Policy continuity expected ahead following President Buhari’s re-election


On 27 February, Nigeria’s electoral commission declared incumbent President Muhammadu Buhari, head of the ruling center-left All Progressives Congress (APC), winner of the 23 February presidential election.

Although analysts expected the election to be a tight race between Buhari and former vice president Atiku Abubakar, from the center-right opposition People’s Democratic Party (PDP), Buhari won by a comfortable margin in the end, securing 55.6% of the votes compared to Abubakar’s 41.2% and a second term to lead the continent’s largest economy. Abubakar subsequently challenged the results in court; however, given Buhari’s solid victory, it is unlikely the outcome will be overturned.

As the incumbent, Buhari is set to maintain the status-quo to policymaking, with his agenda centered on tackling corruption, addressing insecurity and improving the economy.

Considering that a potential Abubakar presidency could have brought about a significant shift in economic policy, particularly in the management of the exchange rate and the vital oil and gas industry, those risks have largely dissipated with Buhari’s re-election. During his campaign, Abubakar contemplated floating the naira and called for replacing Central Bank Governor Godwin Emefiele, whose term ends in June.

Buhari’s victory means that a move towards a free-floating exchange rate regime is unlikely, while the conduct of monetary policy, regardless of whether Emefiele’s term is renewed, is expected to remain largely unchanged.

Furthermore, whereas Abubakar had advocated for in the liberalization of the all-important energy sector, Buhari has been opposed to these moves and the state-dominated oil industry is thus set to remain in place.

Irrespective, Buhari is confronted by a myriad of major economic challenges ahead. The oil industry is in dire need of upgrade as mismanagement, lack of investment and systemic corruption have hindered from developing it to its full potential.

Furthermore, despite growth accelerating and hitting an over three-year high in the final quarter of 2018, the economy is yet to recover fully from the 2016 recession, triggered by the 2014 crash in oil prices. In addition, unemployment has surged to 23.1% in Q3 2018 from 9.0% when Buhari first took office in 2015, while inflation remains stubbornly high, coming in at 11.3% in February, despite tight monetary policy conditions.

Widespread poverty, with almost half of the population living in extreme poverty, and rampant inequality exacerbate the country’s woes. Thus, although no radical changes to the policy environment are expected, bold action will be required to take Nigeria “to the next level”, as Buhari promised throughout his campaign.

Nigeria GDP Forecast

FocusEconomics panelists project that the economy will grow 2.4% this year, which is down 0.1 percentage points from last month’s estimate. In 2020, growth is seen rising to 2.9%.

Nigeria: Growth picks up to over three-year high in Q4

Nigeria’s recovery gained traction in the final quarter of 2018, with growth accelerating to an over three-year high. According to data released by the National Bureau of Statistics (NBS), GDP expanded 2.4% annually in Q4, well above Q3’s 1.8% increase. The acceleration was driven by the non-oil segment of the economy, while momentum within the oil sector remained weak. For the year as a whole, growth came in at 1.9%, picking up notably from the 0.8% expansion logged in 2017.

Growth in the non-oil sector of the economy accelerated in the fourth quarter, coming in at 2.7% annually (Q3: +2.3% yoy) and reflecting faster growth in the three major sectors. Activity in the agricultural sector picked up compared to Q3, mainly thanks to higher crop production. Similarly, the services sector gained steam, with growth hitting a multi-year high in Q4 largely on the back of buoyant activity in the information and communication industries. Moreover, industrial output rebounded from the previous quarter, owing to stronger gains in manufacturing production.

In contrast, the all-important energy sector continued to contract in the fourth quarter, although at a weaker pace than in Q3. Activity in the oil sector fell 1.6% over the same period last year, after tumbling 2.9% in Q3. Oil production—which accounts for the lion’s share of the overall mining and quarrying sector output—declined from 1.94 million barrels per day (mbpd) in Q3 to 1.91 mbpd in Q4 which, coupled with easing global oil prices throughout the quarter, weighed on the overall figure.

Looking ahead, growth is seen strengthening thanks to rising oil production and higher public spending. Uncertainty over the outcome of the upcoming presidential election—and its impact on economic policy-making going forward—cloud the outlook, however.

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