A Look Back on President Buhari's First Year

As we approach the end of Nigerian President Buhari's first year in office, sworn in before celebratory crowds looking for change (May 29, 2015), the country will be waiting to hear his list of accomplishments, but better yet his timelines for implementing the vision, which brought him into office. There seems to be two schools of thought on what type of report card his administration should have. Yes, there are critics who primarily complain about changes taking place way to slowly, but there are those that still believe the government is trying to do the right thing and want to give it time to get there. If you are wondering where I fall, well, I fall into the latter category – very much supporting the need to give the government the time it needs to make the sweeping,  deep, and transformative changes that Nigeria needs and Nigerians want.
 
Certainly, with any new government, there are fits and starts, and the Buhari Administration has had its own over the last 12 months, coupled with critical economic difficulties making it hard for the President to fulfill his campaign promises. There have been 2 steps forward and one back on things like confusion over the budget submission; the long wait for ministerial appointments; and, on the economic side, challenges in protecting its currency (the naira) from devaluation. The President strongly believes that devaluation will hurt the poor and help the privileged. Drop in global oil prices have hit the country's reserves hard over the last year, along with its ability to pay its bills, or move forward on social sector improvements, particularly health, education, and job creation. As of May 24, 2016, oil prices were at $USD48 barrels per day, still $10 off the country's 2016 benchmark, and most of the of last year prices fell between $USD27-36. Luckily the new budget's benchmark has oil at $38 per barrel.

That being said here is the good news:
The list below list is not meant to be exhaustive but highlights some of the changes, followed by an analysis of their impact, gaps, and the expectations for Buhari's May 29, 2016 year anniversary remarks.

The Buhari Government has:
-- Committed to strong anti-corruption efforts; asked foreign governments, including the U.S., to help return $150 billion in stolen state wealth in foreign countries;
-- Moved to "zero-basing," of the budget, linking needs and costs, with a focus on  infrastructure development, social needs, manufacturing, and job creation; publicized his personal wealth (good first tone-setting step); and paid civil servants some of their unpaid wages;
-- Made gains against Boko Haram, including more international resources  to combat Boko Haram and returning more than 800 people held captive by Boko Haram and, two young Chibok girls;
-- Appointed new leadership to the problematic National Petroleum Company (NNPC);
-- Worked to carefully vet senior appointments (we will have to see how they all actually do); and
-- Announced the extension of the Niger Delta Amnesty for ex-combatants through 2018.

Looking at some of these key steps, what do they mean for Nigeria's bigger picture, keeping in mind that the President will have his own checklist of achievements and challenges when he makes his upcoming remarks?

Analysis on Steps Taken on Corruption & the Economy:
President Buhari is unshakeable on his quest to end corruption and his national and international reputation on this issue is virtually unmatched. His recent comment  "what I am demanding is the return of assets" checkmated British Prime Minister David Cameron, at his own London anti- corruption conference, following his remarks that "Nigeria and Afghanistan are the most 'fantastically' corrupt countries in the world," especially in light of his father being named in the Panama papers. Not being deterred over the calls for an apology and keeping his eye on ball, gained Buhari further international respect for his steadfastness to get state assets back and stop corruption in Nigeria from "being a way of life." (NB: The World Bank 2015 Ease of Doing Business Report  listed Nigeria 170 out of 189 countries rated for their lack of transparent and friendly business practices).

At home, the Buhari Administration has had to institute some difficult economic policies to protect the naira such as tightening foreign exchange. Some of these steps are linked to his anti-corruption efforts to block ways in which money has been stolen over the years; cash money being was one of the biggest methods by either former government officials or others of removing funds for decades, or through inflated government contracts.

Business & Investments Feeling the Pinch

So I get it. I know many businesses are feeling the pinch, but presumably these restrictions are short term for a few more months as the government fine tunes its checks and balances. As an example, in September of last year, the Buhari Government required all ministries to use their Central Bank of Nigeria (CBN) accounts, called Treasury Single Account for all government monies. Meaning, ministries cannot deposit government funds into commercial banks – a past practice where it is believed substantial state wealth disappeared.  The other positive is that Nigerian companies have to provide the CBN with foreign contract information in order to obtain foreign exchange to pay clients or partners. All of these have been things in Buhari's anti-corruption tool box for both the country and foreign partners.

Further on the economy is the question of the oil subsidy. Efforts to remove it in 2012 caused strikes which left the country paralyzed for more than a week (I was in Nigeria during this period), and strikes are being threatened again as the Administration try this again. Depending on what happens between now and President Buhari's May 29, 2016 anniversary speech, it will be important for him to better explain in order to convince the public to get on board. They are not onboard now, particularly since in his campaign he promised not to do. He may have to balance this decision to go forward with also providing some social sector benefit in return. I say this because the average minimum wage in Nigeria is about $USD90 (or 18,000 at today's official exchange rate), and the fuel subsidy is one of the few things on which the average Nigerian worker has been able to depend. This doesn't begin to address the impact it will have on those already at the poverty level where the average daily is about $1.25 per day, or for those unemployed -- as today's unemployment rate hovers 7.6 percent. That being said, the fuel subsidy is not financially sustainable for the country so educating the public, along with some out-of-the-box thinking on other types of affordable social sector assistance might help.

Buhari's willingness to provide some "bailout funding" to ease the 6 month burden of unpaid civil servants wages was the right gesture. But the government does not having the resources to do more. The good will garnered on that is being tested daily as economic condition to toughen for workers.  

For a country which has Sub-Saharan Africa's (SSAfrica) largest population (estimated at 178 million) and its largest economy (Nigeria rebased in 2014), these are tough times for a country struggling to get its financial footing back, and keep investors engaged. We will look to President's Buhari speech in outlining his vision of the way forward on corruption issues, the economy, federal salaries, and jobs.

Boko Haram Military Campaign, The Internally Displaced:
In additions to actions on corruption and the economy, Nigeria's counterterrorism and military campaign against Boko Haram has had some gains over the last 8 months. The Nigerian military has retaken much of the territory that Boko Haram controlled and terrorized for more than two years. It is considered the most deadliest terrorist group in the world, overtaking the Islamic State. Nearly 800 civilians, who had been held captive by the group, have been either freed or found by the military. President Buhari also has used his international goodwill to further secure resources, and assistance from international partners such as the U.S. ( $250 million, through a variety of program); the United Kingdom (57 million); France, (with a pledge to provide, intelligence and training announced by President Holland in his May 2016 Nigeria visit); and, China, which rarely gets involved in these issues, saying it would  assist in finding the Chibok girls.

Equally, and emotionally more important to the families, to the country and to all who cared and worried about the 276 Chibok girls for two years, the return of two of them in May, gave hope that many more might be found or released. Certainly these changes and events are positive, but the threat by Boko Haram is far from being over. Boko Haram, as noted by the Department of State and the Global Terrorism Index, is one of the world's deadliest terrorist groups in the world. Furthermore the other issue that I stress from a national security perspective is that Boko Haram has "weaponized" more young girlsand women than any other global terrorist group. On internally displaced person's (IDP's), the number and needs are staggering, even though the Buhari Administration has provided funding to assist them, it falls well short (because the resources are not there) of the total monetary needs required to assist the 2.8 million IDP's.

Going forward over the next 12 months, the Nigerian people, the families of the Chibok girls, and the IDP's in the north are going to want to hear in Buhari's speech what else is planned for the immediate future not only to improve the response to the IDP crisis; but what it plans to do to step-up its efforts to find the remaining Chibok girls, along with its continued military efforts to contain and combat Boko Haram.

A FEEEDS Series Blog Post

 

Nigeria's President Buhari: Not On Anyone’s 100 Day Clock – A Look at His Current Economic & Anti-Corruption Efforts

This two-part FEEEDS Blog Series on Nigerian President Buhari’s time in office (on the eve of his UN visit) provides an analysis of his game plans (Buhari Doctrine); how they are working thus far, and what we might expect as his administration tries to address issues surrounding both the country's economic and security environments.

We start with, Part One, examining the positives and challenges in the economic-investment sectors for a country which boast having Sub-Saharan Africa's (SSAfrica) largest population (178 million) and economy (Nigeria rebased in 2014), although it is struggling to get its financial footing back, and keep investors engaged. Here is today's environment:

-- Key source of revenue and foreign reserves – from the oil sector – has been hit by massive drops in world oil prices;

-- Unemployment remains high (hovering around 7.6 percent) in the 15-34 median age range, where youth and female populations clock-in at around 60 million and 80 million respectively;

-- Devaluation pressures remain high on the country's currency (naira); raising cost for the private sector and daily living needs.

Despite these economic struggles, Nigeria is still considered a go-to frontier capital market; and, remains one of the most important investment destinations in SSAfrica along with Kenya, South Africa, and Ethiopia. It is important to keep in mind that most – not all – of the current economic challenges pre-date the May 29 inauguration. However, that being said, it is now Buhari's Administration's responsibility to both address and resolve.

A Closer Look - Current Business & Investment Environment:

The private sector from China, United States, India, Brazil, and Europe still see Nigeria as a premier investment destination. What makes Nigeria attractive for these foreign businesses? Answer…return on investment (ROI).  The average ROI, (despite risks noted below), can average 28-36 percent -- matched with Nigeria's largely untapped consumer market for good and services. There are specific sectors which provide the greatest returns and/or are growth areas for goods and services. There are seven sectors (not in priority order), from FEEEDS' perspectives that are the most notable for foreign investors:

1.) Power – Nigeria partially-privatized its power sector (generation and distribution) in 2013, giving foreign investors an opening. With this, other attendant opportunities were also created for soft and hardware, and skills transfer (i.e. equipment, metering, asset management, and technical assistance). Nigeria barely produces 2-3 thousand megawatts per day. While, daily power needs are estimated at 40-50 thousand megawatts for consistency in service delivery. Although potential ROI is great, so are risks around poor transmission to the national grid, heavy debt service on acquired national assets, lack of technical production capability, and concern over timely  payments.

2.) Information Communication and Technology (ICT) - Nigeria has the largest number of mobile phone users in SSAfrica with 100 million out of 650. Any ICT investor focused on innovative mobile services, and smartphone hardware, can take advantage of Nigeria’s market. Smartphone penetration is only 27 per cent, as most Nigerians still primarily have feature phones.

3.) Natural Gas – Nigeria has roughly 180 trillion cubic tons of untapped natural gas – making it one of the largest in the world.  This nascent sector remains ripe for services, infrastructure, and developing  gas fields.

4.) Agriculture – About 70 per cent of Nigeria's population lives and works in this sector. It remains underserved as it lacks infrastructure, modernization, insufficient commodity production or food processing, and poor rural-to-urban transportation services. All of these sub areas are good investments; high ROI will be a bit delayed given how far behind the sector lags. But if you are playing the long game this is where to be.

5.) Manufacturing - Nigeria has the odd triangulation of a low manufacturing base, large population, and a growing middle class consumer market all at once. Thus, manufacturing of any product (non-edible or edible) will have ready-made customers.

6.) Extractive industries – Extraction of fossil fuels (petroleum) remains Nigeria’s main export resource, despite low world oil prices. Nigeria also has a wealth of other natural minerals from iron ore (200 million tons of proven reserves), coltan (key for cellphone and appliance manufacturing) gold, silver, zinc, etc.

7.) Housing – There is a 17 million affordable  housing deficit. Meaning if you are poor or unemployed you either do not have adequate housing or housing at all. Although, the sector is ripe for investment, the government will need to move forward with frameworks that provide some form of sovereign guarantees. This will help spur construction financing and mortgage guarantees – two key impediments, thus far, affecting building starts. Nigeria’s new (2013) Mortgage Refinance Corporation, NMRC, also needs these two issues addressed so it can begin to support projects meeting its mission. To date, NMRC has not had a case/project it can approve.

Doing Business in Nigeria – What You Should Know?
Despite the opportunities and high potential for ROI, what are the basics you should know, particularly regarding ease of doing business, and the lack of consistent (and by some accounts unclear and unfriendly) monetary policies. Recently the World Bank 2015 Ease of Doing Business Report  rated Nigeria low, 170 out of 189 countries reviewed on their transparent and friendly business practices. In 2014 Nigeria was ranked 175, so it has improved a bit. Nigeria’s Central Bank (CBN), in its efforts to support the country’s floundering currency -- the naira, under devaluation pressure -- has made it increasingly difficult for both foreign and Nigerian businesses to do transactions in convertible currencies such as dollars or euros. That being said, the positives on this action are: Nigerian companies have to provide the CBN with foreign company business information and contract payment amounts in order to obtain foreign exchange to pay partners or clients. This is an important transparency element in the anti-corruption tool box for both the country and foreign partners.

Buhari required by September 15, all ministries use their CBN accounts, called Treasury Single Account, for all government monies. Meaning, ministries cannot deposit government funds into commercial banks – a past practice where it is believed substantial state wealth disappeared. Ministries’ compliance thus far has been good.

Always in Nigeria there is a flip side. The Nigerian commercial banks, previously holding these funds now have to scramble to find new business to counter huge losses resulting from these transfers. Banks already have started to lay off employees adding to the 7.5 per cent unemployment rate. Most affected will be bank workers in the mid-ranks in their prime wage earning years (25-35).

On the federal budget, reports are Nigeria will move to a clean-slate 2016 "zero-basing," linking needs and costs, and that Buhari's "look ahead" focus will be on infrastructure development, social needs, manufacturing, and job creation.

President Buhari’s  Anti-Corruption Efforts; Economic Team:
FEEEDS also gives Buhari high marks for his unwavering commitment to address endemic corruption. In addition to his above actions, he has publicized his personal wealth (good first tone-setting step); appointed new leadership to the problematic National Petroleum Company (NNPC); worked to carefully vet senior appointments; and, asked foreign governments, including the U.S. to help return $150 billion in stolen state wealth. He is famously known for saying “I belong to everyone; I belong to no one,” underscoring his intolerance for the two forces of evil behind stolen state wealth – corruption and influence peddling.*

For sure Buhari inherited nearly empty national coffers, a struggling currency, coupled with ever-declining world oil prices. However, he is being very systematic and thorough in the formulation of his new government.  This includes deciding who his economic team will be and how they will address current economic issues. We will have to wait for finance minister appointment, and what the full economic vision might be. There is a little ankle biting that he is going too slow ("Baba Go-Slow" or Father Goes Slow, nicknamed by some) to appoint ministers. We also have an additional underlying theory: he may not want to have to negotiate with ministers on vision and direction, putting everything in place first, and then handing them his game plan.

Either way, FEEEDS gives him high credit for taking his time. As deep as the two evils of corruption and influence peddling run, it is prudent to carefully vet. Buhari never put himself on the artificial, but politically-expected “first 100 days” clock. Okay, 8-9 months from now, we might take a different view. Let’s get good, unencumbered folks (from past or present questionable deeds) on board, and go from there.   

Buhari said he would be "steady" in truly setting the tone for a new, reborn Nigeria to achieve its full economic, investment, development, democracy-leadership roles, so given what he inherited, let's give him more time to get there.

Part Two will focus on Current Political-Security Positives & Challenges

*From Buhari's Inaugural speech
A FEEEDS Blog Spot