When Nigeria’s new President, Muhammadu Buhari assumed office on 29th May of this year, it was amid a torrent of concern over the economy’s prospects. Partly due to alleged mismanagement by the outgoing administration of Goodluck Jonathan, 2015 is turning out to be a tough one for African economies.
The slowdown in China and nose dive of oil prices has hit hydrocarbon exporters such as Nigeria particularly hard. Despite repeated efforts by the Central Bank of Nigeria (CBN) to shore up the national currency, the naira, it has remained volatile, and dropped to a record low against the dollar earlier this year.
Add to that the perennial issue of corruption, which affects every aspect of the Nigerian economy, but is of particular concern in the oil industry, the incoming President has got his work cut out for him.
Addressing such myriad issues will take time, but there are signs that this administration will do things differently.
For one, the President made a point of scheduling a state visit to the US in July to shore up and restore confidence in Nigeria, which remains a top destination in Africa for foreign investors. Relations had become somewhat frosty under President Goodluck Jonathan.
Along with a warm welcome by President Obama, the occasion was used as an opportunity to engage the American business community. It seemed to work, as just a month later Stephen Schwarzman, founder of the global private equity firm, Blackstone Group, visited Abuja with a team of executives. US companies are ramping up their investments on the continent, and look set to become a major source of foreign investment in the coming years.
Another, indirect, sign of a different tone in economic leadership came in early September, when both President Buhari and his Vice President Yemi Osinbajo officially declared their assets. Unusual in its own right, it was the modest nature of the wealth declared by the President which made headlines.
According to a statement by his senior special assistant, media and publicity, Garba Shehu, some of Buhari’s assets include a ranch with 270 herds of cattle, two mud houses, and N30m ($150,000) in his only bank account. The statement adds that he does not own a single oil well or operate foreign bank accounts. Buhari’s modest net worth did not come as a surprise to many Nigerians, as he is known to be frugal.
Perhaps the most indicative step taken by the President to date has been his crackdown on the Nigerian National Petroleum Company (NNPC), an institution which has become synonymous with corruption in the country.
In early August, he fired and replaced its managing director and all its executive directors in a clear signal that he intends to take a harsh stance on corruption.
Such steps are undoubtedly encouraging, though he has faced some criticism, including his decision to delay the appointment of a cabinet until September.
Rasheed Adegbenro, an economic policy analyst and former acting director-general of the Manufacturers Association of Nigeria (MAN), believes the president is on the right track.
“The first few months have demonstrated that President Buhari would keep to his campaign promise to offer Nigeria the leadership required to turn around the economy. The public sector institutions have suddenly woken from their slumber and performance has improved.
“In spite of the fact that no new investment has been made in the power sector, appreciable improvement has been recorded in electricity supply. Notwithstanding the slow pace in governance, the larger society is prepared to go along with the new administration because hope is high that tangible results would come.”
Adegbenro, who is currently the senior vice president, strategy and development of the Centre for Values in Leadership (CVL), a socio-economic think-tank based in Lagos, adds that a major lesson that can be learnt from Buhari’s seeming delay in the appointment of ministers is that the government machinery can run quite well without politicians as ministers. He says this strengthens the perception that technocrats in the public service run ministries more efficiently than politicians.
He said: “The absence of cabinet ministers has not affected the perception of the international community concerning governance structures in Nigeria. Rather it has demonstrated that the new leadership is not prepared to sacrifice integrity on the altar of political interest.
“This is good for the economy that needs a better reputation.”
Contrary to criticisms of the current administration’s handling of the economy, Adegbenro believes falling oil prices and fluctuation of the value of the naira to the dollar are predictable, due to excessive reliance on oil as the major source of government revenue and the reliance of the economy on imports.
He added: “The ‘no business as usual’ stance of the Buhari administration is a plus point for Nigeria’s brand equity in the search of fresh inflow of foreign direct investment.”
New economic blueprint
However, there is still much work to be done. The slump in oil prices, which dropped to $42 per barrel, has necessitated adjustments in budget benchmarking. It is anticipated that prices will drop even further when Iran resumes supply of oil, following the lifting of sanctions. Oil exports account for 70% of government revenue.
Though the government had taken steps to mitigate the impact of this drop, by devaluing the naira, first in November 2014, and also in February this year, the economy has yet to come out of the woods. As part of measures to strengthen the naira, the Central Bank has announced a temporary ban on local transactions in dollars.
The government also recently unveiled a new economic blueprint that could potentially lead to the creation of 1.14m jobs, increased annual food production by about 530,000 metric tonnes, and attracting new investments of up to N980bn ($5bn). It is expected that all these new policy measures would help to reflate the economy.
It is still early days for the Buhari government, and much work remains to be done, but there are clear signs that change may be on the cards.