Uphill task for Nigeria’s new economic team
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.
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.
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