6 March 2016 – Nigeria’s newly appointed president, Muhammadu Buhari has endured a tough first six months in office as both macro and micro economic changes have meant that Africa’s largest economy is stuck between a rock and a hard place.
“Baba Go Slow” has had to face up to the harsh realities that the global oil market (of which Nigeria derives the majority of its revenues) has seen a 70% reduction of the last 6 months. This has meant that any hope of sustained economic growth has been decimated by such a macro-shock. Buhari has therefore been placed on the back foot from the get-go, and any attempts to bolster the economy have proven futile.
Buhari announced a record 6 trillion Naira ($30-billion, 27 billion-euro) budget promising to triple investment to stimulate growth, but unfortunately this budget proposal was riddle with errors. The errors include the same purchases for computers, vehicles and furniture that are duplicated 24 times, totalling 46.5 billion Naira.
International investors have been somewhat spooked by these blunders which has meant that the Naira has depreciated heavily over the last 3 months resulting in a large disparity between the government exchange rate and the rate on the black market. If Buhari fails to pay heed to this disparity and devalue the Naira, Nigeria could start to see a further increase in inflation which is already reaching unprecedented levels.
“A plate of rice that was sold for 200 naira in December is now 350 naira. Customers are complaining because they don’t get the same ration like before,” street food proprietor Mary Idowu told AFP.
A 50 kilogram (110 pound) bag of rice that used to cost 9,000 naira now costs 13,000, while a bag of beans has gone up from 12,000 naira to 15,000, she said.
“Whenever I try to explain why prices are high, they flare up,” Idowu said about her customers.
Ultimately it will be policy paralysis that exacerbates the current economic quagmire in Nigeria, and so it is up to Buhari and the Nigeria Central Bank to make the right decisions and act on them as soon as possible.
What do you think needs to be done to improve Nigeria’s economic situation?