Maximise Your Leverage Buhari

by Jul 14, 2016

Maximise Your Leverage Buhari

It is a little over a year ago when I suggested an agenda for President Buhari to address the needs of Nigeria, highlighting the Boko Haram menace, corruption and the infrastructure. The President has delivered and/or made significant attempts to do so. There are still major challenges, notably, the problems in the Delta, electricity power generation, the economy and public perception. These challenges are largely exogenous factors and/or new developments, that is, they have been caused by forces outside his control and/or have come about since he came to power. There are severe limitations on how he can manage the major external factor, the world oil price but his stated objectives and budget seek to ameliorate the effects of low and volatile world oil prices and he is doing his best to grapple with new issues. The president needs to make maximum use of his leverage and convince the electorate that the country is moving in the right direction.

The president has made impressive gains against the Boko Haram problem in a very short time, degrading them significantly and limiting the geographical spread of their operations. In a recent report by Global Terrorism Index, it was reported that 60006 people died in 270 attacks in 2015. In the first three months of 2016 the number of deaths was 422 in 36 attacks. If we extrapolate the 2016 figure total deaths from terrorism in 2016 should be less than a third of those in the previous year and this simple arithmetic underestimates the progress being made since deaths from terrorism have been declining dramatically since March 2016. In fact going by this rapidly declining trend we would expect deaths from terrorism in 2016 to be a tiny fraction of what they were in 2015. Buhari has done in one year what Jonathan could not do all the years he was in power. Buhari achieved this feat in his typical efficient and effective fashion, getting rid of the ineffectual and corrupt army chiefs, shifting army command to the epicentre of the crisis, working with neighbouring countries to set up the Multinational Joint Military Task Force and eroding civilian support for the group, largely, by demonstrating his resolute decision making prowess. This success has been welcomed by Nigerians and acknowledged by foreign observers with the Fund for Peace, publishers of the Fragile State Index recording significant gains in the country’s Security Apparatus Index and substantial reduction in the level of growth of negative indicators in the Fund’s five year and ten year trends.

Buhari’s effort at addressing corruption has been partly through measures adopted but also through his reputation. In the case of the latter, there are many reports of officials making restitutions of funds even before receiving official summons. He replaced the heads of revenue generating agencies, including the head of the Nigerian National Petroleum Corporation. He has directed relevant agencies to vigorously pursue corrupt officials to get them to pay back what they looted and be prosecuted for such offences. He has badgered foreign governments to repatriate stolen funds with some success. In his first budget, one of which’s stated objective was to minimise inefficiencies, he created the Efficiency Unit. The unit will monitor personnel and pensions, conduct continuous audits and extend the integrated payroll information system. The Treasury Single Account (TSA) system aims to increase transparency and improve remittance of collection of revenues. This TSA system has seen a very significant reduction in the number of accounts maintained by government departments which officials used to defraud the state.

Buhari’s effort at addressing the country’s infrastructure deficiencies was to more than double the expenditure on capital spending from 15% to more than 30% in his first budget. He has been engaged in discussions with foreign governments, notably China to secure funds for infrastructure projects.

While his efforts at addressing issues noted above are laudable the country has serious challenges, largely relating to the situation he was faced with when he came to power but also because of new issues that have developed. With regards to measures noted above, Boko haram while severely degraded has not been totally eliminated. The fight against corruption is still very much work in progress and the country still ranks quite high in the corruption and fragile state indexes that is, it is still categorized as very corrupt and fragile. While the president has indicated that he is keen to rehabilitate and expand the country’s infrastructure, it is yet not clear whether he will get the relevant funding. He also has yet to come up with a detailed blueprint and action plan for the sector.

With regards to other challenges the economy is the most pressing and which Buhari has yet to make a significant positive impact but this is largely due to developments outside his control, primarily the collapse of the price of oil. The world oil price has dropped dramatically, from US$112 per barrel in mid-2014 when Buhari was campaigning to be president, to less than a quarter of that level at its lowest point in 2016. The collapse in that price has been compounded by major disruptions in oil production because of the activities of Delta region activists who are protesting that they are not getting a fair share of oil revenues derived from their region. The country’s power generation dropped to a very low level of 2000 megawatts, at its lowest level, less than half that under the previous regime. Consequently the economic growth rate, according to World Bank estimates dropped from 6.3% in 2014 to 2.7% in 2015. The National Bureau of Statistics reported that the economy contracted by .36% in the first quarter of 2016. These economic difficulties have been noted by powerful financial institutions who have taken actions that could compound the country’s problems. J P Morgan Chase and Barclays have excluded Nigeria from emerging market bond indexes. Other financial institutions could follow making it difficult for the country to secure funds in international markets and make its borrowing costs prohibitively high.

The president faces significant opposition from stakeholders who have lost out because of his policies or who will if he is to achieve his stated objective of transforming the country into a major production centre for agricultural and manufactured goods rather than merely an importer. The fuel shortages were no doubt caused by importers angry at the abolition of their subsidies. Importers who had made use of preferential favourable foreign exchange rates, often to buy luxury items or goods that Nigeria could and should produce locally and now have to buy foreign exchange at higher market rates since the Naira was fully floated are also unhappy.

Buhari would need to adapt and rise to challenges, many of which have roots in the actions of his predecessors. With regards to his economic woes, there is little he can do in the short term on the collapse of world oil prices. It however strengthens his move to diversify the economy. The flotation of the Naira will help domestic producers who had suffered when importers had access to foreign exchange at very favourably subsidised rates. Policies to assist agricultural producers announced in the budget, improvements in the physical and soft infrastructure would create a conducive environment for investment by local and foreign investors in all sectors. Diversification of the economy in the medium to long term would minimise the effects of depressed and volatile world oil prices. The low power generation is largely the result of President Jonathan’s crony privatisation which broke up the state power generation company and handed it to operators who do not have the expertise and track record. There was no due diligence when the privatisation process took place and the main qualification of the new owners was how connected they were to Jonathan and his party. Buhari would need to review the privatisation process and performance of these companies and where necessary revoke ownership and get more qualified operators to take over. He needs to negotiate in good faith with the Delta region to maintain and develop oil production and delivery. He needs to counter the opposition of importers with a major public relations campaign, highlighting the fact that he is only being fair to everybody, removing subsidised foreign exchange from importers who were only reaping vast profits. The previous system including the partial flotation was also costly to manage and rather arbitrary in foreign exchange allocation. He should note that Nigeria has the potential to produce many of these imported items, creating jobs, reducing economic shocks from reliance on only one commodity, oil and, achieving equity as wealth is siphoned from a few importers to farmers, local manufacturers and consumers. And floating the Naira is indeed levelling the playing field for all operators.

The country needs to make the maximum use of its leverage, namely, population, oil and geo-political status. In his attempt at diversifying the economy he needs to use Nigeria’s major leverage as China did thirty years ago when it opened up its economy, namely, the size of its market of 171 million people – major foreign brands were salivating when they suddenly realised that they could sell to one billion Chinese consumers. Like China did, Nigeria should encourage and entice foreign companies to build factories in Nigeria to service their customers. Companies who have large market shares should be targeted.

In the oil sector the country should use its leverage for refining and power generation. Major corporations, who are presently involved in oil production, many of whom have refining and power generation facilities in other countries, should be encouraged and enticed to invest in refining and power generation in Nigeria. This can only happen if the country can create a conducive investment climate. Preferential treatment should be given to companies that invest in such facilities. To encourage and entice investment in these areas the country would need to review rules on ownership, notably, the level of foreign control and, profit repatriation. It should ensure that its investment codes and judiciary system are transparent and consistent. Improvements in the physical infrastructure would help and the country needs to ensure that its educational infrastructure can produce workers with the relevant technical skills.

Nigeria needs to leverage its geo-political status, namely its size, in discussions with major powers. Nigeria is the giant of Africa and it is in the interest of major powers, Africa and the world that it is stable and has a growing economy. These points should help in the government’s efforts to repatriate funds looted by corrupt politicians and government officials that have been stashed away in foreign banks, business and properties. Major powers could also encourage investments by their companies in Nigeria. The president should highlight his unique position, a leader who came to power in a fair election and wants to be a good and effective partner. Buhari needs to make the most of reports by observers in major capitals for example the article in the reputable Brookings Institute in Washington which stated that “The 2016 Nigerian budget provides a useful template for African countries. This is the leadership we expect from the country.” It should highlight the fact that his government has demonstrated that it is a serious partner in terms good governance, corruption, terrorism and other areas and should be accorded all the support from major powers..

What then is the way forward for Africa’s sleeping giant? Firstly, Buhari is still the best deal in town, with regards to his sincerity, determination and policies. Ironically the main challenge for him is democracy. The Nigerian patient needs major surgery which can be painful and the patient needs time to heal. Will the patient have the tenacity and patience? Will s/he succumb to the false and discredited statements of selfish and corrupt stakeholders who have lost out? Mr Buhari’s time is limited and he will soon be facing his masters and mistresses, the electorate who will evaluate his record and decide if he should be given time to continue work on his difficult job. Will he get it, who knows, democracy is a strange business and the electorate has often taken perverse decisions. So Mr Buhari you have a tough call, keep up the good work but you also need to be a super sales man. Interestingly when I first heard the President in Oxford I doubted whether he had the right sales pitch, no doubt he will prove me wrong again.

J Boima Rogers is the Principal Consultant at Media and Event Management Oxford MEMO.