President Muhammadu Buhari can hardly be blamed for all of Nigeria’s woes. He inherited a difficult situation when he was elected a year ago but you have to question how he has responded to the reality of low oil prices.
Pilfering and incompetent politicians have, in large part, accounted for why normal Nigerians haven’t enjoyed the spoils of its vast oil reserves. Around 61 per cent of Nigerians lived on less than a $1 a day in 2010 according to Nigeria’s own statistics agency. The CIA World Factbook put unemployment at nearly 24 per cent in 2011. That’s a problem in any country but particularly in one with such a large, young population looking for a living. Read more
By Matthew Page, Council on Foreign Relations
Africa’s largest economy is struggling to find its feet. Sliding oil prices threaten to derail President Muhammadu Buhari’s efforts to put Nigeria’s public finances back in order, fund planned infrastructure spending, and field much-needed social programs. Until global crude prices rebound or he undertakes more ambitious reforms, Mr Buhari almost certainly will need to borrow just to make ends meet.
The good news for Mr Buhari is federal government debt is relatively low as a percentage of GDP, which was estimated at $488bn in 2013. In 2005, Nigeria struck a deal with Paris Club lenders to write off over half of the country’s $30bn debt. Since then, however, Nigeria’s debt profile has steadily grown. As of the end of last year, Abuja owed domestic and international creditors roughly $55bn. Read more
The global commodities rout from mid-2014 brought with it severe market volatility that reshaped the growth trajectories of most economies, especially commodity-dependent economies such as those in sub-Saharan Africa. Countries such as Zambia, Angola, Nigeria and Ghana have experienced the effects of this first hand.
In periods of heightened volatility, the response mechanism of central banks becomes a vital factor that either compounds or abates the problem. This point is exemplified by how the various central banks across sub-Saharan Africa have dealt with rapidly weakening currencies and the subsequent rise in inflation. The policy response adopted by central banks in Zambia and Ghana, for instance, has erred on the side of minimum direct intervention in currency markets. In contrast, Nigeria and Angola have applied a heavy hand in defending their currencies. The two approaches have resulted in the formation of two types of risks: volatility and ‘jump’ risk. Read more
FirstPower has a most perplexing problem for a Nigerian business: too much electricity. In a country with an enormous power deficit, where grid power is only available for a few hours each day, its 14 megawatt power plant in Ijora, an industrial hub in Lagos, has been ready since early 2015. It cannot be brought online because the local Distribution Company (Disco) – the regional government granted monopoly – has no incentive to “play ball”.
Despite the recent privatisation of Nigeria’s power sector, the electricity industry has not been deregulated. Rather, the old state distribution behemoth was carved into “Nigeria’s 11 primary Discos [which] are monopolies,” as the Nigeria Electricity Regulatory Commission (NERC) admits. As a result, competing private plants are routinely denied permission to distribute by the NERC. Read more
This week, the EU and World Bank met to discuss development financing as a means of tackling some of the root causes of irregular migration. This comes after last month’s Valetta Conference, where European leaders pledged €1.8bn to address the potential causes of migration in Africa. This was a crucial start but we need further direct support for areas under specific threat. In both the Middle East and Africa there are clear crisis spots where a majority of EU bound migrants originate. Eritrea, Somalia and South Sudan have been identified but there also needs to be a focus on West Africa, an area bearing the brunt of the continent’s Islamist terror threat.
In Nigeria, terrorist activity has increased significantly since 2013, largely as a result of Boko Haram. In the last week of November the group claimed responsibility for a suicide bombing of a Shiite Muslim procession near Kano which killed 21 people. Over 100 people remain unaccounted for following a battle near the town of Gulak and eight people were murdered in an attack on the northeast region and neighbouring Niger. Read more
There can be no development of Africa, the world’s final frontier market, without access to modern, efficient energy. So how should we address the continent’s current power deficit, which leaves more than 600m people without electricity? Sub-Saharan Africa currently consumes less electricity than Spain. According to the Africa Progress Panel, based on current trends, it will not be until 2080 that every African has reliable access to electricity.
Nigeria presents a stark example. The Nigerian Bureau of Statistics recently almost doubled its estimate of the country’s 2013 GDP to 80.2tn naira ($500bn), meaning Nigeria has overtaken South Africa as the continent’s largest economy. It now ranks 24th in the world, yet its average annual per capita power consumption is only 130 kWh – 7 per cent of that in Brazil and 3 per cent of that in South Africa. Read more
In Nigeria, pensions and infrastructure development are not often mentioned in the same sentence, but this week as Africa’s finance and pension industry leaders gather in Nigeria for the second edition of the World Pension Summit: Africa Special, the focus will be on how the nation’s growing pool of pension funds can be mobilised to drive sustainable development.
Compared with many of its African peers, Nigeria has relatively advanced infrastructure networks that cover extensive areas of the nation’s territory and, thanks to its strong economy, it is better placed than many of its neighbours to increase the share of fiscal resources going to infrastructure. Yet, according to the African Development Bank (AfDB), the nation’s core stock of infrastructure is estimated at only 20-25 per cent of GDP, compared with 70 per cent for other middle income countries of its size, leaving a gaping infrastructure deficit of $300bn. Read more
Nigeria’s new government must use its mandate to implement much-needed reforms in the oil and gas sector, which continues to be the driving force behind the economy. The country has achieved what initially looked to be an unlikely result – democratic elections and a peaceful transition of power. This is an important step towards the country’s full transformation into a developed economy and should be used as a platform for real change.
For a country so rich in oil and with almost ideal geological characteristics, Nigeria suffers from poorly developed infrastructure and sub-par living standards for the majority of the population. Since Shell discovered its first commercial oilfield in the Niger delta, Nigeria has grown to become Africa’s largest oil producer. The oil industry quickly crowded out investment in other sectors of the economy and the country’s oil and gas sector continues to be the most important contributor to the budget. Read more
Mobile internet adoption in Africa is taking place at almost double the global rate, a trend that has sparked debate among development and tech enthusiasts as to whether this marks a radical shift in the way the internet of the future will be used and accessed. Has the range of innovative services currently available on mobile devices come about purely as a result of necessity, or through a deliberate decision to focus on the mobile solution by forward looking African companies and entrepreneurs?
Some recent examples of the level of digital sophistication evident in Nigeria, and in Africa’s technology industry as a whole, can shed some light on this. In February this year, the BBC website announced with fanfare that RBS and Natwest, two UK banks, would be pioneering the use of Touch ID on the iPhone as a security enhancement for their mobile banking applications. What the BBC didn’t know was that Touch ID was already going live across mobile banking networks, with some Nigerian banks incorporating the feature before their UK counterparts. Read more
From hairdressers to film companies, the vast majority of companies in Nigeria are micro, small and medium-sized enterprises (SMEs). They account for the livelihoods of most of the country’s 173m people, and are engines of diversification for a country long reliant on oil.
But so little is known about this universe of entrepreneurs: the enablers helping them grow, or the obstacles holding them back. To address this knowledge gap, this month the Economist Intelligence Unit is publishing a new report, commissioned by IHS Towers, that shines a light on this all-important segment of Nigeria, now the largest economy in Africa. Read more
In 1986 The Economist magazine famously created its Big Mac Index, a guide to the fair value of a currency based on the principle of purchasing-power parity, which states that exchange rates should adjust to bring prices of identical goods into line across national boundaries.
But Big Macs are not sold everywhere. Seeking a similar mechanism applicable to countries in Africa, we have created our Milk Index, based on the price of a gallon of milk. Read more
On the African continent, peaceful transitions of power through free and fair elections are a true rarity. Despite the odds, General Muhammadu Buhari delivered an impressive victory over incumbent president Goodluck Jonathan in last month’s presidential election in Nigeria and is set to take office next month.
While Buhari’s coalition party, All Progressives Congress (APC), won a majority of the seats in the National Assembly, last month’s elections are certainly not the final word in Nigeria’s electoral process.
On Saturday, April 11, Nigerians returned to the polls to vote for both State governors and State Houses of Assembly. These were local elections, and the saying that “all politics is local” certainly holds true in Nigeria. During the country’s local elections, the APC once again defied the odds, and gained control of a majority of the country’s governorships. Read more
The All Progressives Congress (APC), led by former military leader General Muhammadu Buhari, has won Nigeria’s presidential election, unseating the People’s Democratic Party (PDP) that has dominated the country since its 1999 transition to civilian rule.
The election symbolises the institutional change that made the PDP’s election upset possible. Against considerable odds, INEC, Nigeria’s independent electoral commission, played a key role in delivering credible elections. The implications run deep. This glimpse of institutional strength speaks powerfully about Nigeria’s future as the African economic powerhouse that might yet emerge with continued, sustained reforms. Read more
By Kevin Daly, Aberdeen Asset Management
If you are a young Nigerian, life was already hard enough before the price of oil collapsed and Boko Haram established themselves as a real threat to Africa’s largest oil producer. The country’s now delayed elections are unlikely to improve their lot or that of weary investors.
For years Nigeria’s 170m people have laboured to overcome endemic power shortages, a lack of jobs, crippling corruption and institutions which have persistently failed to serve them. Nigeria’s own statistics agency found that 61 per cent of Nigerians lived on less than a dollar a day in 2010.
Electricity consumption per head of population is around 149 kw-hour (Mexico’s, by comparison, is over 2,000 kw-hours). Former central bank Governor Lamido Sanussi was sacked last year after exposing a multi-billion dollar subsidy racket involving the state oil company. Read more
By Peter Leger, Coronation Fund Managers
So you thought a six-month break on a desert island looked appealing and spent long hours in silent meditation, reflecting on self-actualisation, harmony and humanity’s ceaseless race to consume the planet. Now you’ve just made the return journey to find that the oil price collapsed from over $110/barrel to less than $50. Peak theorists having turned into piqued theorists. You didn’t see that coming. And, frankly, neither did we. Nor did we expect to see the Swiss franc jump 28 per cent in a single day – as it did recently.
The lesson being that extreme volatility has to be an assumption when building portfolios, and doubly so when investing in frontier markets, where volatility is often amplified. Read more
“They’re coming up every morning, just like churches,” Peter Kari, a father of two living in Nairobi’s Kawangware slum, says of the private schools mushrooming in his neighbourhood. “They die as they’re being born. You can wake up one morning and see a tin shack. The other night it was a pub. Today, it’s a school.”
A ride down one of the main roads in Kawangware offers evidence for Kari’s claim. Within five kilometres, there are at least fifteen visible signs for private schools, with names like ‘Brightest Star,’ ‘Top Shine,’ ‘Springs of Wisdom,’ and one (see photo) unfortunately misspelt ‘Havard.’ Read more
It’s a few minutes into Marion Akinyi Onginjo’s social studies lesson at Bridge International Academy Gicagi in Nairobi and the class 4 teacher is being drowned out by loud cheers next door.
Bridge International Academy Gicagi, Nairobi. Photo: Tosin Sulaiman
Class 4 finally gets its chance to make some noise when one student, Margaret, correctly answers a question about subsistence crops. After Onginjo tells the class, “let’s give Margaret the cowboy cheer,” they stand up, spin imaginary lassoes in the girl’s direction and yell, “One, two, three, four, five, yee-hah.” Read more
At the entrance to Shomaa Impressive School, a compound of 11 classrooms built from thin wooden boards in the Lagos slum of Makoko, prospective parents are greeted with a banner showing four children in graduation gowns and the motto “Raising future professionals”. Just as the message is crafted to appeal to the aspirational market traders and fish sellers who send their children to the nursery and primary school, the daily tuition fees averaging less than $1 a day are also tailored to their modest budgets.
Schools like Shomaa, which has around 100 students, are contributing to a boom in private education in Lagos and other cities in Africa.
A pupil at Shomaa Impressive School, Makoko, Lagos. Photo: Tosin Sulaiman
After enduring 13 days of straight losses, Nigerian stocks have the questionable honour of being the world’s worst performing this year. Yet the man in charge of the stock market is not worried about a full-blown crisis. “I’m not expecting to see a sell-off, and indeed we haven’t seen a sell-off” said Oscar Onyema, chief executive of the Nigerian Stock Exchange, in an interview with beyondbrics. Rather, he says “the Nigerian stock market has adjusted downward, as you would expect in an OPEC country.” Read more
Source: Thomson Reuters
Nigeria’s central bank on Friday tried to drawn a line under the naira – but the market continues to increasingly bet on a devaluation after the elections set for early 2015. Read more