Monday, April 6, 2015

Nigeria Ripe for Change With Buhari’s Victory, Oil in Spotlight

General Muhammadu Buhari, who won Nigeria’s closely watched and very tight presidential election last week, first came to power in a military coup in the 1990s, and was instrumental in introducing what Nigerians call “The War Against Indiscipline,” which required Nigerians to line up in an orderly fashion at bus stops and the like. In a nation where indiscipline of all sorts runs high, that kind of approach was and will be greatly appreciated, said Nigerian novelist and political commentator Okey Ndibe, and although Buhari also imposed strict controls on the press, he is remembered as someone who lived modestly and did not line his own pockets with public funds.
In a country, which is one of the biggest oil producers, but where corruption has always been endemic, that kind of reputation goes a long way, and it certainly puts Muhammadu several notches above ousted president Goodluck Jonathan.
But for Ndibe, Muhammadu will have much more to do than simply targeting and bringing to task corrupt government officials. If real change is to happen in Nigeria, then “we need strong institutions,” he said. “We need an independent judiciary, we need independent police and security services that would be impartial and not partisan. Nigeria’s problems are systemic and structural and in my view, if the entire country is to be restructured, it’s going to take more than a single leader to do that, it has to be a Nigerian Project, an alignment of different interest groups to realize that change is in our own self-interest.”
Nigeria is a $500 billion economy and with a population of close to 180 million, it is a huge market with great potential, and one that foreign investors like Peter Thoms, founder and lead portfolio manager at Africa Capital Group, have a keen interest in.
“Nigeria has been growing very nicely over the past 10 years despite some very fixable inefficiencies,” Thoms said, “and if those inefficiencies can be fixed, it can become an even greater investment destination. That voters came out in full force for the presidential election is a huge positive for Nigerian democracy, but now we need to see a government that is governing for the people and using its wealth and resources to build for the people.”
For both Nigerians and foreign investors, corruption and insecurity are huge issues that have to be dealt with, Thoms said. Buhari got much of his support from the northern part of the country, in particular the northeast, which is still under threat from Islamic fundamentalist group Boko Haram, and ridding the country of Boko Haram is a key task for the new government, he said.
“Nigeria also suffers from a resource curse. It is the second largest oil producer but none of that oil wealth has trickled down to the people,” Thoms said. “They need to cut the fat and the corruption to make sure the oil wealth is more evenly distributed among the population.”
Nigeria also does not have any working refineries, which makes for a tremendously inefficient oil industry, since the oil has to be exported for refining and then brought back into Nigeria. There are plans to build a big refinery near Lagos, which will help, Thoms said, but as much as the oil sector needs to be developed, it’s also key that Nigeria diversify its economy away from oil and build up other sectors, particularly since the price of oil has fallen.
He said that both the agricultural sector and the manufacturing sector have great potential in Nigeria.
“The country is definitely underutilizing its agricultural potential. Nigiera imports a lot of food and there really is no need for that if agriculture is properly developed,” he said.
As for manufacturing, it, too, has great potential, and Thoms said that many more items can be made in Nigeria itself as opposed to being imported. Nigeria has a young population that is eager to work, he says, and there is an entrepreneurial spirit there that can easily be tapped for greater opportunity.
Even with the many challenges it has to contend with, Nigeria will still grow at around 4% or 5%, but for the longer-term, meaningful and lasting reform has to happen. No industry can hope to really take off properly without transparency and the rule of law, Thoms said, adding that as much as the new government has to prove it’s up to the task, in a nation where much of the wealth is concentrated in the hands of a few, Nigerian businessmen also have the potential to make a huge difference if they, too, invest in Nigeria. 

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