Uphill task for Nigeria's new economic team

Source: - News24, 15/11/2015

Lagos - Nigeria finally has a government after a wait of more than
five months but the new ministers have their work cut out to reverse a
damaging slump in Africa's leading economy.


Falling global oil prices have shrunk government revenues and slowed
growth to a near standstill, while the naira currency is weak,
inflation high and unemployment causing widespread concern.


At the same time, the military is working to end a bloody insurgency
by the radical Islamist Boko Haram group that has devastated the
people and economy of the remote northeast.


"Nigeria has never been this bad," said political commentator Olapade
Agoro, who is also an opposition politician and former presidential
candidate.


All eyes are now on new Finance Minister Kemi Adeosun and her team to
come up with policies to tackle the rot.


But Bismarck Rewane, of the Lagos-based consultancy Financial
Derivatives, said time was of the essence, with investors keen for
clarity about the direction the government will take.


"The thing to do is to hit the ground running because there is no time
for rhetoric," he told AFP.


"The economy is in dire straits. The GDP is low at 2.4%, while
inflation is nearing 10% with weak purchasing power and a falling
naira."


Unemployment is currently at 8.2%, while the oil shock has left
Nigeria - Africa's number one crude producer - short of cash to pay
for government projects and even civil servants' salaries.


"You've got to raise money to deal with fiscal deficits," said
Rewane.


Cash required
Adeosun, a former investment banker, has been credited with turning
round the finances of the cash-strapped southwestern state of Ogun,
yet is untested at national level.


Analysts suggest she will work closely with other key ministers such
as Udo Udoma, in charge of budget and national planning, and Okechukwu
Enelamah at industry, trade and investment.


The appointment of other technocrats has also been welcomed, in
particular former ExxonMobil executive Ibe Kachikwu as junior oil
minister to overhaul the graft-ridden sector.


Babatunde Fashola was put in charge of a "super-ministry" for power,
works and housing after being seen to have performed well in those
areas in Lagos State, which drives Nigeria's economy.
Rotimi Amaechi, the former governor of oil-producing Rivers state, was
named transport minister.


Both are seen as powerful members of the new cabinet.


But they will need ready cash to follow through and are under pressure
to show results quickly, with almost half of President Muhammadu
Buhari's first year in office already over.


Sola Oni, of Lagos-based stockbrokers Sofunix Investment and
Communications, said the government should look to the stock market
for financing.


"The federal government should for once exploit the capital market to
fund the infrastructural deficiency which has become the bane of our
economic growth and development," he said.


Dependency on oil, which supplies 70% of government revenue, should be
cut, and a renewed emphasis put on addressing the country's crippling
power deficit, he added.


Drive growth
The five-month absence of government ministers created uncertainty
among investors in what has been a fast-growing emerging market, with
nearly 7.0 percent annual average growth from 2005-13.


Attention now is on the announcement of next year's budget, which has
to be submitted to parliament by December.


Reports this week suggested Vice President Yemi Osinbajo was proposing
a budget of about eight trillion naira ($40bn) for 2016 - double that
for this year.


Muda Yusuf, director-general of the Lagos Chamber of Commerce, said
with a ministerial team now in place, "there should be coherent,
consistent and positive signals to investors" to drive growth.


The Central Bank of Nigeria, which filled the void in fiscal policy in
the absence of a cabinet, in particular should review its foreign
exchange restrictions policy, he added.


Seeking to conserve dollar reserves, the bank in June ruled that
importers could no longer get hard currency from the interbank market
to import dozens of items, from toothpicks to private jets.


In the past year, reserves have fallen by nearly a quarter as it tried
to prevent the naira from falling in tandem with plummeting crude
prices.


The central bank has twice devalued the currency, taking it from 155
naira to the dollar a year ago to 199 currently.


Adeosun, viewed as a reformist, and her fellow ministers should meet
with the private sector to plot a way forward and also address rising
national debts, he added.


"Debt service burden is becoming increasingly unbearable, especially
domestic debt," he said.