Worries over growth and unemployment are dominant concerns ahead of February vote
Nigerian market businesses say that just a few years ago they could do a roaring trade. But now, with nearly a quarter of the population out of work, ‘the middle-class man doesn’t have any money, so there’s no customers’
by Neil Munshi in Lagos
At the New Market in the Lekki area of Lagos, Nigeria, Joy Eno is painting a customer’s toes bright yellow. It is one of the few bits of business she has done all day.
“Customers come but not really that much because they don’t have money and there’s no jobs,” said the 23-year-old beautician. “The economy is not really good.”
Nearby, Peter Chuks can remember a time just a few years ago when businesses in the market could do a roaring trade. “You couldn’t move in here,” recalled the 38-year-old, who deals in chemicals to treat water. Now, with nearly a quarter of Nigerians out of work, “the middle-class man doesn’t have any money, so there’s no customers”.
As Africa’s most populous nation heads toward presidential elections in February, its roughly 200m citizens are feeling the pinch of sluggish economic growth. The government last month released unemployment data for the first time in a year, which showed joblessness had risen to 23.1 per cent in the third quarter, from 18.1 per cent a year earlier.
While the country has emerged from a recession brought on by a slump in oil prices, the economy grew at just 1.8 per cent in the third quarter, according to data released in December.
“We’re not in a recession officially but there’s no growth that would actually inspire any confidence,” said Nonso Obikili, an economist at Abuja-based Economic Research Southern Africa. “We are trudging along.”
Yvonne Mhango, Sub-Saharan Africa economist at Renaissance Capital, said growth in 2018 was well below the 3 per cent she had expected. “We didn’t appreciate how weak the consumer was and how much more it will take for the consumer to emerge from this slump.”
As the battle for the presidency hots up, analysts expect a close race, dominated by economic concerns.
A vote will pit incumbent president Muhammadu Buhari against Atiku Abubakar, centre, a former vice-president © AFP
Mr Obikili noted that a vote that will pit incumbent president Muhammadu Buhari against Atiku Abubakar, a former vice-president, will be “one of the first elections where there seems to be some kind of policy difference” between the candidates.
“The Buhari policy focuses more on state-driven, more interventionist, more social, and the Atiku policy ideas are more market-sensitive, business-friendly,” he said. “Depending on who wins you will see reactions either in the stock market or just in overall business sentiments.”
Growth has picked up of late thanks to improvement in non-oil sectors such as telecoms. The government also ramped up infrastructure spending and foreign direct investment for the first three quarters of 2018 which, at $14.7bn, exceeded the figure for the whole of 2017.
But the multiple security crises that have plagued the country, including a brutal insurgency by Boko Haram militants in the country’s north-east, are “having a material impact on growth”, Ms Mhango said.
The naira has come under pressure, despite the central bank’s relentless focus on stabilising the exchange rate. Double-digit inflation has come down, but its effects are abundant in the wallets of Nigerians whose wages have stagnated, if they are lucky enough to be working at all.
And the drop in crude prices is hitting Nigeria, Africa’s biggest oil producer, which pumps out about 2m barrels per day. When Nigeria’s oil minister was asked last month on Bloomberg TV why the country would only make a small contribution to Opec’s planned production cut, he was blunt: “We need the money.”
Foreign reserves have fallen from $47.6bn in May to $42bn in November. Observers said such outflows were typical investor behaviour ahead of elections and with US interest rates also rising. But Bismarck Rewane, chief executive of Lagos-based Financial Derivatives Company, said outflows were accelerated by the government’s decision in the autumn to impose $10bn in fines on MTN, a telecoms operator. The move was widely panned as anti-private sector. MTN recently settled the matter with a $53m payment.
He said he had little confidence of any correction soon. “It’s quite a tough situation, and in the run-up to the election there’s no way the officeholders or policymakers can make any efficient decisions,” he said.
Most of Lagos’s business elite hope the economy will improve with Mr Abubakar, a wealthy businessman, at the helm. But at the New Market Mr Chuks has little faith that a change of political leadership will make any difference.
“I don’t believe in the government of Nigeria,” he said. “They are not going to make any change, and they’ve been telling us forever that they’ll fix this economy.”
Copyright The Financial Times Limited .