Buhari Euphoria Fades One Month in as Investors await Direction

Nigerian President Muhammadu Buhari, who was sworn-in amid hopes of unleashing the country’s economic potential is marking his one month in office with little economic policy direction and infighting among party members.

 

Lawmakers on Thursday engaged in fisticuffs in parliament, during attempts to fill principal leadership positions in both chambers of the Nigerian legislature, with the Senate announcing an adjournment till 21 July.

With the recent setback, it means the president’s ministerial list may be delayed for another four weeks, pushing back movement on vital power, oil and gas, agriculture and tax reforms.

“The elections have derisked Nigeria and there was initially a lot of excitement from Private Equity players and other investors,” said Femi Olaloku, executive director, treasury, at tier –one lender UBA.

“People want to know the direction of government so they can participate.”

The delays characterise a month in which the initial euphoria that greeted Buhari’s election into office has steadily faded as the reality of governing a diverse nation of 170 million people and an economy reeling from a slump in oil prices dawned.

Nigeria’s benchmark NSE All Share Index which hit a five month high of 35,728 points on April 02 (the first trading day after presidential elections) has since given up 7.8 percent of its gains to close at 33,121.65 on Thursday.

Buhari, 73, emerged as president against most odds, three months ago, when his All Progressives Congress (APC) party won an election that became the first transfer of power to an opposition party from a ruling party in Nigeria’s 55-year history since gaining independence from the British.

After the elections, Africa focused Investment Bank Renaissance Capital, said “a Buhari win implies reformist policies,” while Jim O’Neill, former chairman of Goldman Sachs Asset Management, said former President Goodluck Jonathan’s loss would be viewed “positively” by foreign investors.

BusinessDay findings however show that a lot of investors are restraining from investments, pending when Buhari announces ministers or unveils a clear blueprint.

Ede Dafinone, chief executive officer, Sapele Integrated Industries Limited, recently told BusinessDay that he spoke with an ambassador from one of the European countries who plainly told him that a team of investors from his country said they were awaiting Buhari’s ministers.

Between May 29 and today, this restraint has persisted, as investors seem uncertain on whether the policies of the previous administration as contained in the National Industrial Revolution Plan, would be retained or jettisoned.

“I would not say that Buhari is slow, but one would have expected him to have unveiled his agenda to know the direction the economy will be moving,” said Muda Yusuf, director-general, Lagos Chamber of Commerce and Industry ,in a telephone chat.

As Nigeria reels under crude oil shocks, the mantra is economic diversification and non-oil exports. But non-oil exporters have no incentive as obtains in China, Brazil and other countries.

The only incentive meant to drive non-oil exports, called Export Expansion Grant, has been removed and exporters believe only a settled-down government can restore this incentive to help shore up foreign reserves.

Meanwhile, power is available to industrial zones for a maximum of only four hours in a day.

“Cost of power is enormous and could lead to massive shake-ups in existing factories,” said Frank Udemba Jacobs, president, Manufacturers Association of Nigeria (MAN), in an interview in Lagos, adding that manufacturers spend N73.12 million on alternative power monthly on the average, while 40 percent of production costs also go in the same direction.

“This could hinder potential investment in the sector, as majority of manufacturing companies are under SME category,” Jacobs said. 

Many Nigerian corporates have announced a slashing of their FY15E Capital expenditure (Capex) plans with Flour Mills, a blue chip consumer goods firm, planning to halve its Capex.

Growth in the first quarter of 2015, slowed to about 4 percent, on an annual basis, compared with 5.9 percent a quarter earlier, as the oil sector shrunk by 8.2 percent, the Nigerian Bureau of Statistics said.

The ongoing dollar shortage and lack of clarity on fuel subsidy payments have also constrained manufacturers and the business outlook.

“A guide on policy direction and the appointment of ministers are overdue. It is a “wait and see” approach by investors presently, as uncertainty trails the economy and financial markets,” Kayode Omosebi Team Member, Research, at United Capital Plc, said.