When Nigeria’s President, Major General Muhammadu Buhari (retd), defeated the incumbent President Goodluck Jonathan in February 2015, investors were upbeat. The peaceful handover of power from Jonathan to Buhari brought back investor confidence that was lost before the election due to apprehension.
In response, Nigerian stocks gained most in the world, with the yield on a $500 million Eurobond offered by the country falling to the lowest level since December 2014 due to a growing confidence. A falling yield on a bond means that investor confidence in an economy is rising, but the reverse is the case for a rising bond yield.
On April 1, 2015, the stock market all share index rose by 8.4 per cent and the naira firmed at N217/$ in the parallel market, gaining 0.46 per cent. The nation’s currency remained stable at N197/$ at the interbank market since February.
Consequently, Renaissance Capital remarked that “a Buhari win implies reformist policies,” noting that it would be positive for investors.However, soon after Buhari was sworn in, his boom turned to bust as all the market indices began to tumble. By August 2015, the stock market had lost N2.5 trillion due to what the Lagos Chamber of Commerce and Industry, LCCI, described as “lack of policy clarity and economic direction.”
Investors became jittery
Six months after Buhari came to power, he moved from one government ministry to another, assuring them of his vision and mission for the country. Ordinarily, according to market analyst, Ike Ibeabuchi, there was nothing wrong with the move. “But while he dilly-dallied, the economy began to wane and he had to pay a heavy price for that for that.”Critical ministerial appointments were ignored, which turned out to be his Achilles heel. Investors soon started demanding an economic direction.
“Council urged the Buhari administration to make a clear pronouncement with respect to its fiscal policy, foreign exchange policy, tax policy, subsidy policy, trade policy, reform of oil and gas sector (upstream and downstream), the power sector, the 2015 budget, the auto policy, sectoral policies, etc. All these are necessary for investors to have a clear insight into the policy direction of the government and take strategic investment decisions,” the LCCI said in its statement released in August 2015, three months after Buhari’s swearing-in.
The delay began to have impact on the currency.
In response, the LCCI said, “Council, therefore, calls for a more strategic framework for the management of the foreign exchange market. Council urged the President of the Federal Republic of Nigeria to quickly set up an economic team that will interface with the CBN, the organised private sector and the key economic ministries to come up with a sustainable model for the management of the foreign exchange market.”
Investors told our reporters by August 2015 that they were awaiting Buhari’s ministers.
Recession came
While Nigeria burnt, Buhari fiddled. The urgency needed by the economy was not matched by Buhari’s responses, according to analysts.Unemployment rises by 437%
As at the fourth quarter of 2014, Nigeria’s unemployment rate was 6.2 per cent, according to data by the National Bureau of Statistics, NBS. As at the fourth quarter of 2021, the NBS disclosed that the joblessness rate in the economy had risen to 33.3 per cent, making it one of the worst in the world and signifying a 437 per cent increase over the seven-year period.
“Unemployment will continue to rise as school leavers join an economy that is weak at creating jobs,” said Augusto & Co., which had predicted that the unemployment rate would hit 35 per cent in 2021.
Naira weakens by 181%
The exchange rate management system is, perhaps, the area that has attracted most criticism to Buhari and the Central Bank of Nigeria, CBN. As at May 2015, Naira exchange for dollar at N197/$ at the interbank market and N217/$ at the parallel market. On Friday, May 26, 2022, Naira-to-dollar exchange rate was N415.72 at the Importers and Exporters Window and nearly N610 at the parallel market.
By implication, dollar has weakened by 111 per cent in the official market and 181 per cent in the parallel market since Buhari came to power. Analysts generally blame the CBN for its focus on demand management rather than on the supply side which deals with foreign exchange earnings.
The Chief Executive Officer of Centre for the Promotion of the Private Enterprise, Dr Muda Yusuf, said in one of his statements that, “The CBN has not allowed the market to determine the market rate; it needs to give the market a chance. Its current approach would continue to deepen distortions in the economy, perpetuate round-tripping, fuel speculation, suppress forex supply and boost underground economy.”He noted that what was happening in the foreign exchange market was a result of the CBN policy choice of a fixed exchange rate regime and administrative allocation of forex, which should not happen.
He further said that suppressing the market was like swimming against the tide, adding that moving retail forex transactions from BDCs to the banks was like kicking the can down the road.The same issues would manifest even with the banks. Managing a subsidy regime is typically a herculean task. We have seen this happen with fertiliser subsidy and petrol subsidy. The story cannot be different with foreign exchange.”
Subsidy rises by N3.9trn
As at 2015 when Buhari came to power, petrol subsidy had been pruned to N100 billion. In the 2022 budget, Buhari proposed N4 trillion to the National Assembly in a subsidy regime that has been described as fraudulent and opaque. Oil theft has also worsened as the country loses N30 to N60 trillion annually, according to a 2022 research supported by Shell.
The President of MAN, Mansur Ahmed, told Sunday PUNCH that petrol subsidy was a yoke on the Nigerian economy, arguing that placing much importance on petrol over issues of health and infrastructure was misdirected.
“We believe that subsidy is a yoke on our economy. First of all, the social sector is critical. Maybe people feel that fuel is so important, but if you compare it with health, education and security, you will notice it is nowhere near them,” he said
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