Up­hill task for Nige­ria’s new eco­nomic team

Kuwait Times - - BUSINESS -

LA­GOS: Nige­ria fi­nally has a gov­ern­ment af­ter a wait of more than five months but the new min­is­ters have their work cut out to re­verse a dam­ag­ing slump in Africa’s lead­ing econ­omy.

Fall­ing global oil prices have shrunk gov­ern­ment rev­enues and slowed growth to a near stand­still, while the naira cur­rency is weak, in­fla­tion high and un­em­ploy­ment caus­ing wide­spread con­cern.

At the same time, the mil­i­tary is work­ing to end a bloody in­sur­gency by the rad­i­cal Is­lamist Boko Haram group that has dev­as­tated the peo­ple and econ­omy of the re­mote north­east.

“Nige­ria has never been this bad,” said po­lit­i­cal com­men­ta­tor Ola­pade Agoro, who is also an op­po­si­tion politi­cian and for­mer pres­i­den­tial can­di­date. All eyes are now on new Fi­nance Min­is­ter Kemi Adeo­sun and her team to come up with poli­cies to tackle the rot.

But Bis­arck Re­wane, of the Lagos­based con­sul­tancy Fi­nan­cial De­riv­a­tives, said time was of the essence, with in­vestors keen for clar­ity about the di­rec­tion the gov­ern­ment will take.

“The thing to do is to hit the ground run­ning be­cause there is no time for rhetoric,” he said. “The econ­omy is in dire straits. The GDP is low at 2.4 per­cent, while in­fla­tion is near­ing 10 per­cent with weak pur­chas­ing power and a fall­ing naira.”

Un­em­ploy­ment is cur­rently at 8.2 per­cent, while the oil shock has left Nige­ri­aAfrica’s num­ber one crude pro­ducer-short of cash to pay for gov­ern­ment projects and even civil ser­vants’ salaries.

“You’ve got to raise money to deal with fis­cal deficits,” said Re­wane.

Cash re­quired

Adeo­sun, a for­mer in­vest­ment banker, has been cred­ited with turn­ing round the fi­nances of the cash-strapped south­west­ern state of Ogun, yet is untested at na­tional level. An­a­lysts sug­gest she will work closely with other key min­is­ters such as Udo Udoma, in charge of bud­get and na­tional plan­ning, and Okechukwu Enelamah at in­dus­try, trade and in­vest­ment.

The ap­point­ment of other tech­nocrats has also been wel­comed, in par­tic­u­lar for­mer ExxonMo­bil ex­ec­u­tive Ibe Kachikwu as ju­nior oil min­is­ter to over­haul the graftrid­den sec­tor.

Ba­batunde Fashola was put in charge of a “su­per-min­istry” for power, works and hous­ing af­ter be­ing seen to have per­formed well in those ar­eas in La­gos State, which drives Nige­ria’s econ­omy.

Ro­timi Amaechi, the for­mer gov­er­nor of oil-pro­duc­ing Rivers state, was named trans­port min­is­ter. Both are seen as pow­er­ful mem­bers of the new cab­i­net. But they will need ready cash to fol­low through and are un­der pres­sure to show re­sults quickly, with al­most half of Pres­i­dent Muham­madu Buhari’s first year in of­fice al­ready over.

Sola Oni, of La­gos-based stock­bro­kers So­fu­nix In­vest­ment and Com­mu­ni­ca­tions, said the gov­ern­ment should look to the stock mar­ket for fi­nanc­ing. “The fed­eral gov­ern­ment should for once ex­ploit the cap­i­tal mar­ket to fund the in­fras­truc­tural de­fi­ciency which has be­come the bane of our eco­nomic growth and de­vel­op­ment,” he said.

De­pen­dency on oil, which sup­plies 70 per­cent of gov­ern­ment rev­enue, should be cut, and a re­newed em­pha­sis put on ad­dress­ing the coun­try’s crip­pling power deficit, he added.

Drive growth

The five-month ab­sence of gov­ern­ment min­is­ters cre­ated un­cer­tainty among in­vestors in what has been a fast­grow­ing emerg­ing mar­ket, with nearly 7.0 per­cent an­nual av­er­age growth from 2005-13.

At­ten­tion now is on the an­nounce­ment of next year’s bud­get, which has to be sub­mit­ted to par­lia­ment by De­cem­ber. Re­ports this week sug­gested Vice Pres­i­dent Yemi Os­in­bajo was propos­ing a bud­get of about eight tril­lion naira ($40 bil­lion, 37 bil­lion eu­ros) for 2016 dou­ble that for this year.

Muda Yusuf, di­rec­tor-gen­eral of the La­gos Cham­ber of Commerce, said with a min­is­te­rial team now in place, “there should be co­her­ent, con­sis­tent and pos­i­tive sig­nals to in­vestors” to drive growth.

The Cen­tral Bank of Nige­ria, which filled the void in fis­cal pol­icy in the ab­sence of a cab­i­net, in par­tic­u­lar should re­view its for­eign ex­change re­stric­tions pol­icy, he added. Seek­ing to con­serve dol­lar re­serves, the bank in June ruled that im­porters could no longer get hard cur­rency from the in­ter­bank mar­ket to im­port dozens of items, from tooth­picks to pri­vate jets.

In the past year, re­serves have fallen by nearly a quar­ter as it tried to pre­vent the naira from fall­ing in tan­dem with plum­met­ing crude prices. The cen­tral bank has twice de­val­ued the cur­rency, tak­ing it from 155 naira to the dol­lar a year ago to 199 cur­rently.

Adeo­sun, viewed as a re­formist, and her fel­low min­is­ters should meet with the pri­vate sec­tor to plot a way for­ward and also ad­dress ris­ing na­tional debts, he added. “Debt ser­vice bur­den is be­com­ing in­creas­ingly un­bear­able, es­pe­cially do­mes­tic debt,” he said. — AFP

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