Entering second year, Nigeria’s Buhari faces economic turbulence

May 27, 2016 5:18 pm
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But as he enters his second year, the fallout from the nearly two-year slump in global oil prices has left the country facing economic meltdown, as potentially dangerous new security threats emerge/AFP
But as he enters his second year, the fallout from the nearly two-year slump in global oil prices has left the country facing economic meltdown, as potentially dangerous new security threats emerge/AFP

, LAGOS, Nigeria, May 27 – Nigeria’s President Muhammadu Buhari marks one year in office on Sunday, after 12 months dominated by efforts to end the brutal Boko Haram conflict and tackle endemic corruption.

But as he enters his second year, the fallout from the nearly two-year slump in global oil prices has left the country facing economic meltdown, as potentially dangerous new security threats emerge.

Overview
  • Buhari has complained that his predecessor Goodluck Jonathan's administration left the treasury "virtually empty" and that "mind-boggling" sums of public money had been looted for decades.
  • But while he inherited an economy on the skids and can do little about the global price of oil, critics say his failure to name ministers for six months left the government running to catch up.
  • OPEC member Nigeria has lost its status as Africa's leading oil producer to Angola, with production now at 1.4 million barrels per day -- well below the 2.2 million bpd budgeted for this year.

“There is a major challenge to get the economy reactivated, stimulated and boosted,” economist Bismarck Rewane told AFP, while warning it could be at least another year before any measures take effect.

That will likely test the patience of many embattled Nigerians who voted for Buhari on his promise of “change”.

Inflation in Africa’s leading economy is 13.7 percent; growth shrank by 0.36 percent in the first quarter of this year; and the weakened naira has caused a crippling foreign exchange shortage.

Recession is “imminent”, said Central Bank of Nigeria (CBN) governor Godwin Emefiele, who has also indicated that a further devaluation of the naira is on the cards.

Coffers ‘virtually empty’

Buhari has complained that his predecessor Goodluck Jonathan’s administration left the treasury “virtually empty” and that “mind-boggling” sums of public money had been looted for decades.

But while he inherited an economy on the skids and can do little about the global price of oil, critics say his failure to name ministers for six months left the government running to catch up.

Emefiele said proposed financial reforms to tackle the currency crisis would have no immediate effect because of delays in passing the federal budget.

According to Malte Liewerscheidt, senior Africa analyst at risk consultants Verisk Maplecroft, devaluation could spark a “short-term spike in inflation” and even a banking crisis.

“A banking crisis would most probably push Nigeria’s already faltering economy into a full-blown recession,” he said.

“This raises the spectre of an IMF (International Monetary Fund) intervention, which is precisely the kind of scenario Buhari has been so eager to avoid,” he added.

Pipeline attacks

OPEC member Nigeria has lost its status as Africa’s leading oil producer to Angola, with production now at 1.4 million barrels per day — well below the 2.2 million bpd budgeted for this year.

The reduction in oil output has been blamed on attacks on pipelines and facilities by a group calling itself the Niger Delta Avengers, raising fears of a return to the violence that plagued the creeks and swamps in the 2000s.

Dirk Steffen, maritime security director at Denmark-based Risk Intelligence, said Buhari’s handling of the situation will in part determine whether the violence persists.

“The main threat posed by this development at the moment is the severely reduced oil output… which puts further pressure on the financially constrained Buhari government,” said Steffen.

“This may, in the mid-term, create problems for the political stability in Nigeria.”

Corruption

Dozens of prominent opposition figures have been arrested and put on trial over the last year as part of Buhari’s promised crackdown on corruption.

Clement Nwankwo, director of the Policy and Legal Advocacy Centre in Abuja, said Nigerians were generally pleased to see someone finally taking the matter in hand.

But he said there was dissatisfaction at perceived abuses of process, notably among Jonathan’s Peoples Democratic Party (PDP), which has accused him of a political witch-hunt.

“If people are put behind bars because the courts have convicted them, that’s understandable,” he said.

But if people were being arbitrarily held without charge or the backing of the courts, that was a concern, he said.

“That’s the worry.”

Buhari may have curbed the “brazen” flaunting of ill-gotten gains but it remained to be seen if the president could make the fight an enduring legacy and if his zeal is shared more widely, he added.

Advances against Boko Haram

The military counter-insurgency began gathering pace in January 2015 but Buhari can claim some credit for sustaining operations to the point where attacks have decreased significantly.

The Islamists have been pushed out of captured territory and earlier this month, one of the 219 Chibok schoolgirls kidnapped by Boko Haram was also found.

Yan St-Pierre, of the Modern Security Consulting (MOSECON) group, said a military shake-up and improved relations with Nigeria’s neighbours have helped the fight against Boko Haram.

“Things are much more complicated for Boko Haram now and that’s a good thing,” he said.

But Buhari will need to ensure Boko Haram does not “fall back” to positions in neighbouring countries and limit new security threats, with the military already overstretched.

Hardline protests have increased from pro-Biafra separatists in the southeast and there has been an upsurge in attacks by nomadic Fulani herdsmen in central states.

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