At least the taxi drivers in Lagos are happy, even if businessmen in Nigeria’s commercial capital are not.
A year after becoming president,
Muhammadu Buhari pulled out of his first official visit to Lagos on
Monday, averting citywide gridlock but angering business leaders who
said the 73-year-old former military ruler is deaf to their plight.
With Africa’s largest economy now
contracting, the foreign exchange market frozen by red tape and a new
Niger Delta insurgency sending crude oil output to a 20-year low, it is a
plight that gets worse by the day.
Yet businessmen say Buhari, who swept to
power in an election a year ago, remains oblivious and continues to
sacrifice short-term growth in pursuit of his long-term dream of
overhauling the way Africa’s most populous nation works.
To many, sending Vice-President Yemi
Osinbajo, a Lagos commercial lawyer, to the meeting in his place –
despite thousands of posters welcoming “the People’s President to No. 1
Africa’s mega city” – was another sign of his disdain.
“It is rather unfortunate that the
federal government would raise the expectations of the people… only to
cancel the presidential visit, seemingly with no obvious cogent reasons
being given,” said Yemi Adeleke, director of World Trade Centre, a trade
and investment agency.
Buhari’s spokesman Garba Shehu said the
president, who is based in the capital, Abuja, was forced to postpone
his visit after being “faced with scheduling difficulties”. Buhari will
visit the port city after the Muslim fasting month of Ramadan which ends
at the start of July, he added.
Foremost among private sector complaints
are foreign exchange curbs initially introduced to protect currency
reserves hammered by the decline in the price of crude oil, but which
are now a pillar of Buhari’s vision of a transformed economy.
In order to keep the naira at 197 to the
dollar, the central bank has scuppered the interbank foreign exchange
market, blocking access to dollars for anybody not armed with a valid
overseas invoice.
Buhari has argued that this is about ending speculation, as well as a decades-long cycle of devaluations that has hit ordinary Nigerians in the form of high inflation and discouraged the investment needed to build a serious domestic factory sector.
Buhari has argued that this is about ending speculation, as well as a decades-long cycle of devaluations that has hit ordinary Nigerians in the form of high inflation and discouraged the investment needed to build a serious domestic factory sector.
“It is extraordinarily frustrating for
those of us in the business community who supported him that he has
chosen to be intransigent about something it seems as if he doesn’t
really understand,” said Timi Soleye, president of CRYO Gas and Power.
Critics, including the International
Monetary Fund, point to a currency trading at almost half its official
value on the black market, fuelling expectations of a devaluation that
are now so widespread that investment has dried up.
This view received support on Friday,
when the National Bureau of Statistics revealed the economy shrank 0.4
per cent in the first quarter, with industry and manufacturing shrinking
5.5 per cent and 7 per cent respectively.
“It is now clear that the adverse effects
of the oil price shock have filtered through to the demand side of the
economy, and we maintain our view that Abuja’s current policy framework
only serves to exacerbate the oil shock,” Cape Town-based NKC African
Economists said.
“The economy might still find itself on a slightly firmer footing towards year-end, but this will largely depend on Abuja abandoning some of its unconventional economic policies.”
“The economy might still find itself on a slightly firmer footing towards year-end, but this will largely depend on Abuja abandoning some of its unconventional economic policies.”
Vice-President Osinbajo hinted at changes
when he called this month for a “substantial” review of foreign
exchange policy, but there are few signs of this filtering down to the
Central Bank of Nigeria, which announces its latest monetary policy
decision Tuesday.
Over the last year, Governor Godwin Emefiele’s speeches have chimed closely with Buhari’s views on the economy and currency, and this month the bank explicitly denied an online media report of an imminent devaluation to 290 to the dollar.
Over the last year, Governor Godwin Emefiele’s speeches have chimed closely with Buhari’s views on the economy and currency, and this month the bank explicitly denied an online media report of an imminent devaluation to 290 to the dollar.
One-month deliverable forwards –
essentially a view on the currency one month out – hit 245 to the dollar
on May 16 after the devaluation report, but have retraced to 224 this
week, reflecting a more sober analysis of the chances of a weaker naira.
All but one of 12 analysts polled by
Reuters this month said the currency would be devalued, with a median
expectation of a 15 per cent weakening – although many were reluctant to
be pinned down on the timing.
Analysts also say Buhari’s actions now closely mirror his behaviour as a military ruler in the early 1980s.
Analysts also say Buhari’s actions now closely mirror his behaviour as a military ruler in the early 1980s.
Besides sending in soldiers with
bullwhips to bring order to chaotic queues at bus-stops, he tried to
stimulate domestic manufacturing by banning imports and rebuffed IMF
pressure to devalue the currency.
Still locked in a military mindset – he came to power in a coup and left via the same route – diplomats say he is unlikely to respond in a conventional manner to public or political criticism.
“Buhari doesn’t do politics. He does command and control,” said one Abuja-based diplomat. “And so far it’s working.”
Still locked in a military mindset – he came to power in a coup and left via the same route – diplomats say he is unlikely to respond in a conventional manner to public or political criticism.
“Buhari doesn’t do politics. He does command and control,” said one Abuja-based diplomat. “And so far it’s working.”
•This report from Reuters was published
before the CBN announced on Tuesday it will introduce a flexible foreign
exchange rate regime
