Nigeria’s newly re-elected President Buhari has declared that he will see through his existing policy agenda, but critics fear that failure to change course will lead to economic disaster. David Thomas reports.
Shortly after securing a second four-year term as president of Nigeria by a surprisingly comfortable margin over rival Atiku Abubakar, Muhammadu Buhari gave a victory speech to his supporters in which he promised to intensify the implementation of his contentious policy agenda.
“The new administration will intensify its efforts in security, restructuring the economy and fighting corruption.
“We have laid down the foundation and we are committed to seeing matters to the end,” he said.
For the president’s supporters – 15.2m of whom ushered him back to office on a low turnout of 35.6% – the victory speech represents a welcome endorsement of the unshakeable principles and priorities that Buhari has carried with him since his first term as president in the 1980s.
Yet for critics concerned by stuttering growth, statist and protectionist economic policies, and a lack of policymaking urgency, Buhari’s campaign promise to push things on to the “next level” has prompted fears of further drift.
With Buhari safely ensconced in Aso Rock, his critics are knuckling down for another four years of the economic status quo.
“Essentially he’ll continue what he started.
This is an ideological issue for him and it’s difficult to change his mindset now.
The rhetoric will change, he’ll make some positive noises, but the underlying policies won’t change.
I don’t expect him to become a fan of market-based policies, remove restrictions, or be more business friendly than he has previously been,” says Olu Fasan, visiting fellow in the International Relations Department at the London School of Economics.
In his first term, the president introduced an interventionist policy agenda, defined by strict currency controls, lists of banned import items, and tentative reforms to the unwieldy oil sector.
For his voters, especially the northern poor that comprise his heartland support, this policy agenda, combined with increased spend on local infrastructure, offer evidence to support his “man of the people” image.
But for investors crying out for pro-business reforms and the opening of a stagnant economy, the first term has been a crushing disappointment.
In 2016, the economy entered recession for the first time in over 20 years, as oil prices – a major engine of the country’s growth – slipped to less than $50 per barrel.
While growth has since recovered – the IMF projects real GDP growth of 2% in 2019 – experts say this is not enough to keep up with population growth estimated at 2.6% a year in a country of over 180m.
“It’s important to understand how bad the result happening right now is,” says John Ashbourne, senior emerging markets economist at Capital Economics.
“Growth of 2% to 2.5%, which is the range people are talking about, isn’t so bad for a lot of countries – South Africa would love to have that – but with a country with the demographic changes that Nigeria has, that’s not even treading water.
Keeping that kind of outcome for another four years would be a disaster… a radically different policy framework is needed to change it.”
With a radical policy overhaul neither offered by Buhari nor expected by his critics, investors are again pinning their hopes on a greater role for Yemi Osinbajo, the reputedly reform-minded vice-president who exerted his influence during the president’s illness-induced first term absences.
In the midst of a 2016 currency crisis prompted by an artificially high naira exchange rate, Osinbajo publically questioned government policy by calling for a devaluation that was later ushered in.
But experts doubt whether Osinbajo will be able to pull the trick a second time.
“He’s already playing that role as chairman of the National Economic Council.
“He’s not going to get more power than he currently has constitutionally,” says LSE’s Fasan.
“It’s a question of policy – will he have the influence in shifting or changing Buhari’s mind on policy, does he have the power to say to the president we need one exchange rate or we need to liberalise trade? I don’t think he has the influence.”
As a prominent southerner who helped the president shore up his support in the hostile south, Lagos-born Osinbajo’s usefulness to the president may have diminished now that his second and final term has been secured, according to Ashbourne.
Recent months have seen Osinbajo working on the introduction of a handout scheme to allow the country’s informal traders to buy stock and expand their businesses, and the VP could be further marginalised as factions jostle for ascendency during Buhari’s second term.
With Osibanjo potentially sidelined, analysts are looking to Buhari’s pick for central bank governor for clues to the economic policy agenda.
Current governor Godwin Emefiele, who has been broadly supportive of Buhari’s policy agenda, could stand down in June in line with a one-term tradition followed throughout the democratic era.
While the role may revert to a northerner after southerner Emefiele’s term, analysts expect the pick to have little bearing on the general direction of economic policy.
The bank enjoys formal independence from the government, but the governor rarely acts contrary to the president’s wishes.
Emefiele has seen off occasional political pressure to boost the economy by reducing interest rates, but has generally been seen as an ally of the president and could even land a rare second term.
“There’s a power play after the election, people are trying to put their people in office.
“It won’t change the policy… if you change personalities and you haven’t changed ideology or ideas, its not going to make a difference,” says Fasan.
One area that has the potential to change Nigeria’s economic fortunes for the better is the wholesale reform of the oil sector promised at the beginning of Buhari’s previous term but only patchily delivered so far.
While there has been a broad consolidation of the downstream industry within the government-owned Nigerian National Petroleum Corporation, the long-awaited Petroleum Industry Bill promising an upstream shakeup has not been fully enacted.
Capital Economics estimates that the value of Nigeria’s oil production could plunge by 20% this year in line with price expectations, potentially forcing Buhari to abandon high-profile investment promises.
While majors continue to drill for oil – Total has started production at the Egina oilfield off the coast of Nigeria – the trend for offshore projects suggests that investors are keen to give the country’s overwhelming bureaucracy a wide berth.
“They just invest in an oil platform that sits out at sea.
“It’s administratively within Nigeria but doesn’t actually touch the country at all, and that way you avoid some of these problems,” says Ashbourne.
Unless Buhari radically shakes up his economic policy, oil majors may not be the only investors keeping the country at arm’s length.
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