Nigeria’s
newly appointed president, Muhammad 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.
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