Buhari’s Policies Destroying Nigeria’s Economy And Scaring Investors – Bloomberg (DETAILS)
Nigerian former Gen. Muhammadu Buhari speaks moments after he was presented with a certificate to show he won the election in Abuja, Nigeria, Wednesday, April 1, 2015. | AP/Sunday Alamba
When Muhammadu Buhari clinched victory in Nigeria’s presidential elections in March, stocks soared as investors looked to the former military ruler to reverse decades of economic mismanagement and policy inertia. Now hopes have fizzled in his ability to turn around Africa’s largest economy and oil producer.
Money that flowed into stocks and bonds in the West African nation, which McKinsey & Co. says could become one of the world’s 20 biggest economies by 2030, is now fleeing as growth prospects diminish along with oil prices. While Buhari, 72, has prioritized stamping out the graft that has plagued Nigeria since independence from Britain in 1960, policy-making appears as uncertain and haphazard as ever.
“After the initial euphoria, people have become disillusioned,” Ayodele Salami, who oversees about $500 million of African equities as chief investment officer of London-based Duet Asset Management Ltd., said by phone. “He would probably say that he’s being deliberative and cautious. But we expected more.” Duet’s Africa fund has cut its investments in the country to about 24 percent of the total from 38 percent in the last year.
Buhari waited five months before naming his cabinet, hasn’t proposed a clear plan to revive growth and backed foreign-exchange controls aimed at defending the naira. His retention of gasoline subsidies, plans to raise spending in the face of declining revenue and silence about a $5.2 billion fine levied on mobile-phone operator MTN Group Ltd. have added to investor unease.
Nigeria’s benchmark stock index has plunged 22 percent since reaching a year-high on April 2, the day after Buhari was declared the winner of the presidential race against incumbent Goodluck Jonathan. That’s the third-worst performance globally in the period, after the bourses in Ukraine and Egypt. The index advanced 12.5 percent in the two days after Jonathan conceded.
To be sure, Buhari inherited depleted government coffers and a bureaucracy that multiple probes have blamed for looting billions of dollars of oil revenue. The president has said he delayed appointing ministers because he needed time to vet suitable candidates.
Garba Shehu, a spokesman for Buhari, didn’t immediately respond to written questions after requesting they be sent that way.
The hiatus has compounded the pain caused by the slide in the price of crude, which accounts for two-thirds of government revenue and 90 percent of export earnings. Growth, which averaged 6.3 percent annually over the past decade, is set to slow to a 16-year low of 3.3 percent this year, according to the median estimate of 15 economists surveyed by Bloomberg.
Many filling stations ran dry this month as the government withheld fuel subsidies to suppliers, preventing them from restocking. Lengthening lines forced Buhari to ask lawmakers for permission to pay 413 billion naira ($2 billion) in overdue payments, an amount that hadn’t been budgeted for.
While next year’s budget has yet to be finalized, Buhari wants to raise spending by 56 percent, according to a person who attended a briefing on the government’s plans and asked not to be identified because the matter is private. Vice President Yemi Osinbajo says the government plans to spend its way out of a slowing economy and that an infrastructure fund will be created with public and private financing.