Buhari, ‘Buharism’ and Fixing Nigeria’s Troubled Economy

Muhammadu Buhari, Nigeria’s future president took care to be photographed beside a Muslim elder and a bishop in a show of religious unity as he watched INEC declare him winner of the presidential polls on TV.

More importantly for investors, over the left shoulder of the purple-robed bishop was a smiling figure in a sharp grey suit: Aliko Dangote, Nigeria's most celebrated business magnate and Africa's richest man.

It is less clear what his victory means for Nigeria's troubled economy, but Dangote's grinning, capitalist presence in the sandal-wearing general's inner circle at his moment of triumph looks reassuring.

As evidence of Buhari’s endorsement, as well as relief that the elections avoided the violence of previous polls – Nigeria’s stock market leapt more than 8 percent, and the naira appreciated against the dollar in the immediate aftermath of his win.

‘Buharism’

This is not to say all is set fair for the 72-year-old, whose last time in office was 20 months as a military dictator in the mid-1980s.

Then, his response to a yawning trade gap and runaway inflation was to fix prices and ban "unnecessary" imports, rather than let the currency depreciate, under a disastrous economic programme dubbed 'Buharism'.

For good measure, he also cut ties with the International Monetary Fund and ordered his soldiers to whip people who failed to form orderly queues at the bus stop.

Inherited Hurdles

Buhari's political views have mellowed since then, and his relationship with Dangote, whose business empire stretches from cement to pasta, suggests his economic ones have gone the same way.

But he faces many dark clouds on the horizon.

Buhari inherits an economy decelerating sharply from the 7 percent annual growth to which it has become accustomed.

Several International rating agencies have downgraded Nigeria’s ratings Abuja's borrowing costs.

Oil price languishes at around $55 a barrel, half its level of a year ago and a massive blow to a country that relies on crude sales for 80 percent of government revenues and 95 percent of foreign exchange.

Outside the capital, huge road-building projects lie deserted and half-finished and cranes stand idle across its skyline, testament to a construction sector pole-axed by the government's difficulty in paying its bills.

Foreign reserves have dropped by a third in the last year to below $30 billion.

Probable Solution

Against such a backdrop, Buhari - now free of the need to get elected - will have few options but to cut Nigeria's cloth to a more appropriate size, analysts say.

"Nigeria has been postponing a really important macro-economic adjustment because of the sensitivity of voters," said Jan Dehn, head of research at Ashmore Group, an emerging markets investment manager. "That's really critical for investors."

In practical terms, that means cutting government spending, hammering the corruption that overshadows every facet of life, and letting the naira find a more stable - and lower - footing to stem the bleeding of central bank dollar reserves.