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COVID-19-induced impact on oil, tourism sectors to have wide-ranging economic, social ramifications on GCC countries over coming months – GCC Analysis

Executive Summary

The decline in global oil prices and tourism due to ongoing COVID-19-induced travel and business restrictions has led to severe economic challenges for the Gulf Cooperation Council (GCC) states, which heavily depend on these sectors for revenue. This will likely lead to a recession, as per International Monetary Fund (IMF) projections that the GCC economy will contract by 7.1 percent in 2020.

The ongoing repatriation of thousands of expats from the region to their countries of origin as a result of the crisis is likely to have multiple social and economic ramifications, particularly in countries like the UAE and Qatar, where foreign nationals make up almost 90 percent of the total population.

This will lead to labor shortages, increasing the need to expedite the nationalization of the workforce and rapidly train domestic workers, which is unlikely to occur in such a short time span.

Those operating in the GCC states are advised to remain abreast of COVID-19-triggered restrictions and related economic and labor measures that are being undertaken by the respective governments, and to take mitigating actions against potential resultant risks.

Please be advised

In light of the ongoing COVID-19 pandemic, Gulf Cooperation Council (GCC) countries have adopted various measures, the most prominent of which include:

Bahrain

On March 17, the government announced an economic stimulus package worth 11.4 billion USD to support the country’s private sector.

On April 20, Bahrain announced that the budget of ministries and government departments will be reduced by 30 percent, for an unspecified period, in order to mitigate the impact of COVID-19.

According to June 12 reports, the state-owned oil company decided to terminate the contracts of “hundreds of foreign employees”.

On June 15, the government approved a draft law to allocate approximately 470 million USD to the budget of 2020 in order to “deal with emergency expenses required for mitigating COVID-19 impacts and curbing its spread.”

Kuwait

On June 3, Kuwait’s Prime Minister vowed to “resolve the demographic imbalance” by reducing the expat population from 70 to 30 percent.

On June 10, the government announced that expats will no longer be hired in the oil sector.

Oman

On March 17, Oman’s Ministry of Finance announced a five percent reduction in the budget allocated to government agencies.

On April 29, Oman ordered public sector companies to accelerate the process of replacing foreign staff with Omani nationals.

Qatar

According to June 11 reports, Qatar directed ministries and government-funded entities to reduce costs through layoffs or salary cuts of non-Qatari employees.

On July 8, the Qatari cabinet approved a draft law, which stipulates that state-owned private sector companies must strive towards ensuring that their overall workforce is made up of at least 60 percent Qatari nationals.

Saudi Arabia

On April 12, the Organization of Petroleum Exporting Countries (OPEC) Plus, which is de-facto led by Saudi Arabia, agreed to reduce production by 9.7 million barrels per day (mbpd) until July, then by 7.7 mbpd from August-December, and then by 5.5 mbpd until April 2022. The group also called upon “all major producers to contribute to the efforts aimed at stabilizing the market”.

On April 15, the Saudi government allocated 13.3 billion USD to support the private sector.

On May 11, Saudi Arabia announced budgetary cuts totaling eight billion USD to “Vision 2030”-related programs and increased the value-added tax (VAT) on goods and services from five to 15 percent for an unspecified period.

UAE

On July 5, the UAE announced a broad government restructuring for “agile and swift” decision-making amid the pandemic. This includes the merging of energy and infrastructure ministries as well as abolishing several government service centers and converting them to digital platforms within two years.

The UAE has announced a phased stimulus package for businesses, totaling approximately 1.7 billion USD, the most recent part of which was announced on July 11. This has included postponement of rent payments, customs reimbursements, and refunds of 50 percent on municipality fees on sales for hotels and restaurants.

Background

There are several common features that characterize the six GCC economies, namely, Saudi Arabia, UAE, Qatar, Kuwait, Bahrain, and Oman. These include high dependency on hydrocarbon revenue, a young and rapidly growing national labor force, and high reliance on the expat workforce. Together, they account for approximately one-fifth of the world’s crude oil production and possess approximately two trillion USD worth of financial wealth.

However, there is a wide variation in resource endowments across these states, which, in turn, poses unique risks and challenges for these economies. For instance, Kuwait, Qatar, and the UAE have substantial energy reserves, with relatively small populations, as compared to Saudi Arabia, which has the largest reserves of oil but is spread across a much larger territory and population. Bahrain and Oman, with oil and gas reserves that are relatively limited, are more vulnerable to economic deficiencies when compared to the other GCC states. While plans to diversify their energy-based economies have been in place across the Gulf states in varied scale since the 1970s, the drop in oil prices since 2014 has brought forward the urgency of economic diversification in GCC states.

COVID-19-related restrictions on travel and business operations have had an overall adverse impact on the global economy. The economic ramifications of these restrictions have been severely witnessed in GCC states amid a decrease in the global demand for oil, approximated at 18 percent since the start of 2020. This has led to a steep decline of more than 70 percent in the price of oil, the lowest in over 20 years. According to an IMF report on July 13, oil revenues are now projected to decline by more than 270 billion USD in 2020, relative to 2019.

Assessments & Forecast

COVID-19-related restrictions on business, travel pose significant economic challenges to Gulf countries

Challenges posed by steep decline in oil prices

The hydrocarbon sector, namely oil, petroleum, and gas, as well as their derivatives, contribute significantly to the GDP and government revenue of GCC countries. In the case of states such as Kuwait, Qatar, and Saudi Arabia, the GDP derived from the oil and gas sector accounts for almost 50 percent of their total GDP. At the onset of the global spread of the COVID-19 pandemic, an initial catalyst that contributed to the plummeting of oil prices in the February and March was the failure of Saudi Arabia and Russia, two of the world’s largest major oil producers, to reach a consensus to slash oil production, which led to a price war between the two countries. Thereafter, Riyadh propelled its output to an unprecedented 12 million mbpd in early April in a bid to defend its share in a shrinking market. On April 12, the OPEC Plus reached a deal to slash production by 9.7 mbpd until the end of July, which underscores joint efforts to rebalance the demand and supply in the market. Despite this, oil prices have fluctuated over recent months, largely due to oscillations in global uncertainty amid the spread of the pandemic. FORECAST: While it is likely that the expected easing of restrictions on travel and businesses will boost demand for crude oil over the coming months, the ongoing uncertainty surrounding the pandemic, and potential for additional waves of infection, threatens to derail this recovery.

The decline in oil prices of more than 70 percent over recent months has led to increased financial constraints for all GCC states. This has compelled authorities to slash public spending while simultaneously redirecting funds to help citizens and the private sector cope with the significant financial challenges resulting from the virus. This has been particularly evidenced by reductions in the state budget for 2020 in Bahrain and Oman, as well as the allocation of millions of USD by Saudi Arabia and UAE to boost liquidity in the economy.

FORECAST: Overall, given that government spending is a key driver for economic growth, and is mostly derived from the energy sector, the recent cuts in capital and current spending will likely lead to an economic recession in at least some of the GCC states. This is bolstered by the IMF’s prediction, as of July 13, that the GCC economy is expected to shrink by 7.1 percent this year, both in the oil and non-oil sectors. The fact that this is a revision of the 2.7 percent predicted contraction in April, indicates the overall downward economic trend that is likely to be experienced by all six countries over the coming year, albeit in varying degrees. Most notably, the largest GCC economy, Saudi Arabia, is predicted to shrink by 6.8 percent, per June 24 reports quoting the IMF, compared to a 2.3 percent contraction that was predicted in April.

Meanwhile, GCC countries have long sought to diversify their hydrocarbon export-driven economies in order to decrease the vulnerability of their revenues. To this effect, all of the GCC countries have set out ambitious targets and strategic visions that are also designed to appeal to global investors. These include Bahrain’s Vision 2030, Kuwait’s New Vision 2035, Oman’s Vision 2040, Qatar’s National Vision 2030, Saudi’s Vision 2030, and UAE’s Vision 2021. However, given that commitment to these reforms have been inconsistent over the past years, most governments continue to rely on oil revenues. FORECAST: In this context, the slump in oil prices, as well as the overall depreciation of government revenue over the recent months indicates that investments in non-essential projects, such as in the sectors of infrastructure and real estate, will likely be postponed, which will further prolong the countries’ efforts to diversify their sources of income.

Challenges posed by decline in tourism, hospitality industry

Most GCC states have made significant efforts to transform to a hub for tourism and hospitality over recent years, constituting a major economic driver in terms of these countries’ economic diversification strategies. To this effect, GCC states have laid out long-term plans for airport expansions to increase the handling capacity of projected visitor inflow, further supported by the relaxation of visa rules to further boost tourist arrivals. Moreover, the hosting of mega-events, such as the Expo 2020 in Dubai and the FIFA World Cup 2022 in Qatar, were expected to grow the GCC’s leisure and hospitality construction sector expenditure from 467 billion USD in 2019 to 642.3 billion in 2023, implying a five-year compound annual growth of 8.6 percent, compared to the 5.7 percent achieved in 2013-18.

FORECAST: In this context, the effect of COVID-19-induced restrictions on travel between countries will have a significant economic impact on the GCC countries. For example, according to reports, the forecasted revenue loss for the UAE airline industry alone is projected at 5.3 billion USD, due to the drop in approximately 23.8 million passengers. Additionally, the postponement of highly anticipated events will exacerbate these losses. For instance, the Expo 2020 in Dubai, which was originally scheduled to take place in October 2020-April 2021 and was expected to contribute approximately 30 billion USD to the economy, will add to the decline in predicted revenues. Saudi Arabia will likely face similar challenges, given that authorities have banned pilgrims from other countries from traveling for the Hajj pilgrimage, which is slated to begin on July 28. This is particularly given that Hajj, which witnesses the arrival of almost 2.5 million pilgrims every year, generates an annual revenue of approximately 12 billion USD.

Measures adopted to mitigate economic challenges likely to increase socio-economic grievances, labor shortages

The “rentier state” model in the Gulf region has been long associated with the overall lack of taxation due to the abundance of allocated resources, wherein the state offers its citizens goods and services in return for substantial autonomy in decision-making, which is often characterized by a reduction in political engagement. However, economic conditions that have persisted across recent years, particularly in the wake of declining oil prices since 2014 and increased budget deficits in 2015-16, indicate that this pattern of governance is no longer feasible, especially as prolonged low oil prices could worsen the fiscal situation. Along with increased borrowing through the issuing of local and international bonds, in 2016, all GCC states signed an unprecedented framework for the introduction of Value Added Tax (VAT), known as the Common VAT Agreement. While the measure came into effect in the UAE and Saudi Arabia on January 1, 2018, and in Bahrain on January 1, 2019, other countries have stated that they needed more time to implement the reform. In the former states, a five percent levy has been imposed on several designated essential products and services including gasoline and diesel, food, clothes, utility bills, and hotel rooms, with the exception of public transport, medical treatment, and financial services. Similarly, a 50-100 percent “sin tax” has been imposed on certain products, including soft drinks and tobacco, in the UAE, Saudi Arabia, and Oman. In this context, Saudi Arabia’s tripling of VAT from five to 15 percent on May 11 highlights the Kingdom’s efforts to accelerate revenue generation through the collection of taxes.

FORECAST: These measures, combined with the cutting of the cost of living allowance for state workers that has been in place since 2018, will likely increase socio-economic grievances among the local population due to the increase in the cost of living. While Riyadh’s move was expected to cause a ripple effect across the region, the UAE’s Ministry of Finance indicated on May 12 that the country did not have immediate plans to raise taxes. Oman and Kuwait are expected to introduce VAT systems by 2021. However, given the possibility of protracted economic effects of COVID-19, there remains a potential for the introduction of tax reforms and other austerity measures by the remaining GCC states over the coming months.

Furthermore, the COVID-19 pandemic has forced many sectors across the GCC to shore up spending through layoffs and employee salary cuts. In this context, given that a high percentage of the population of most GCC states’ workforce consists of expats, it is this community that is liable to be most impacted by the economic downturn. While several governments have implemented policies that seek to prioritize employment for local citizens at the expense of foreign workers over the recent years, since the outbreak of the health pandemic, an acceleration of these measures has been witnessed in countries such as Oman, Qatar, Bahrain, and Kuwait.

This is evident by Oman’s April 29 decision to replace expats with Omani nationals in its public sector, as well as Qatar’s June 11 directive to all state-owned entities to curb spending through layoffs and salary cuts of expats, rather than Qataris. Meanwhile, Kuwait has explicitly stated its objective to reduce the expat population from the current 70 percent to 30 percent, although no timeframe was attached to this objective. This is part of an effort to address the demographic imbalance in the country, as indicated by the Kuwaiti PM’s statement on June 3. Kuwait has further passed measures such as a ban on the hiring of expats in the country’s oil and municipality sectors. Furthermore, several lawmakers have also tabled a bill in the parliament to introduce a quota system, wherein the percentage of expat population from different countries will be capped at certain ceilings.

To some extent, the sense of urgency in passing such expat-focused legislation has also been triggered by the growing perception that the spread of the virus in some of the GCC countries has been caused by foreigners, particularly by blue-collar workers that make up a high percentage of the countries’ migrant population. This is primarily due to the fact that a majority of such workers live in low-cost, overcrowded labor camps, a number of which had emerged as hotspots for the spread of the virus, as in the case of Doha’s Industrial Area. This may have increased resentment among parts of the local citizenry towards the migrant population, due to the pressure placed on the country’s resources and infrastructure amid the current health crisis.

That said, such policies and sentiments vis-a-vis the expat population do not resonate uniformly across all GCC states. For instance, per June 11 reports, UAE’s Minister for Infrastructure Development stated that the “UAE is a place where expats are well-skilled and we definitely need them. The pandemic is not going to be here for a long time…then we would regret that we got rid of our skilled workforce, whether it is nationals or expats. We would like to keep them”. This indicates the country’s recognition that the expat population, especially skilled migrants that constitute a majority of the middle class in the UAE, are vital for economic growth and development. This is further evidenced by the fact that the UAE and Saudi Arabia have not passed any major legislation over the recent months that seeks to specifically slash the expat population by denying them employment. FORECAST: Regardless of the absence of long-term policies to “address the demographic imbalance”, as in the case of Kuwait, the large departure of the migrant population, some of whom who are being repatriated to their home countries from the Gulf amid the COVID-19 pandemic, is liable to have several far-reaching social consequences. This will be explored in the next section.

Social, economic implications of economic slump, expat-focused measures over coming months

Domestic impact on economy, potential for labor shortage

FORECAST: The sudden exit of the migrant worker population will significantly alter the demographics, especially in countries like the UAE and Qatar, where foreign residents comprise approximately 90 percent of the population. In the UAE alone, more than 350,000 Indian nationals, and over 60,000 Pakistani nationals, have registered to be repatriated, as of the time of writing. Similarly, over 25,000 Indians have reportedly registered for repatriation due to job losses in Saudi, while 10,000 such nationals have already departed from Qatar. Moreover, countries like Kuwait also announced amnesty schemes for the evacuation of workers of all nationalities, which has reportedly benefitted over 45,000 Indians and other nationals. This will therefore have substantial economic and social implications over the coming months and years, which is expected to be larger than those witnessed during the 2008-2009 financial crisis.

FORECAST: The uprooting of middle-class residents and their families is liable to negatively impact the domestic economy, as sectors that relied on these customers such as restaurants, schools, clinics, and the retail sector, will suffer major losses. Without government support, these services will be forced to lay off more people, which may trigger a deflationary impact and likely lead to a secondary wave of migrant exodus. The exit of low-income earners, such as domestic assistance, will also lead to social implications, as this may force a change in the overall lifestyles of locals. In the UAE, it is suggested that 96 percent of Emirati families employ domestic help to raise their children, highlighting the dependence of the local population on expat workers.
FORECAST: The utility of expats as consumers and sources of revenue in the form of taxes and fees, including VAT on goods and services, road tolls, and visa renewal fees will decrease. For example, in 2018, the UAE collected approximately seven billion USD in VAT collection, which accounted for almost 1.7 percent of the country’s nominal GDP that year. Similarly, Saudi Arabia collected almost 9.3 billion USD in the form of VAT in 2018. Saudi was also expected to raise 17.3 billion USD in 2020 in the form of expat visa renewal fees, as well as the charges that are to be paid by companies for every foreign worker they hire. Therefore, this will contribute to a further reduction in government revenue.

FORECAST: A labor shortage will likely be experienced in the market over the coming months due to the departure of expat personnel, both high-earning professionals and low-income workers. This will likely be most acutely felt when the economy and oil prices rebound and stabilize to a relative degree, which will, in turn, facilitate the resumption of several infrastructural and development projects that have been currently postponed. The implementation of these projects will be hindered by the labor shortage. This is given that ambitious development plans adopted by the GCC states have largely led to an extensive, unregulated import of both skilled and unskilled labor. Moreover, the financial ability of these countries to purchase technology and knowledge also meant that professional development has not always been a top priority. This has led to a disconnect between rewards offered to nationals in the form of lucrative jobs in the public sector, unemployment and other benefits, and their level of merit and competency.

FORECAST: Therefore, GCC governments will likely face significant challenges in developing the skill sets of its national workforce to fill the gaps within the labor market over the short term. Authorities will be forced to provide substantial incentives for citizens in order to attract them towards the private sector at a time of diminishing resources, as employment in the public sector for most countries has either been or are approaching saturation. In the absence of such incentives, there also remains a possibility for protests in demand of better employment and economic opportunities. However, in many states, the overall lack of large civil society organizations and protest groups as well as a broader absence of a protest culture will render it difficult for a potential anti-government movement to mobilize.

FORECAST: Overall, COVID-19-triggered restrictions and resulting losses in revenue in both the private and public sectors have, and will likely continue to lead to, job layoffs and salary cuts across the region. For short-term delay, most GCC governments have announced emergency economic stimulus packages. These have included the expansion of government loans provided to businesses, direct cash transfers as partial payment of salaries, as well as deferments on rent and utility payments to help citizens and residents cope with the economic impact of the pandemic. Additionally, governments have been forced to utilize resources on protective measures and health infrastructure to mitigate the spread of the pandemic, bolstered by the free testing and treatment of the virus in several countries, including the UAE and Saudi Arabia. These costs are liable to increase in the event of further waves of infection. However, over the coming years, restrictions will gradually be eased in order to restore economic activity. Given the already diminished government revenue as well as the pressure to curb state expenditure and bolster public finances, states will be compelled to mitigate economic challenges by increasing taxes and training the local workforce. However, as noted, this will have a profound impact on the economic structure, social dynamics, and functionality of these societies.

Recommendations

Travel and operations can continue in GCC states while remaining abreast of COVID-19-related restrictions and procedures, as well as of social and economic developments due to changes to the workforce and reductions in state revenue.

It is therefore advised to take necessary measures to mitigate the potential adverse effect of these developments to ensure business continuity, while allotting for potential disruptions and service failures in these countries.

Furthermore, it is advised to maintain vigilance due to the heightened risk of anti-foreign sentiment in the GCC states on account of the perception among some parts of the local populace that expats are a burden on their resources.

Global Travel Risk Map 2020

Islamic State-linked media reports shooting attack in Nizhny Novgorod on May 6; first 2018 Islamist militant attack in World Cup host city – Russia Analysis

Please be advised

On May 6, the Islamic State (IS)-linked media group, al-Amaq, claimed that a shooting attack which took place in Nizhny Novgorod, western Russia, was committed by a ‘soldier’ of the Sunni-jihadist group. According to a statement from Russia’s Federal Security Service (FSB) on May 4, an assailant opened fire on police officers during an identity check and barricaded himself inside an apartment in the city. The statement indicated that the perpetrator was later neutralized by security forces.

From 14 June to 15 July 2018, Russia will host the FIFA World Cup in a number of cities, including in Nizhny Novgorod. In the run-up to the tournament, Russian security forces have carried out a large number of raids and arrests, looking to neutralize militant cells made up of both Central Asian migrants, mostly based in major cities, and North Caucasian militants, mostly from the Republics of Chechnya, Dagestan, and Ingushetia.

Since the beginning of 2018, at least 38 militant counter militancy raids have been recorded in Russia, the majority focusing on reportedly IS-linked militants. At least five of the raids occurred in or near World Cup cities, including Moscow, Nizhny Novgorod, and Rostov-on-Don.

On April 17, three suspected IS-linked militants were arrested near Rostov-on-Don by FSB agents. A number of reports suggested the possibility that the militants were embedded in the city to wait until the start of the World Cup and carry out an attack during the tournament.

Islamic State-linked media reports shooting attack in Nizhny Novgorod on May 6; first 2018 Islamist militant attack in World Cup host city - Russia Analysis | MAX Security
Islamic State-linked media reports shooting attack in Nizhny Novgorod on May 6; first 2018 Islamist militant attack in World Cup host city | MAX Security

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Assessments

The claim from IS and the reports from the FSB indicate the first case of a successful attack occurring in a World Cup host city in 2018. The most recent Islamist militant attack in one of the host cities was in St. Petersburg in mid-2017. The incident underscores previous assessments that militants, from both Caucasian and Central Asian origins, are looking to focus their operations on the World Cup, so as to maximize exposure during the tournament. In addition, the developments come following the publication IS’ official newsletter, Al-Naba, on May 4 which called on its supporters to conduct attacks across Russia, underscoring the group’s continued interest in projecting its militant capabilities in the country. This assessment gains further credence considering IS’ repeated threats to the World Cup.

While there is no indication as to the origin of the militant at the time of writing, there are three main possibilities, all of which have been previously recorded in Russia. In the event that the attacker was a lone-wolf Central Asian migrant, who was locally radicalized within Russia through online and on ground Islamist networks, the incident highlights that lone-wolves in major cities are heeding to IS’ demands to carry out attacks on World Cup cities, demonstrating the threat in any city with a significant Central Asian diaspora community. In the event that the militant had links to Caucasian militant cells, it highlights attempts by the Caucasian Emirate pro-IS group to embed radicals within major cities, prior to the tournament, who will then carry out attacks. This is likely designed to occur before security in the North Caucasus becomes overwhelming around the time of the World Cup. The third option is that the militant may have had connections with both Central Asian militant networks and Caucasian cells, which would constitute a significant threat as such an assailant would be able to utilize the covert nature of the loosely linked Central Asian networks and the expertise of the well established Caucasian groups.

Going forward, a significant increase in counter-militancy operations in major cities and the North Caucasus will occur in the run-up to the World Cup. Furthermore, the potential for both minor and major attacks in all host cities remains before and during the tournament, likely looking to specifically target stadiums and locales with international attention, so as to maximize exposure.

Recommendations

Travel to Russia may continue while maintaining vigilant given the elevated risk of militancy and crime, particularly in major cities and World Cup host cities. (Click for our special report on threats to the 2018 World Cup).

Remain cognizant of any suspicious individuals or items that look out of place. Immediately alert authorities if identified.

Avoid all nonessential travel to the North Caucasus region, given the high risk of militancy and kidnapping.

Boko Haram’s abduction, subsequent release of 104 schoolgirls in Dapchi likely to increase group’s notoriety, legitimacy among locals – Nigeria Analysis

Executive Summary

Militants attacked a government school in Dapchi village, Burasari Local Government Area (LGA) in Yobe State and abducted 110 students and two other children on February 19.

Following extensive negotiations with the Nigerian government that resulted in the safe return of 104 of the schoolgirls and the other two children after one month in captivity, Boko Haram has been able to once again garner international attention and portray themselves as a viable threat in Nigeria’s northeastern region despite extensive counterinsurgency operations.

In light of the upcoming general elections in 2019, the girls’ safe return has been projected by President Muhammadu Buhari’s administration as a triumph, which seems to have paved the way for the government’s appeasement stance toward the insurgency.

However, the incident has highlighted the administration’s propaganda of exaggerated success against the militant group and is poised to create backlash in the form of domestic and international criticism for Buhari’s policies concerning the insurgency.

We continue to advise against all travel to the northeastern Nigerian states of Adamawa, Borno, and Yobe, given the ongoing Boko Haram insurgency and extreme insecurity in the region.

Current Situation

Militants attacked a government school in Dapchi village, Burasari Local Government Area (LGA) in Yobe State and abducted 110 students and two other children on February 19.

President Muhammadu Buhari issued a statement on February 24 expressing his concern about the abduction, claiming that the situation was a “national disaster”. On the same day, the opposition People’s Democratic Party (PDP) issued a counterstatement blaming Buhari for issuing exaggerated statistics suggesting that Boko Haram had been completely decimated, a situation that they claim put unsuspecting citizens in danger.

On March 12, Borno State authorities announced the closure of all boarding schools in 25 out of the 27 state’s LGAs due to the threat of Boko Haram militants conducting additional abductions. This came in wake of President Buhari’s decision to engage in negotiations for the release of the schoolgirls.

During the early morning hours of March 21, 106 abductees, including 104 schoolgirls and the two additional children, were dropped off in the middle of Dapchi by their captors, who also warned the locals against sending the girls to Western-style schools. While five of the remaining abductees reportedly died due to exhaustion, one Christian girl remains in the militants’ custody. The Nigerian government characterized the release as “unconditional”, though some sources citing locals indicate that authorities did free several militants who joined the kidnappers, while other sources suggest that the Nigerian government had paid a ransom to secure the girls’ release.

On March 23, while receiving the released girls in Abuja, President Buhari announced that his government was ready to grant amnesty to Boko Haram members who were ready to accept unconditional surrender.

Meanwhile, on April 1, at least 29 people were killed, including six militants, in a multi-pronged Boko Haram attack on Akikaranti, Bille Shuwa, and Bale-Galtimari communes surrounding Borno State capital, Maiduguri, coinciding with the Christian Easter holiday.

Boko Haram’s abduction, subsequent release of 104 schoolgirls in Dapchi likely to increase group’s notoriety, legitimacy among locals - Nigeria Analysis | MAX Security

Assessments & Forecast

Assessments: Following extensive counterinsurgency operations targeting Boko Haram strongholds, group attempts to reassert presence, garner international, domestic attention

Despite subsequent large-scale security operations targeting well-documented militant strongholds such as the Sambisa Forest and Lake Chad shores in Nigeria’s northeastern region, the militants successfully launched the well-planned abduction of the Dapchi girls. Indeed, this incident resembles Boko Haram’s April 2014 attack on a school in Chibok, Borno State, when 276 girls were kidnapped. The Chibok attack resulted in an extensive international outcry,  triggered by a domestic campaign started by the families of the Chibok girls. The #BringBackOurGirls movement put the Boko Haram conflict in the international spotlight, particularly when the former US First Lady Michelle Obama endorsed the campaign. In this context, the Dapchi attack was likely motivated by the prospect of achieving similar notoriety. Additionally, the attack came in response to security forces’ triumphant claims of the near-destruction of the militant group’s presence in the region. Through the Dapchi attack, the militants debunked such claims and reasserted their continued operational capabilities across the country’s northeast.

The Dapchi abductions rendered a successful outcome for the militants. While the federal government characterized the negotiations and the subsequent release of the hostages as completely “unconditional”, it contradicted local reports of the authorities’ release of several militants. Such conflicting reports align with previous allegations against authorities for releasing militants and paying ransom for militants, with the latest incident being the February 10 release of three lecturers from the University of Maiduguri, along with ten police officers abducted by Boko Haram last year. Under these circumstances, the suspected hefty ransom payment will likely be utilized by the militants to enhance and develop their operational capabilities in the region, which may have been hampered, to some extent, by the counterinsurgency operations.

Indeed, the government’s repeated payment of ransoms without any resistance is poised to encourage the militant group to carry out similar large-scale kidnappings. Such a concern was further emphasized by the Borno State authorities’ decision to shut down boarding schools across 25 of the 27 LGAs. Furthermore, the release of militants as part of the ransom payment reintroduces experienced and well-trained fighters to the ranks of the militant group, increasing their operational capabilities. This is further highlighted in the latest Boko Haram multi-pronged attack on April 1 that was reportedly coordinated by Shuaibu Moni, a top Boko Haram commander who was released by the government to facilitate the return of 82 Chibok girls in May 2017. Moni had previously appeared in a Boko Haram video on March 7 taunting the Nigerian security forces and threatening to launch additional attacks.

The theatrical grandeur of the return of the abductees as the militants drove into the center of Dapchi hailed as heroes by the local population for safely bringing back their girls was likely a symbolic attempt by the group to embolden its authority in the region. This sheds light on the militant group’s propaganda aimed towards gaining the locals’ trust and consolidate their influence in their areas of operation. As the militants shook hands with the locals and warned them against the return of the girls to schools for Western education, they compelled the latter to adhere to the militant group’s Islamist ideologies. Through the dramatic aspects of the event, the militants effectively portrayed themselves as legitimate actors in the region, with more control than the federal government in Abuja. Given the communities’ grievances against Abuja, as they continue to feel disregarded and neglected by the government, such an image of Boko Haram is poised to render the locals more susceptible to getting recruited by the militant group. Amidst the ongoing insurgency, these circumstances increase the possibility of better cooperation between the local communities and the militants, with the former providing shelter and engaging in economic transactions with the militants for their own survival.

Assessments: With 2019 elections nearing, Buhari makes strategic shift toward developing appeasement stance to overcome Boko Haram insurgency

Since President Buhari came into office in 2015, negotiations with Boko Haram in their kidnap-for-ransom schemes have become a recurring phenomenon, which includes the 2016 release of 21 Chibok girls and another 82 released in May 2017. Such a stance toward the militant group likely stems from large-scale international and domestic attention that these incidents received. Buhari has attempted to make good on his electoral promise of combating Boko Haram in contrast to the perceived failure of former President Goodluck Jonathan’s administration to effectively defeat the militant group. However, Buhari’s administration has also projected a stronger government resistance to the insurgency, which has led to a distorted perception of success over Boko Haram militancy in Nigeria. Continued militant attacks have highlighted the government’s propaganda in displaying exaggerated data regarding the success of counterinsurgency operations and falsely claiming the defeat of the militant group. This may, to a certain extent, reduce Buhari’s international and domestic credibility.

With Nigeria’s presidential elections slated to take place in 2019, such an approach by Buhari for the safe release of abductees is poised to become his legacy. To further add to his administration’s successes against the insurgency, following the Dapchi events, Buhari appears to have embarked towards an appeasement stance with the latest amnesty deal. It is likely that through these propositions Buhari seeks to strategically portray to the international community his efforts for a peaceful resolution in parallel to the continuation of counterinsurgency operations. Under these circumstances, it is likely that Buhari will attempt to negotiate with the militant group to reduce attacks in exchange for reduced military actions in the northeastern region.

However, the administration’s conciliatory attitude towards the militants may be perceived by some as weak, with negative implications particularly by security forces, which may have a  detrimental impact on the fighting morale of the soldiers who are endangering their lives in battle. FORECAST: As such, any attempts by Buhari to negotiate with the militants to reduce attacks in light of the upcoming elections, as well as the latest amnesty deal, may add to Nigeria’s security agencies’ frustration concerning the ongoing nine-year long insurgency and weaken their determination to actively combat it. Additionally, Buhari’s administration is poised to receive substantial criticism from opposition political parties for their weakened stance towards the insurgency and their propaganda of exaggerating military successes, as evidenced by the opposition People’s Democratic Party’s (PDP) statement denouncing the Dapchi deal.

FORECAST: Buhari’s latest amnesty deal offered to Boko Haram is quite similar to an opportunity offered by former President Jonathan in 2013, which Boko Haram’s leader Abubakar Shekau outright declined. As such, it seems unlikely that Boko Haram will accept the latest deal, particularly given that the government does not seem to have any substantial negotiating leverage. Furthermore, the latest April 1 multi-pronged Boko Haram attack continues to highlight that the group remains capable of executing sophisticated large scale attacks in their traditional sphere of influence. Given the group’s resilience in remaining a viable threat in Nigeria’s northeastern region despite the large-scale counter-militancy measures, a persistence of the conciliatory approach by the government is liable to be detrimental to their interests.

Recommendations

Travel to Lagos, Abuja and Port Harcourt may continue while maintaining heightened vigilance and following heightened security protocols regarding criminal and militant activity.

We continue to advise against all travel to the northeastern Nigerian states of Adamawa, Borno, and Yobe, given the ongoing Boko Haram insurgency and extreme insecurity in the region.

We advise to avoid all travel to areas of Nigeria, Niger, Cameroon, and Chad within the Lake Chad Region given the high risk of militancy.