Nigerian leaders have for too long, acted as though the only decisions they had to make concerned who should get what. When Muhammadu Buhari, the newly elected president, announces his ministerial appointments at the end of the month, he should make clear that his government will follow a different course.
He and his colleagues have the power to improve the fortunes of all Nigeria’s people.
Africa’s most populous country faces huge challenges.
Its economy, which is also the continent’s largest, has been battered by external shocks, which have been amplified by its excessive reliance on crude oil revenues.
As oil prices have fallen, several states became unable to pay workers salaries and have had to be bailed out by the federal government.
Unemployment is high, and growth is faltering.
After security, engineering a turnaround is the greatest challenge for the Buhari administration.
In part, the country’s troubles reflect its failure to save up for a rainy day when oil prices were high.
Foreign reserves have been eroded and the country’s currency, the naira, has been devalued twice in the past year.
It also reflects the country’s excessive reliance on volatile natural resources markets.
Yet efforts to diversify Nigeria’s economy are hamstrung by the parlous state of its infrastructure.
Consider the electricity sector, which generates only one-tenth the amount of power produced in South Africa, in a country that has more than three times as many people. Remedying this shortfall provides an opportunity for foreign and domestic investments.
To make this happen quickly and ensure sustainability, much of the emphasis should be on off-grid renewable energy; Morocco provides the model.
The Nigerian central bank has recently taken measures to control the depletion of foreign reserves, imposing strict controls on foreign exchange transactions in order to prevent the currency from falling further.
That has led many in the financial markets to question central bank’s independence; JPMorgan, the US investment bank, removed the country from its Emerging Markets Government Bond Index earlier this month, citing a lack of liquidity in the foreign exchange market.
Yet the central bank must demonstrate that it is independent, not only from the government, but also from vested private sector interests including investors. Although some observers believe that JPMorgan’s action will force foreign investors to sell billions of dollars worth of bond holdings, the extent of the damage may be overstated. (China and India have both sustained years of impressive growth despite never having been listed in JPMorgan’s index.)
Even so, there is no doubt that Buhari believes the state should play a big role in managing the economy. He has so far proved reluctant, for example, to abolish wasteful petroleum subsidies, apparently believing that to do so would hurt the poor. He is wrong about that. The subsidies overwhelmingly benefit the rich and the middle class. Buhari would achieve far more by doing away with them, and targeting the resulting savings at conditional cash transfers to the indigent.
Kingsley Moghalu
Kingsley Moghalu (Former CBN Deputy Governor)
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