eco TV Week

Nigeria: A new mandate with limited leeway

3/22/2019

The presidential election in Nigeria was held on the 23rd and 24th of February. President Buhari has been re-elected amid a difficult macroeconomic backdrop.

Stéphane ALBY

TRANSCRIPT // Nigeria: A new mandate with limited leeway : March 2019

The presidential election in Nigeria was held on the 23rd and 24th of February. The incumbent president Muhammadu Buhari won 56% of the votes against 41% for its main opponent. It was a large victory but it did not cause a wave of enthusiasm like in 2015. The turnout was 36%, ten points less than in the previous election. And the macroeconomic situation remains fragile.

Nigeria still suffers from the oil shock. The economy is no longer in recession since 2017 but the economic growth remains too low. It was estimated at 1.9% in 2018. The IMF revised downwards its forecasts to only 2% this year and 2.2% in 2020. It means that the real GDP per capita will probably continue to contract. And the external climate has deteriorated.

Despite the start of several oil fields, exports will suffer from the downturn in oil prices. It does not seem to be a threat to the stability of external accounts. But the situation of public finances remains fragile. The public debt has growing rapidly since 2014. If the level of debt remains moderate, interest payments are now absorbing more than 20% of the government's revenues, the half of which comes from the oil sector.

To the narrow fiscal leeway is added a fragile banking sector and a high level of inflation, above to 10%. The Central Bank is thus forced to maintain a tight monetary stance.

The re-election of president Buhari raises a number of questions about the authorities' ability to tackle fundamental problems.  The Nigerian economy is constrained by a lack of infrastructure and by a difficult business climate. And, concerning most of these issues, during Buhari's first mandate, the progress was limited.

Another issue remains unsolved. The Nigerian currency adjusts lately to the falling oil prices were made late. And it was not fully implemented. Multiple exchange rates are in place which create major distortions. A consensus seems to emerge about maintaining the status quo of the exchange-rate regime. But a possible replacement of the governor of the Central Bank in May-June could be a game-changer. It could potentially pave the way highly influence.To a broad-change of the government economic policy of the government.

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