Nigeria’s new President, Muhammadu Buhari, who took office on Friday, made history by notching the first defeat of an incumbent president since independence in 1960. Now comes the hard part: getting Africa’s biggest economic dynamo restarted. According to experts, two things complicate that task: Boko Haram’s deadly insurgency, which has claimed more than 14,000 lives and displaced more than 1.5 million Nigerians, and the recent halving of the price of oil, which accounts for more than two-thirds of Nigeria’s government income and almost all its export revenues.
Under these burdens, Nigeria’s economy has been sputtering. The currency has fallen sharply, making imports more dear and stoking inflation. The plunge in oil revenues has forced the government to borrow more than it planned.
And a recent back-pay dispute between the government and fuel-distribution companies all but shut down the country. With this daunting task staring him in the face, he noted in his inaugural speech that “no single cause can be identified to explain Nigeria’s poor economic performance over the years than the power situation.
It is a national shame that an economy of 180 million generates only 4,000MW, and distributes even less. Continuous tinkering with the structures of power supply and distribution and close on $20 billion expanded since 1999 have only brought darkness, frustration, misery, and resignation among Nigerians. We will not allow this to go on. “Careful studies are under way during this transition to identify the quickest, safest and most cost-effective way to bring light and relief to Nigerians,” he said.
The International Monetary Fund also noted that fundamentally, Nigeria’s once-breakneck increases in Gross Domestic Product haven’t translated into shared growth: “Unemployment last year was 25.1 per cent, the number of Nigerians living in poverty is not decreasing, and the economic divide between the country’s south and its north — Boko Haram’s killing ground — is deepening. Entrenched corruption has afflicted every corner of the economy, making Nigeria a cellar-dweller in Transparency International’s Corruption Perceptions Index.”
Buhari’s quick reply to the ugly situation is, “We intend to attack the problem frontally through revival of agriculture, solid minerals mining as well as credits to small and medium size businesses to kick – start these enterprises. We shall quickly examine the best way to revive major industries and accelerate the revival and development of our railways, roads and general infrastructure.”
He further noted that the country faces enormous challenges. Saying the immediate concern of his young administration is insecurity, pervasive corruption, the hitherto unending and seemingly impossible fuel and power shortages.
“We are going to tackle them head on. Nigerians will not regret that they have entrusted national responsibility to us.
We must not succumb to hopelessness and defeatism. We can fix our problems,” he stressed. Buhari further assured the wider international community of the readiness of his administration to cooperate and help to combat threats of cross-border terrorism, sea piracy, refugees and boat people, financial crime, cyber crime, climate change, the spread of communicable diseases and other challenges of the 21st century.
Managing Director of Financial Derivatives Limited, Mr. Bismarck Rewane, told Sunday Telegraph that for starters, the new President can dismantle the Nigeria National Petroleum Corporation that he helped set up when he was oil minister in the 1970s.
He said this because the agency has allegedly been the nexus for corruptionand incompetence, draining nearly half the proceeds from crude oil sales before they reach the treasury. Buhari had earlier pledged to follow up on that audit. “Better still would be to sell the company, or end its majority stake in joint ventures,” he said.
He said though the President does seem to be in a hurry to remove the inefficient fuel subsidies, which IMF says cost the treasury almost one per cent of GDP in 2014, “doing so would strike an even stronger blow against graft than his sensible plans to consolidate Nigeria’s corruption- fighting agencies,” he said.
IMF in its report further said that for the President to protect the country from oil price swings, he will have to increase its non-oil revenues by reforming the tax system. It said that one of the less painful ways to do that would be to trim the liberal tax exemptions granted to companies.
“This step alone could raise tax yields by half a per cent of GDP. Yet even assuming greater efficiency (and less corruption and favoritism) in tax collection, Nigeria will have to raise its value-added tax rate, which at 5 per cent is one of the world’s lowest,” it said.
According Political Economist and Head of Lagos Business School, Prof. Pat Utomi, Buhari needs to get through the current fiscal crunch while freeing up money for badly needed investment. He said he would need to impose austerity on a government apparatus known for high running costs and its well-heeled bureaucrats and legislators. “But he should spare aid to sectors that employ the poor (including agriculture) and the striving (small and medium enterprises).
That includes finding more ways to extend them credit and get more Nigerians into the formal banking system, an area where the country lags behind Kenya, South Africa and other African peers.
In particular, to blunt the appeal of Boko Haram, he needs to preserve funds for the poorer northeast, he said. Associate practice leader for sub-Saharan Africa research at Washington-based Frontier Strategy Group, Anna Rosenberg, said: “Many investors intend to accelerate their Nigerian expansion plans in the second half of the year.
However, if Buhari’s government does not follow through on plans to cut spending and to tackle corruption and waste, the low oil price could affect the economy even more severely than it already has.”
Out going Coordinating Minister of the Economy and Minster of Finance, Dr Ngozi Okonjo-Iweala, said last month that the oil slump forced the government to borrow N473 billion ($2.4 billion) in the first four months of the year to cope with a “cashflow crunch.” This year, close to 85 per cent of the budget is swallowed up by official salaries, government running costs and debt payments, leaving little for infrastructure investment.
“If you look at expectation and look at funding, there’s quite a gap,” Olusegun Sotola, a research fellow at the Initiative for Public Policy Analysis, said by phone. “Buhari is going to be running a government without the necessary funding, which is a big problem because expectations are very high.”
Brent crude is down 46 per cent from last year’s peak of $115.71 in June. Lower prices are already hurting the economy. Growth slowed to four per cent in the first quarter compared with 5.9 per cent a quarter earlier, the National Bureau of Statistics said this month. The naira has declined 8 per cent against the dollar this year.
But former President of Association of National Accountants of Nigeria, Dr Samuel Nzekwe, said that the biggest challenge for Buhari is that voters who put him in charge of the country have faith he will deliver no matter the challenges.
“We want him to tackle the issue of insecurity in the northern Nigeria and Nigeria at large,” said Ado Basiru, 49, who runs a cement-making business in Kano. “We want him to bring steady power supply that would help to boost companies and industries that are collapsing.”
A former US Ambassador, John Campbell, toldBloomberg that though Buhari has talked about cleaning up the opaque stateowned NNPC and the military, achieving these in the short-term will not be easy “The trouble with cleaning up corruption is that it takes time, and particularly when the corruption is structural,” said Campbell, now a New York-based senior fellow for Africa Policy Studies at the Council on Foreign Relations.
No comments:
Post a Comment