Nigeria: Not On Anyone's 100 Day Clock – A Look at President Buhari's Economic & Anti-Corruption Efforts

President Muhammadu Buhari and former President, Chief Olusegun ...
blog

This two-part FEEEDS Blog Series on Nigerian President Buhari’s time in office provides an analysis of his game plans (Buhari Doctrine); how they are working thus far, and what we might expect as his administrations tries to address issues surrounding both the country's economic and security environments.

We start with, Part One, examining the positives and challenges in the economic-investment sectors for a country which boast having Sub-Saharan Africa's (SSAfrica) largest population (178 million) and economy (Nigeria rebased in 2014), although it is struggling to get its financial footing back, and keep investors engaged. Here is today's environment:

  • Key source of revenue and foreign reserves – from the oil sector – has been hit by massive drops in world oil prices;
  • Unemployment remains high (hovering around 7.6 percent) in the 15-34 median age range, where youth and female populations clock-in at around 60 million and 80 million respectively;
  • Devaluation pressures remain high on the country's currency (naira); raising cost for the private sector and daily living needs.

Despite these economic struggles, Nigeria is still considered a go-to frontier capital market; and, remains one of the most important investment destinations in SSAfrica along with Kenya, South Africa, and Ethiopia. It is important, however, to keep in mind that most – not all – of the current economic challenges pre-date the May 29 elections. However, that being said, it is now Buhari's Administration's responsibility to both address and resolve.

A Closer Look - Current Business& Investment Environment:

The private sector from China, United States, India, Brazil, and Europe still see Nigeria as a premier investment destination. What makes Nigeria attractive for these foreign businesses? Answer…return on investment (ROI). The average ROI, (despite risks noted below), can average 28-33 percent -- matched with Nigeria's largely untapped consumer market for good and services. There are specific sectors which provide the greatest returns and/or are growth areas for goods and services. There are seven sectors (not in priority order), from FEEEDS' perspectives that are the most notable for foreign investors:

1.) Power – Nigeria partially-privatized its power sector (generation and distribution) in 2013, giving foreign investors an opening. With this, other attendant opportunities were also created for soft and hardware, and skills transfer (i.e. equipment, metering, asset management, and technical assistance). Nigeria barely produces 2-3 thousand megawatts per day. While, daily power needs are estimated at 40-50 thousand megawatts for consistency in service delivery. Although potential ROI is great, so are risks around poor transmission to the national grid, heavy debt service on acquired national assets, lack of technical production capability, and concern over timely payments.
2.) Information Communication and Technology (ICT) - Nigeria has the largest number of mobile phone users in SSAfrica with 100 million out of 650. Any ICT investor focused on innovative mobile services, and smartphone hardware, can take advantage of Nigeria’s market. Smartphone penetration is only 27 per cent, as most Nigerians still primarily have feature phones.

3.) Natural Gas – Nigeria has roughly 180 trillion cubic tons of untapped natural gas – making it one of the largest in the world. This nascent sector remains ripe for services, infrastructure, and developing gas fields.
4.) Agriculture – About 70 per cent of Nigeria's population lives and works in this sector. It remains underserved as it lacks infrastructure, modernization, insufficient commodity production or food processing, and poor rural-to-urban transportation services. All of these sub areas are good investments; high ROI will be a bit delayed given how far behind the sector lags. But if you are playing the long game this is where to be.

5.) Manufacturing - Nigeria has the odd triangulation of a low manufacturing base, large population, and a growing middle class consumer market all at once. Thus, manufacturing of any product (non-edible or edible) will have ready-made customers.
6.) Extractive industries – Extraction of fossil fuels (petroleum) remains Nigeria’s main export resource, despite low world oil prices. Nigeria also has a wealth of other natural minerals from iron ore (200 million tons of proven reserves), coltan (key for cellphone and appliance manufacturing) gold, silver, zinc, etc.

7.) Housing – There is a 17 million affordable housing deficit. Meaning if you are poor or unemployed you either do not have adequate housing or housing at all. Although, the sector is ripe for investment, the government will need to move forward with frameworks that provide some form of sovereign guarantees. This will help spur construction financing and mortgage guarantees – two key impediments, thus far, affecting building starts. Nigeria’s new (2013) Mortgage Refinance Corporation, NMRC, also needs these two issues addressed so it can begin to support projects meeting its mission. To date, NMRC has not had a case/project it can approve.

Doing Business in Nigeria – What You Should Know?

Despite the opportunities and high potential for ROI, what are the basics you should know, particularly regarding ease of doing business, and the lack of consistent (and by some accounts unclear and unfriendly) monetary policies. Recently the World Bank 2015 Ease of Doing Business Report rated Nigeria low, 170 out of 189 countries reviewed on their transparent and friendly business practices. In 2014 Nigeria was ranked 175, so it has improved a bit. Nigeria’s Central Bank (CBN), in its efforts to support the country’s floundering currency -- the naira, under devaluation pressure -- has made it increasingly difficult for both foreign and Nigerian businesses to do transactions in convertible currencies such as dollars or euros. That being said, the positives on this action are: Nigerian companies have to provide the CBN with foreign company business information and contract payment amounts in order to obtain foreign exchange to pay partners or clients. This is an important transparency element in the anti-corruption tool box for both the country and foreign partners.

Buhari required by September 15, all ministries use their CBN accounts, called Treasury Single Account, for all government monies. Meaning, ministries cannot deposit government funds into commercial banks – a past practice where it is believed substantial state wealth disappeared. Ministries’ compliance thus far has been good.
Always in Nigeria there is a flip side. The Nigerian commercial banks, previously holding these funds now have to scramble to find new business to counter huge losses resulting from these transfers. Banks already have started to lay off employees adding to the 7.5 per cent unemployment rate. Most affected will be bank workers in the mid-ranks in their prime wage earning years (25-35).
On the federal budget, reports are Nigeria will move to a clean-slate 2016 "zero-basing," linking needs and costs, and that Buhari's "look ahead" focus will be on infrastructure development, social needs, manufacturing, and job creation.

President Buhari’s Anti-Corruption Efforts; Economic Team:

FEEEDS also gives Buhari high marks for his unwavering commitment to address endemic corruption. In addition to his above actions, he has publicized his personal wealth (good first tone-setting step); appointed new leadership to the problematic National Petroleum Company (NNPC); worked to carefully vet senior appointments; and, asked foreign governments, including the U.S. to help return $150 billion in stolen state wealth. He is famously known for saying “I belong to everyone; I belong to no one,” underscoring his intolerance for the two forces of evil behind stolen state wealth – corruption and influence peddling.*

For sure Buhari inherited nearly empty national coffers, a struggling currency, coupled with ever-declining world oil prices. However, he is being very systematic and thorough in the formulation of his new government. This includes deciding who his economic team will be and how they will address current economic issues. We will have to wait for finance minister appointment, and what the full economic vision might be. There is a little ankle biting that he is going too slow ("Baba Go-Slow" or Father Goes Slow, nicknamed by some) to appoint ministers. We also have an additional underlying theory: he may not want to have to negotiate with ministers on vision and direction, putting everything in place first, and then handing them his game plan.

Either way, FEEEDS gives him high credit for taking his time. As deep as the two evils of corruption and influence peddling run, it is prudent to carefully vet. Buhari never put himself on the artificial, but politically-expected “first 100 days” clock. Okay, 8-9 months from now, we might take a different view. Let’s get good, unencumbered folks (from past or present questionable deeds) on board, and go from there.
Buhari said he would be "steady" in truly setting the tone for a new, reborn Nigeria to achieve its full economic, investment, development, democracy-leadership roles, so given what he inherited, let's give him more time to get there.

Part Two will focus on Current Political-Security Positives & Challenges

*From Buhari's Inaugural speech

AllAfrica publishes around 500 reports a day from more than 100 news organizations and over 500 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.