President Muhammadu Buhari can hardly be blamed for all of Nigeria’s woes. He inherited a difficult situation when he was elected a year ago but you have to question how he has responded to the reality of low oil prices.

Pilfering and incompetent politicians have, in large part, accounted for why normal Nigerians haven’t enjoyed the spoils of its vast oil reserves. Around 61 per cent of Nigerians lived on less than a $1 a day in 2010 according to Nigeria’s own statistics agency. The CIA World Factbook put unemployment at nearly 24 per cent in 2011. That’s a problem in any country but particularly in one with such a large, young population looking for a living.

Corruption has hollowed out a lot of Nigeria’s potential for years. Fittingly, it was the country’s information minister who alleged this year that a mere 55 Nigerians have stolen N1.34tn, or about $6.8bn, in eight years. He pointed out that the money could have paid for 635 kilometres of road and a score of other infrastructure assets that the country sorely needs. Two years ago, the country’s central banker was sacked for pointing out that $20bn of oil revenue had simply gone missing. Many Nigerians simply shrug at the scale of the corruption, familiarity breeding a forlorn lack of interest.

In fairness to Buhari, he has acted on his election promise to crack down on corruption, ruffling a lot of feathers with a series of investigations and arrests. Finance Minister Kemi Adeosun turned up 23,000 fake workers on the government payroll. Removing them has saved N2.29bn a month. Another 11,000 have since been found. So one should give credit to the first opposition-led government since elections were resumed in 1999.

Buhari has also delivered on his election pledge to tackle Boko Haram. He certainly can’t claim victory but a joint operation with neighbouring countries has seen the militant group lose much of the territory it held in the north east. The challenge for the government now is to retain those gains. The group continues to kidnap and bomb. Any long-term solution to Boko Haram needs to include stopping the corruption that drives frustrated young men into the group’s hands.

But it’s on the economy where Buhari has made the most missteps. Perhaps he erred too much on the side of caution in putting together his cabinet, which occurred some seven months after his ground-breaking victory last year. He said this was to give time to form a corruption-free team. While this was a noble cause, growth slumped to 2.8 per cent in 2015, far below the level needed to create the jobs and income that the country needs. Much of the slowdown was in the non-oil sector with falling incomes hitting demand. The continued decline in oil prices and the reluctance to adjust an overvalued currency have exacerbated the economic woes.

Buhari’s strong influence is largely to blame for the current gridlock on exchange rate policy, which has had economic implications. After the election and before the cabinet was assembled, the central bank introduced import controls on a number of items in order to stem the decline in foreign currency reserves and help ensure an exchange rate of around N200 to the US dollar. Foreign exchange reserves are currently around $28bn, comfortably above the critical level of three months of import cover, but well below where they should be for an oil exporting country.

While Central Bank Governor Godwin Emefiele has repeatedly said that a devaluation would have a detrimental impact on inflation, the ruinous policy of pegging the naira to the US dollar means the real value of the currency on the streets has collapsed. Unable to get dollars from the central bank, people have had to turn to the black market. This has seen the black market dollar rate hit a record breaking N400 to the dollar. Official inflation spiked to 11.4 per cent in February but is likely to be much higher on the streets since dollars are so scarce. Meanwhile, the import ban is causing manufacturing activity to slow because companies can’t get the dollars they need to buy their input goods, almost all of which are imported.

It’s hard to underestimate how much the central bank’s policies have formed a noose around the neck of the economy. Nigeria was always going to struggle when a decline in the oil price occurred, as oil accounts for about 50 per cent of revenues and more than 95 per cent of foreign income. By Buhari’s own admission, Nigeria “virtually imports everything, from rice to toothpicks”. This is cited as a reason why imports must be restricted but it is exactly the opposite. Nigeria simply does not have the infrastructure to produce enough of the goods it imports. It produces roughly as much electricity as Slovakia, a country with about 168m fewer people.

Buhari has not ruled out a devaluation yet he’s clearly not sold on the benefits, which suggests a continuation of existing policies that will do no favours to the economy. Rising oil prices could provide a respite, but the bottom line is that Nigeria’s economy cannot function properly in the short to medium term with such measures in place. Companies and individuals can muddle through for a time but there’s only so long that they will be able to get by without having to shut down. Every day that the government’s policies persist is another day closer to a disorderly devaluation that would be disastrous.

A hike in interest rates in March marked a return of some degree of conventional monetary policy and more hikes are possible if inflation continues to accelerate. That might put a further dent in growth, but if there’s a silver lining, the shift in monetary policy suggests Buhari is allowing policy makers to get on with their jobs. Less interference from the top would certainly be an encouraging sign, although there are challenges ahead for Buhari after a mixed first year at the helm.


https://next.ft.com/content/63b8b0e8-831a-3e64-a893-91f1dc7895ed

Our problem is that we took buhari to a magician, haba everything we are facing today is not buhari's fault rather the man is trying his best to put things in place. Well individual difference shall.

Of course je should be given at least 3 years b4 i can judge him. In obamas first 3years everyone inderstood he was trying to fix a problem created by bush. Thus..i think we should give buhari 2 to 3 years to fix things. My problem with him is his lopsided appointments....is it fair?? Where is federal xter?? And all those so called northern elders who were crying federal xter during doctor jo.s reigne.

Benikuuse:
Our problem is that we took buhari to a magician, haba everything we are facing today is not buhari's fault rather the man is trying his best to put things in place. Well individual difference shall.