Nigeria struggles as Buhari wrangles with budget, Naira

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President Muhammadu Buhari

Nigerian President Muhammadu Buhari finally swore in his cabinet in
November, nearly six months after taking office, he hoped to shake off
his nickname “Baba Go Slow”. But troubling errors in the budget of
Africa’s largest economy and the continuing free fall of the naira on
the black market have both Nigerians and investors worried that Buhari
still isn’t moving fast enough to address a deepening economic crisis.

Since its peak in 2014, the global price of oil — which accounted for
two-thirds of the Nigerian government’s revenue — has plunged by 70
percent, decimating economic growth and the naira. In response, Buhari
announced a record 6 trillion-naira ($30-billion, 27 billion-euro)
budget promising to triple investment to stimulate growth.

Yet his budget proposal was pockmarked with mistakes, repetitions and,
given the circumstances, extravagant demands. The errors include the
same purchases for vehicles, computers and furniture that are
duplicated 24 times, totalling 46.5 billion naira.

This opens the door for graft, according to Oluseun Onigbinde,
co-founder of BudgIT, a Nigerian transparency group. “It clearly
showed there was foul play,” said Onigbinde said. “Nigerians are in a
crisis period with the price of oil dipping below 30 dollars, so there
should be a budget in line with the mood of the time,” he added.
Buhari on Monday sacked the director-general of the budget office and
appointed former banker Tijjani Abdullahi to take the helm. Now there
are serious revisions to be made before Buhari can sign off on the
budget and inject Nigeria’s sputtering economy with much-needed cash.
It’s a process likely to take months. “We need more speed on this
thing,” Onigbinde said,

“he (Buhari) should have moved faster when he got into power.” –
Policy paralysis – The budget confusion is yet another deterrent for
investors already reluctant to invest in the country as a result of
Buhari’s monetary policies, which have caused a severe dollar shortage
and the naira to hit unprecedented lows of 340 against the dollar on
the black market. Nigeria has frozen the naira at 197-199 to the
dollar for almost a year in a bid to protect the poor, while the
government has banned a wide range of imports — including toothpicks
and shovels — to conserve foreign exchange reserves.

The policy has been criticised by international investors, who say
pegging the currency and restricting imports is futile and only serves
to suffocate growth. Recent pressure from the International Monetary
Fund to devalue the currency appears to have been rebuffed by Buhari,
who declared last month “I won’t kill the naira” and promised the
country’s economy will “stabilise soon”.

“Investors aren’t confident because there isn’t a clear path
forward,” Rand Merchant Bank Africa analyst Nema Ramkhelawan-Bhana
told AFP. “As long as those budget delays are happening it means that
the central bank is going to have to do the heavy lifting for the
economy,” she said, speaking from Johannesburg. “The worst case
scenario is policy paralysis, particularly what we’ve been seeing with
the central bank and foreign exchange policy.” – Stoking inflation –
Instead of protecting the poor, the policy vacuum is stoking inflation
on the streets of Lagos, Nigeria’s commercial hub, where people bemoan
the price of previously affordable staples. “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 vendor 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. Rising food costs pushed the inflation rate to 9.6 in
January — above the bank’s target range — with no sign the pressure
will ease anytime soon.

“Prices are rising, despite attempts to keep the official Nigerian
naira exchange rate unchanged,” said Standard Chartered Bank economist
Razia Khan. “It is unfortunate that our policy makers are very slow at
responding to critical issues,” said Lagos Business School political
economy professor Pat Utomi. “The government should realise it cannot
continue to defend the naira because it does not have enough reserves
to do so,” he said. “Ultimately, the naira will find its true value
whether we devalue or not.”

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