six years have shown that the Modi economic philosophy is not premised on free-trade instincts. Coronavirus and the understandable lockdown that the Indian government has implemented have severely hurt the Indian economy—as lockdowns have done all over the world. With unemployment hovering around 23 percent (per Center for Monitoring Indian Economy), and banks and ratings firms revising their forecasts for the Indian economy at recession-level figures, the details of what the new self-reliance scheme will entail are eagerly awaited.

The coronavirus is delivering yet another heavy blow to natural disaster–prone Puerto Rico, threatening to deepen the U.S. territory’s economic and social crisis.

The United States is not alone in giving millions of people stimulus checks. Dozens of countries are also using cash transfer programs to help people cope with the pandemic’s economic toll.

Accompanying the misery of the coronavirus pandemic has been an ongoing crisis in the oil industry. While the scale and tragedy of the coronavirus is front and center in our minds, the collapse of oil is more abstract, and its long term consequences will be serious. In the United States, the oil industry is already collapsing, but oil does not play the central role in the American economy that it does elsewhere, such as the Middle East sand Russia. Especially in Africa, the collapse of oil is likely to devastate government revenue at exactly the same time the continent faces the astronomical costs of responding to the coronavirus and looming famine. The trade war between Saudi Arabia and Russia over oil production levels, and therefore the world price of oil, destabilized markets at the very moment that the seriousness of the pandemic was starting to hit home. Now, the oil crisis is dramatically worse. For a day or so, the price of oil fell into negative territory. That is, sellers were paying buyers to take the oil off their hands, in part because they have run out of storage capacity. While there has been some slight recovery, there is a worldwide glut of oil-producing capacity. At the same time, the shutdown of much of the world's economic activity has all but dried up demand. It is recognized that oil is crucial to Nigeria, which usually produces 2 million barrels per day, and Angola, which produces about 1.8 million barrels. Less well known is that over the past decade other African countries have entered the oil market. So much so that oil now accounts for more than half of sub-Sahara Africa's exports. Further, African governments are often overly dependent on oil revenue, even when their oil industry is playing a declining role in their national economies. In Nigeria, for example oil accounts for less than 10 percent of GDP, but accounts for more than 90 percent of the country's foreign exchange and can account for as much as 70 percent of the government revenue. Yet, faced with the costs of responding to the virus and the possibility, even likelihood, of famine, African governments will desperately need revenue and foreign exchange, both of which are disappearing. Governments will need to turn to the international financial institutions and foreign governments.  Eventually, oil will stabilize and the virus will be controlled. But it is hard to see oil prices ever again achieving their former levels; as recently as 2011, oil sold on the international market for over $110 a barrel, and many African governments were flush with cash. Those days are unlikely to ever return. This may force a reckoning in how African economies develop in the future.

Links between COVID-19 and other global challenges underscore the importance of multilateral cooperation across a broad array of issue areas.

The U.S. Federal Reserve is using creative means to counter the economic shock caused by the global coronavirus pandemic, but those measures must be matched by aggressive fiscal action.

Long-standing financial troubles and drought in Zimbabwe have pushed millions to the brink of starvation.

Frank O. Mora is director of the Kimberly Green Latin American and Caribbean Center and professor of politics and international relations at Florida International University. There seems to be no end in sight to the political and humanitarian crisis facing Venezuela. The political impasse is deepening polarization and confrontation, particularly since January when Nicolas Maduro and Juan Guaido, leader of the opposition-controlled National Assembly, each took an oath of office as president of Venezuela. Meanwhile, the economic and humanitarian crisis has reached critical levels with the collapse of the food supply and infrastructure, putting the cost of food and other basic services, such as health care, out of the reach of an overwhelming number of Venezuelans. Four million Venezuelans refugees are now living in neighboring countries, frontline states that are not able to absorb such large numbers. This crisis has the potential to destabilize the region. What are the plausible scenarios and what policy options are available to address the goals of restoring democracy and providing humanitarian assistance? In a new Contingency Planning Memo Update, I delve into these questions and offer the United States and its regional partners recommendations for hastening change, as well as ideas for preparing for the “day after” stabilization phase. Of all the potential scenarios, the most likely is a prolonged period of stasis and deterioration where the political situation in Venezuela remains at an impasse and the socioeconomic situation deteriorates further. Other scenarios in descending order include: military/palace coup; democratic transition via popular coup; and state collapse and anarchy. Regardless of the scenario, the United States and its partners, in order to hasten change, should complement existing sanctions with clear incentives to members of the Maduro regime willing to accept a peaceful political transition (e.g. lifting individual sanctions, immunity, and the opportunity to participate in politics). In addition, it must show an attractive future to regime elements by developing and implementing a post-Maduro plan for stabilization and reconstruction that includes an international donors conference that offers a compelling package of humanitarian and development assistance. This would have the added benefit of deepening fissures within the regime. Policy options that include the use of military force, led by the United States, are likely to be counterproductive to U.S. interests and regional stability. One factor not discussed much regarding stabilization and reconstruction is security. Venezuela is among the most violent countries in the world. Today, Caracas is the third most violent city in the world. In addition to a number of nonstate armed groups and criminal gangs that roam major cities without resistance from government forces, it is believed that nearly half of Venezuela has become a haven for Colombian guerrillas and paramilitary groups, who are engaged in drug trafficking and other illicit activities. In the period of stabilization and reconstruction, systemic violence and insecurity will impede the delivery of humanitarian assistance, preparations for new elections, and the restoration of democracy and the rule of law. Planning and coordinating with regional partners and Venezuela’s democratic coalition needs to begin now, to provide both humanitarian relief and security assistance in the immediate phase of the transition. The United Nations should get more involved in Venezuela, particularly in the planning and implementation of a stabilization plan. In the area of security, the UN should sanction an international stabilization force, in support of existing state security institutions, that has the authority and capacity to enforce a secure and stable environment in order to establish democratic governance and facilitate the delivery of humanitarian aid. To learn more about how the Venezuela crisis threatens the interests and stability of the United States and Venezuela’s neighbors—and for more recommendations—read the full Contingency Planning Memo Update. To stay up to date on the crisis in Venezuela, visit CPA’s Global Conflict Tracker.

The staying power of Nicolas Maduro’s embattled government may hinge on three critical allies: Russia, China, and Cuba.

Test your knowledge of Venezuela, from its role in global oil markets to its increasing political instability.