Nigeria: Scrutinizing the “Change Agenda”…100 days Appraisal

LAGOS, Nigeria Capital Markets in Africa — Following the result of the 2015 presidential polls, the new administration was ushered into power amidst groundswell optimism. We attempt an appraisal of the performance of the Buhari led government 100 days after inauguration (since May 29, 2015), having been sworn in amidst high expectations of structural reforms, improvement of government’s fiscal state, tackling of endemic corruption and stamping out insurgency in Northern Nigeria.

Although the much awaited economic reform agenda of this new administration remains hazy, -a situation which has recently doused investor confidence given the heightened uncertainty- certain achievements have been recorded so far. The Buhari’s administration has embarked on reforming some revenue generating agencies of government (majorly the NNPC, Customs and FIRS) with the intention of plugging leakages in the system while also improving the fiscal inflow from these agencies. This led to the change of guard in the leadership of these agencies which are believed would be run more efficiently and professionally going forward. Despite the cloud of uncertainty due to absence of a cabinet, the perceived disposition of the Presidency in light of some recent directives are pointers to anticipated positive reforms for the economy. This is particularly important to stem the tide of corruption, the absence of which appears is a sine qua non for Buhari before the wheels of the economy can be kick-started.

Succinctly, we highlight some of the milestones achieved under this current government in the last 100days.

• The directive for the full implementation of a Treasury Single Account (TSA) by the Federal Ministries, Departments and Agencies (MDAs) is a move that will ensure transparency and improve fiscal revenue inflow amidst the falling global oil prices.
• As widely believed, the body language of the President seems to be positive for power supply as significant improvement is being noticed across the country. Electricity generation peaked at 4600MW in late August (relative to less 3500MW before his assumption of office) traceable to the radical decline in cases of gas-pipeline vandalism nationwide. Nonetheless, power generation remains below optimum level given the installed capacity of approximately 10,000MW.
• Amidst low global oil prices, Nigeria’s external reserves has appreciated 6.3% (under Buhari) from 1^st of June 2015 to date traceable to the reduced oil revenue leakages as  well as  the demand-management policies of the CBN to constrain FX outflow. Consequently, the exchange rate at the interbank has remained stable at N199.00/US$1.00 although the parallel market rates still trade at higher volatile bands.
• Creeping inflation (9.2% for July) has characterized the general price level in the past few months on the back of the exchange rate devaluation and the ban of some consumer items from accessing FX at the interbank.
• In terms of security, the Buhari administration scored some quick wins in mobilizing a multi-national effort to combat insurgency in the North-East Nigeria. The kick-off of the Multi-National Joint Task Force (MNTJF) in July and appointment of new military chiefs appear to be achieving the desired result.
• Investors in the financial markets have remained on the sideline as a result of lack of fiscal policy direction from the President coupled with exchange rate uncertainty. The Nigerian equities market has lost 14.0% since June till date while the bonds market (as measured by FMDQ index) shed 3.0% in the same period.

In the absence of clear fiscal economic blueprint, the monetary authority introduced several exchange rate policies which have continued to pressure the market — constraining foreign portfolio inflows into the market. Notwithstanding, the President has promised to unveil his list of cabinet members in September. This is expected to catalyze the economy and the capital market to optimizing their potentials in the medium term.

Source: Afrinvest (West Africa) Limited Research Team