Concern grows over Nigeria’s lack of economic direction

Nobody, least of all Nigeria’s new president, has said that rooting out the rot in the political system will be easy.
When he took office in late May, Muhammadu Buhari described Africa’s biggest economy as being “in a precarious state” because of external factors — mainly falling oil prices — that intensified internal problems: namely poor management that enabled or encouraged mass theft of state revenues.
In his inauguration speech, the former military ruler, aged 72, said “careful management” would be needed to bring the Nigerian economy out of the “deep trouble” it was in. He also pledged to take action to tackle the Boko Haram insurgents who have terrorised the people of the impoverished north-eastern region and neighbouring nations.
Almost four months later, the country’s economic woes have deepened, while a rise in Boko Haram attacks has forced 800,000 people from their homes since June, according to UN figures published this month.
Mr Buhari has changed the military’s top brass and sacked the leadership of the state-run oil company, the Nigerian National Petroleum Corporation, but he is facing increasing criticism for not articulating a vision for Nigeria’s economy. Change was not expected overnight, but the wave of optimism that swept the country after Mr Buhari made history by becoming the first opposition candidate to defeat an incumbent has faded. Nigerians and foreign investors worriedly await signs of a plan, particularly as oil prices continue to fall.
Economic growth slowed sharply in the second quarter to less than half the rate of a year ago.
The naira has lost more than 15 per cent of its value against the dollar in the past year. The central bank devalued the currency in November and February and has introduced capital controls and spent billions to avoid a third devaluation. Traders and analysts say this has caused liquidity to dry up and most are calling for a devaluation.

Many agree with Mr Buhari’s focus on tackling institutionalised corruption and understand that it takes time, says Ayodeji Ebo, head of research at Afrinvest in Lagos.
“It’s a challenge we have that cuts across all sectors,” Mr Ebo says, adding that the president’s approach in terms of restructuring various sectors to clean up state institutions could yield fruit once he appoints a cabinet.
Mr Buhari has promised to appoint ministers this month and has said the long wait was needed to ensure that the individuals he selects as ministers are capable of carrying out the root-and-branch reforms he has promised.

Read also: Graffiti… Buhari goes from Nigeria’s change champion to ‘baba go slow’

But because of the president’s relative silence and the lack of a finance minister or named economic policy team, the only person seen to be dictating economy policy publicly since Mr Buhari took over is the central bank governor, Godwin Emefiele, who was appointed by the previous administration. Mr Emefiele’s view that the currency is “appropriately priced” — despite the divide between official and black market rates and controversial measures such as effectively blocking certain imports, like rice — has bewildered economists.
If the currency is not devalued, market uncertainty and foreign outflows could cause foreign reserves to drop below the $30bn critical level needed to cover four months of imports, such as important food stuffs, says Mr Ebo.
“Nigeria is digging itself into a deeper hole as the days and weeks go by,” says Angus Downie, head of economic research at Ecobank. And, with oil prices unlikely to rise soon, Mr Downie says the government cannot rely on external forces to come to its aid.
This month, JPMorgan ejected Nigeria from its influential emerging markets bond index. The move triggered outflows, but some said the biggest implication of the exclusion was the hit to confidence about the management of Nigeria’s economy. “People will start asking questions about ‘do these people know what they are doing?’” says a Nigerian economic expert familiar with the administration’s thinking.
Some Nigeria watchers are optimistic. “He’s trying to do the right thing and maybe it’s taking a bit longer than anyone expected, but he’s still fighting for the good cause”, says Miguel Azevedo, head of investment banking for Africa at Citigroup.
Mr Azevedo says the president has appointed people to take charge of the shaky oil industry, citing the new head of the state-run oil company, Emmanuel Ibe Kachikwu, a former ExxonMobil executive, as an example.
However, Nnamdi Obasi, senior Nigeria analyst at the International Crisis Group, says: “Clearly, there is a sense of anxiety and concern about economic direction, also because the president himself doesn’t have any economic credentials whatsoever and it’s not clear who is advising him.”
Credit: Financial Times, September 21, 2015.

RipplesNigeria …without borders, without fears

Join the conversation

Opinions

Support Ripples Nigeria, hold up solutions journalism

Balanced, fearless journalism driven by data comes at huge financial costs.

As a media platform, we hold leadership accountable and will not trade the right to press freedom and free speech for a piece of cake.

If you like what we do, and are ready to uphold solutions journalism, kindly donate to the Ripples Nigeria cause.

Your support would help to ensure that citizens and institutions continue to have free access to credible and reliable information for societal development.

Donate Now