International Business magazine,
Bloomberg.com
today published an article title "Buhari Bounce Becomes Bust as Nigeria
Policies Irk Investors". The article states that President Buhari's
policies since assuming office
has continued to chase investors away and
has dashed the hopes of many who believed in him when he assumed
office. Read the full text of the article below
"When Muhammadu Buhari clinched victory in Nigeria’s presidential
elections in March, stocks soared as investors looked to the former
military ruler to reverse decades of economic mismanagement and policy
inertia.
Now hopes have fizzled in his ability to turn around
Africa’s largest economy and oil producer.
Money that flowed into stocks and bonds in the West African nation,
which McKinsey & Co. says could become one of the world’s 20 biggest
economies by 2030, is now fleeing as growth prospects diminish along
with oil prices. While Buhari, 72, has prioritized stamping out the
graft that has plagued Nigeria since independence from Britain in 1960,
policy-making appears as uncertain and haphazard as ever.
“After the initial euphoria, people have become disillusioned,” Ayodele
Salami, who oversees about $500 million of African equities as chief
investment officer of London-based Duet Asset Management Ltd., said by
phone. “He would probably say that he’s being deliberative and cautious.
But we expected more.”
Duet’s Africa fund has cut its investments in the country to about 24
percent of the total from 38 percent in the last year.
Buhari waited five months before naming his cabinet, hasn’t proposed a
clear plan to revive growth and backed foreign-exchange controls aimed
at defending the naira. His retention of gasoline subsidies, plans to
raise spending in the face of declining revenue and silence about a $5.2
billion fine levied on mobile-phone operator MTN Group Ltd. have added
to investor unease.
Nigeria’s benchmark stock index has plunged 22 percent since reaching a
year-high on April 2, the day after Buhari was declared the winner of
the presidential race against incumbent Goodluck Jonathan. That’s the
third-worst performance globally in the period, after the bourses in
Ukraine and Egypt. The index advanced 12.5 percent in the two days after
Jonathan conceded.
To be sure, Buhari inherited depleted government coffers and a
bureaucracy that multiple probes have blamed for looting billions of
dollars of oil revenue. The president has said he delayed appointing
ministers because he needed time to vet suitable candidates.
Garba Shehu, a spokesman for Buhari, didn’t immediately respond to
written questions after requesting they be sent that way.
The hiatus has compounded the pain caused by the slide in the price of
crude, which accounts for two-thirds of government revenue and 90
percent of export earnings. Growth, which averaged 6.3 percent annually
over the past decade, is set to slow to a 16-year low of 3.3 percent
this year, according to the median estimate of 15 economists surveyed by
Bloomberg.
Many filling stations ran dry this month as the government withheld fuel
subsidies to suppliers, preventing them from restocking. Lengthening
lines forced Buhari to ask lawmakers for permission to pay 413 billion
naira ($2 billion) in overdue payments, an amount that hadn’t been
budgeted for.
While next year’s budget has yet to be finalized, Buhari wants to raise
spending by 56 percent, according to a person who attended a briefing on
the government’s plans and asked not to be identified because the
matter is private. Vice President Yemi Osinbajo says the government
plans to spend its way out of a slowing economy and that an
infrastructure fund will be created with public and private financing.
The penalty imposed on MTN’s Nigeria unit last month for failing to
register about 5 million subscribers may be an attempt to plug the hole
in government finances, according to Cobus de Hart, an economist at NKC
Independent Economists.
“You cannot deny there might be a fiscal element to the massive fine,”
he said by phone from Paarl, near Cape Town. “It will make investors a
little bit more wary of investing in Nigeria.”
An even bigger concern for many investors is the authorities’ naira
policy. The Central Bank of Nigeria, with Buhari’s backing, has burned
through $4.3 billion of reserves this year and choked off supply of
foreign exchange to banks and their customers to defend the naira, even
as major oil exporters such as Russia and Colombia have let their
currencies slide. The restrictions prompted JPMorgan Chase & Co. to
remove Nigeria from its local-currency emerging-market bond indexes,
tracked by more than $200 billion of funds, in September, triggering a
selloff in the nations’ assets.
While the naira has been all but fixed at about 198 to 199 per dollar
since March, forward prices suggest it will drop by almost one-fifth, to
243.5, in a year.
The number-one issue is the exchange rate,” Andrew Howell, a Citigroup
Inc. frontier markets strategist, said from Lagos. ”Access to foreign
exchange is becoming a widespread problem.”
Nigerian Breweries Plc, the nation’s biggest brewer that’s controlled by
Heineken NV, said it takes two weeks to obtain dollars to pay for its
imports, twice as long as it required a few months ago. Nestle SA’s
Nigerian unit has had to wait six weeks for dollars, according to
Renaissance Capital Ltd. analysts.
Buhari has won plaudits from leaders including President Barack Obama
for his effortsto tackle graft. He replaced the management of the state
oil company, which was accused of withholding billions of dollars from
the government, and has stepped up the fight against an insurgency being
waged by Islamist group Boko Haram.
“The degree of transparency we’re starting to get with the new
administration is hugely positive,” Douglas Rowlings, an analyst at
Moody’s Investors Service, said in an interview in Lagos. “It gives
investors the perception that operating in Nigeria will now be done
following proper procedures.”
Jan Dehn, head of research at Ashmore Group Plc, which oversees almost
$60 billion of emerging market assets, remains unconvinced that Buhari
is up to the job. The fund manager sold all its Nigerian government debt
in the past year.
“So far the Buhari administration has done all the wrong things,” Dehn
said by phone from London. “Not only has he been incredibly slow in
taking any action, when he finally has taken action on the economic
front it’s been diametrically opposed to sensible policy. That is a
major disappointment given expectations prior to his election.”
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