SINCE the emergence of President Muhammadu Buhari on May 29, to the imminent 100 days in office, no doubts, the financial system’s landscape has taken clear shots — good or bad. And three things have been outstanding for the sector.
First, the announcement of the results and peaceful conceding of power by the immediate past President, Dr. Goodluck Jonathan, sent positive sentiments to the global business community in two ways — that the continuity of the country is assured as opposed to speculated “doom”; and that the endemic corruption in the system would be tamed.
The first economic segment to get the message was the interbank foreign exchange market, especially, the parallel market (black market), as the naira instantly appreciated to record N185/$ notwithstanding the devalued rate of N199/$, on anticipation of improved transparency in the process. Unfortunately, it wasn’t long before the market dynamics overturned the gains, but generally, the system has not been as usual.
The second is the heightened tension over the lack of economic blueprint or assessed tacit economic direction, which is manifest in the delay in constituting a cabinet for the government, including some strategic appointments that have raised controversy over their legality.
Stakeholders and experts in the financial system have associated uncertainty to the development and alleged that investments both foreign and domestic worth billions of dollars are on the sideline, as investors are still playing cautious game, especially in the financial markets.
Perhaps, more intriguing, as it remains mostly untested since its emergence is the Treasury Single Account (TSA), with its avalanche of expected benefits to the economy against anticipated implementation hitches, together with legal challenges that might emerge.
Already, the market capitalisation of the Nigerian Stock Exchange (NSE) has plunged by N353 billion since Buhari’s inauguration, as investors continue to react to the absence of a policy direction.
To be fair, President Buhari’s performance in his first 100 days are more apparent in two keys areas, anti-corruption and war against insurgents in the North-East, where he seems to have taken personal charge. The economy on the other hand has received little of the President’s attention hence the need for him to urgently constitute an Economic Management Team to steer the Nigerian economy away from an imminent slowdown.
Currently, the report of the National Bureau of Statistics (NBS) indicated that in the second quarter of 2015, Nigeria’s Gross Domestic Product (GDP) grew by 2.35 per cent (year-on-year) in real terms.
This is lower by 1.61 per cent points from the growth recorded in the preceding quarter and also lower by 4.19 per cent points from growth recorded in the corresponding quarter of 2014. For the oil sector, oil production stood at 2.05 million barrels per day; 5.9 per cent lower than production in Q1 of 2015.
Oil production was also lower relative to the corresponding quarter in 2014 by 7.3 per cent when output was recorded at 2.21mbpd. For the non-oil sector, growth was largely driven by the activities of trade, crop production, construction and telecommunications. The non-oil sector grew by 3.46 per cent in real terms in Q2 of 2015.
This was 2.13 per cent points lower from Q1 of 2015 and 3.26 per cent points lower from the corresponding quarter in 2014. The statistics for July and August are not yet out, but may likely maintain the status quo and portray an economy that is no longer growing at the previous high levels.
The Head of Research at Afrinvest Securities Limited, Ayodeji Eboh, said Buhari’s victory at the 2015 polls amid groundswell optimism was made possible by a combination of factors- the right-wing socialist campaign promises; the integrity perception about him; and an oft-repeated anti-corruption campaign mantra, as well as widespread public disaffection against the previous administration.
Eboh noted that although several policy documents were released, the bulk of the promises fall under three categories — security of lives and properties; economic prosperity and job creation; and fight against corruption.
Winning has, however, been the easy part, as the administration’s performance across the three highlighted areas may have fallen short of the high public expectations.
The administration’s anti-corruption drive has largely been piecemeal with no clear strategy mapped out, while no major milestone is yet to be recorded in terms of assets recovery or prosecution of alleged corrupt political office holders. “However, some major structural and institutional actions to deepen transparency have been taken.
The directives to Ministries, Departments and Agencies on TSA implementation and restructuring efforts being taken to reposition the Nigerian National Petroleum Corporation as a more transparent and accountable profit-driven corporation are major highlights of these institutional efforts. “The recent composition of an anti-corruption advisory team may be a signal of things to come, but we would advocate for more institutional reforms with long-term benefits in government transparency and accountability, including the judiciary reforms.”
He pointed out that the investment community is yet to gain certainty on the economic policy framework of the Buhari administration, as reforms have been stalled by the absence of cabinet ministers needed to formulate, articulate and manage them.
For the Abuja-based development consultant and Executive Director of OJA Development Consult, Jide Ojo, assessing the government in this short period evokes mixed feelings, although the President may have recorded some progress in some areas, he’s yet to take off in many other areas of governance.
According to him, although the change of leadership of some Federal Government’s key and economic agencies like the Nigerian Maritime Administration and Safety Agency, Nigerian Ports Authority, Nigerian National Petroleum Corporation, Asset Management Corporation of Nigeria is not unexpected, it is commendable.
The Department of Petroleum Resources tough stance on oil retailers has led to the sales of petroleum at the official price of N87 in most of the fuel stations where it was sold above the approved price. “The fight against corruption is also yielding positive results as the President is canvassing and receiving diplomatic support around the world.
The TSA order is also a positive step, as it will ensure greater probity, transparency and accountability in the collection, disbursement and utilisation of national funds. “The President’s approval of the United Nation’s Environmental Programme on Ogoniland presents a lot of economic value as it will help boost economic activities in the affected communities when the remediation programmes must have been concluded,” he said.
Ojo however noted that the president would have achieved more in the first 100 days if he had appointed his aides and lieutenants. “Belatedly, he just appointed his Chief of Staff, Secretary to the Federal Government. Still, his cabinet is yet to come.
This is a big minus for the administration. The uncertainty over economic blueprint is affecting quests for foreign direct investments,” he said.
The Lead Director of Centre for Social Justice, Eze Onyekpere, said given the state of the economy inherited by the new administration and 100 days measurement, it is a difficult task to assess economic performance of the government, which in “simple term, is still studying what it took over from the previous government.”
According to him, the government has failed to make any major policy pronouncements since assumption of office and at best, being run with the policies of the previous administration. “There seems to be a policy vacuum, which has created some level of uncertainty about the economic policy direction of the new government. This has made planning and projections very difficult for economic actors in all spheres of national life,” he said.
To him, the difficulty in assessment is also accentuated by the declining oil prices- being the mainstay of the economy as the major foreign exchange earner and source of revenue to the three tiers of government.
But how will the economy grow or employment improve when government has not invested in capital projects contained in the 2015 Appropriation Act, while the operating environment for the private sector is filled with strong headwinds? “It is on record that not a single kobo has been released for capital projects in the year 2015.
What is not clear is whether the non-release of funds is due to the paucity of funds or operational reasons associated with the change of government,” he said.
The fiscal governance activist, however, applauded the appointment of Babatunde Fowler as the new chairperson of the Federal Inland Revenue Services, saying it is a step in the right direction, considering his sterling performance that raised internally generated revenue of Lagos State from less than N4 billion monthly to about N23 billion monthly. “In all these developments, what is clear is that President Buhari-led administration needs to unfold its economic policy direction now and as a matter of urgency, to give policy direction to economic actors,” he added.
The Managing Director and Chief Executive Officer of Cowry Asset Management Limited, Johnson Chukwu, noted that President Buhari’s economic performance in his first 100 days in office, might not be completely accurate to use the uptick in unemployment by 69 per cent and drop in GDP growth rate to 2.35 per cent in the second quarter of 2015 as published by the National Bureau of Statistics.
According to him, he was only in the office for one of the three months that make up the quarter and the second quarter was a period of near hiatus in governance at the federal level, with a defeated party presiding over affairs for two months and the new government trying to settle in the remaining month.
In terms of policy decisions/pronouncements, the absence of an Executive Council has meant that there have been few categorical statements on key policy areas such as the economy, health, education, agriculture.
This dearth of policy direction has naturally led to withholding of investment decisions by both local and foreign investors, which will in turn lead to further slowdown in economic growth. “To be fair, President Buhari’s performance in his first 100 days are more apparent in two keys areas, anti-corruption and war against insurgents in the North-East, where he seems to have taken personal charge.
The economy on the other hand has received little of the President’s attention hence the need for him to urgently constitute an Economic Management Team to steer the Nigerian economy away from an imminent slowdown.
This is more so in view of the current upheaval in the global economic space due to a slowdown in China’s economic growth and the attendant crash in commodity prices with crude oil- Nigeria’s main export commodity, dropping below $40 per barrel,” he said.