Shaping the Direction of Buhari’s Economic Policies
As countdown to the May 29 inauguration of new administration of General Muhammadu Buhari continues, analysts have continued to list priority areas for the in-coming government, reports Festus Akanbi
As the euphoria of the general elections settles, attention was last week shifted to the transition committees being put in place ahead of the May 29, hand over date. In the estimation of economic affairs commentators, the quality of the crop of Nigerians that will be saddled with the responsibility of effecting a smooth hand over of power will go a long way in shaping the new administration of General Muhammadu Buhari come May 29.
Given the fact that some members of the committee may form the bulk of the cabinet of the new administration, it is expected that members of the local and international business community will be able to determine the incoming administration’s economic direction by the time the full list of members of the committee is made public.
However, analysts said General Buhari will need a crop of brilliant economic managers for his administration to effectively navigate the current global economic crises. Expectedly, names of prospective ministers and aides have been making headlines in a section of the media.
As at last week, the outgoing administration had begun the process of collecting briefs from the Ministries, Departments and Agencies, MDAs, which will be presented at a meeting with the committee raised by the in-coming government. Oil Sector Reforms In a position paper made available to THISDAY, Managing Partner, Zenera Consulting, Mr. Meka Olowola, recommended, among others, immediate passage of a pro-Nigeria PIB. He explained however that considering some controversial clauses in the PIB, like the appropriation of enormous power to the petroleum minister, there is need for the bill to undergo further modifications and then be eventually passed into law, adding that this process may become a reality in about a year’s time contrary to more prevalent aggressive estimates.
He said, “Despite these permutations regarding the PIB, the new government will still be under enormous pressure to deliver on its massive campaigns promises of “Change” with oil prices still likely to stay down at under $60 and current overheads still responsible for 85 per cent of government expenditure. Should it force itself into making a budget deficit? That would be an unpopular way to kick off for an administration that rode to power on the crest of popular support.”
For the incoming administration to continue to enjoy its national and international goodwill and complement the anticipated transformation in the petroleum ministry and the NNPC, the report recommended that the new government must muster the political courage to deregulate the downstream petroleum industry so as to restructure the national balance sheet.
The outgoing government had attempted similar moves in January 2012, but had to retract after widespread dissent and loss of national goodwill. The timing and public education were poor. This is where the new government must be proactive and creative, just like it did with its pre-election campaign programme. Priority Sectors In its report, FBN Capital Research believe one of the priorities of the incoming administration is the power sector.
The research firm, in the report titled, ‘In need of attention: The Power Industry,’ believed that one of the priorities for the new administration will be the power sector.
It recalled that the outgoing federal government broke up the former Power Holding Company of Nigeria, privatised its generation and distribution arms, and indicated that transmission could also have a future in the private sector (rather than under private management).
According to the report, “Successful transformation of the sector could have proved a major vote-winner in the presidential elections but remains far off.”
It added that “South Africa offers a salutary lesson in the cost of neglecting the industry’s investment needs. It was often noted that it generated substantially more power (than Nigeria) for less than one third of the population. However, its state-owned utility Eskom has been imposing “load shedding” for more than three years at a monthly cost in lost production currently between $1.7bn and $6.8bn according to the South African department of public enterprises.”
Analysts from FBN Capital also believed that the consistency of tariff policy is worth giving attention to by the incoming administration.
They recalled that National Electricity Regulatory Commission indicated in Abuja on March 16, that exchange-rate weakness could well lead to a rise in the tariff from mid-year yet announced a 50 per cent reduction the following day.
The cut did not apply to residential users, who were granted a six-month reprieve from the increase imposed on commercial and industrial consumers with effect from January 1.
They therefore suggested that the Federal Government could also resolve the impasse which has prevented Geometric Power/Aba Power from starting production at its $500m generating plant in the capital of Abia State. Media reports had quoted Geometric as saying that the concession had been “double-sold” and that the many industrial businesses in Aba were being denied access to regular power supply by vested interests.
The Federal Government last month signed a memorandum of understanding (MoU) with Chicago-based Mill house covering the development of the Enugu coal reserve and its utilisation for power generation. Also in March it signed another MoU with One Nation Energy for the generation of 500MW from coal deposits in Enugu State (Good Morning Nigeria, 10 March 2015).
The African Development Bank has reportedly pledged US$200m for coal-to-power projects.
The latest figure for peak daily generation from the national grid is 3,571MW (on 10 April). NNPC estimates suggest that diesel, petrol and kerosene provide a further 2,300MW for households and businesses in proportions of 43:35:22. Oil Slump Still an Issue The international finance and economic