Nigerians wait for Buhari’s promise
Economic blueprint overdue
WITH discontent mounting and Nigeria seeking to raise international debt, lenders and investors are waiting for President Muhammadu Buhari to announce a plan that could determine whether he keeps his promises to boost the economy and create millions of jobs.
Buhari’s economic blueprint for the next four years, due to be released this month, will aim to lift West Africa’s biggest economy from its worst slump in more than two decades and boost the annual economic growth rate to at least 7 percent by 2020, Budget and Planning Minister Udo Udoma said in the capital, Abuja, on Monday.
The recovery and growth plan for 2017 to 2020 comes after Buhari forced the central bank to maintain a currency peg for more than a year, curbing foreign investment, while the importers of certain raw materials and equipment are still banned from accessing dollars, denting manufacturing output. Buhari approved the 2016 budget almost five months after the start of the year, causing delays in spending and adding to the woes of an economy hurt by declining oil prices and output.
“This is the last opportunity,” Ayodele Akinwunmi, head of research at Lagos-based FSDH Merchant Bank, said on Tuesday. “If it has taken them two years to develop a plan, I don’t want to believe it won’t work, otherwise it will be total failure for this government.”
Ensuring macro-economic stability, foreign-exchange availability and food and energy security are immediate priorities for the government. Part of the plan will be to boost oil production and revamp refineries, raise power generation, build food-processing zones, and invest in mines, and the government could sell assets and increase foreign borrowing to fund this, Oduma said in October.
“The devil is in the details,” Pabina Yinkere, the Lagosbased head of research at Vetiva Capital Management, said. “It’s those detailed strategies that will determine sources, and amount of money the government can raise to fund the plan. From the onset, fund-raising will be a challenge.”
The African Development Bank (AfDB) in November released $600 million (R8.03 billion) of the $1bn it agreed to lend Nigeria, and said the rest will be disbursed after the lender knows the nation’s economic plan.
The government is seeking a $1bn loan from the World Bank, and officials are meeting with investors in the UK and US in preparation for the sale of a $1bn Eurobond. China has pledged several financing packages totalling $40bn for Nigeria’s infrastructure over an unspecified period.
Huge demand “The Eurobond is an easy one, and will be oversubscribed because of its small size and huge demand,” Yinkere said. “But lenders like the World Bank might have conditions on things like the foreign-exchange regime, and subsidies, while China will have several trade-offs in exchange for its money.”
While the Central Bank of Nigeria removed a 197 to 199 naira per dollar peg in June, causing the currency to lose about 40 percent of its value against the dollar, it continues to intervene to keep the naira at around 315 per dollar and blocks importers of 41 items it deems non-essential from the official foreign-currency market.
The scarcity of dollars has forced some importers to buy foreign currency on the black market at about 30 percent above the official rate, pushing inflation to an 11-year high.
The AfDB wants to see reforms in the energy industry to include cost-reflective power tariffs to encourage investment, said the lender’s president, Akinwumi Adesina.
Investec Bank’s head of Africa strategy and sales, Andrew Schultz, said Nigeria should follow Egypt’s lead and allow its currency to float freely so portfolio flows can return, even as these decisions may raise inflationary pressures, rendering them non-populist and difficult for Buhari to make almost halfway into his term.
Buhari, whose current term ends in 2019, pledged to increase economic growth to 10 percent and create 1 million jobs annually. – Bloomberg