A burst of reform will help Africa’s most populous nation to fly again
A seasoned economist in Ghana likens his country to a plane perpetually trundling down the runway, never quite taking off. Extend the metaphor along the coast, and Nigeria’s economy, the largest in Africa in dollar terms before the collapse in world oil prices, has been grounded.
In the throes of its first recession in 25 years, inflation is soaring, factories closing and the fabled middle class has been retreating to the place from which it only recently re-emerged. Nigerians were quick therefore to spot the symbolism in this week’s closure — for essential repairs — of the airport at Abuja, the capital. The government simultaneously launched a recovery programme for the economy. After two years of policy paralysis this was overdue.
The plan does however provide some grounds to believe in an eventual lift-off. As often with such documents, there is some wishful thinking. If the government finds a way to revamp domestic refining, boost anaemic power supply, strip back spending on the bloated civil service, invest in infrastructure and encourage both agriculture and industry, Nigeria will indeed be flying.
These are all things that past governments had on their list of things to do. But if it accomplishes even a quarter of what it is setting out to do by 2020, it will at least restart the engines.
The document has important new elements too. For the first time in an official policy document, the state is proposing to sell its stakes in the joint ventures with international oil companies. It also recognises the need to liberalise the exchange rate and end an experiment with partial controls that generated multiple rates, encouraged corruption, undermined investor confidence and arbitrarily punished some of the most vibrant parts of the economy.
There is no timing for these reforms. But there is no doubt they are needed urgently if Nigeria is to regain momentum before politics moves back centre stage ahead of 2019 polls. If the government were to reduce its stakes in the oil joint ventures to a minority it would not only raise some $20bn towards achieving other objectives.
It would liberate the oil companies to invest, providing the country with a more realistic chance of raising production (and with it revenues) from 1.6m barrels a day to 2.5m b/d by 2020 — the new target. More urgently, if it wants to revive the confidence of foreign investors, it must sort out the exchange rate mess.
Under the seemingly capable hands of Yemi Osinbajo, the vice-president who is in charge so long as the ailing President Muhammadu Buhari remains on extended leave, there is a chance to press ahead. Nigeria, from which one in five black Africans hails, has wasted precious time by taking half measures in an attempt to forestall a looming economic crisis. To escape, the country will require bolder moves.