President Buhari takes his sweet time, but clock may have started ticking

Buhari, elected in March, has not seemed to be in a hurry. His Cabinet would only be announced in September, he said, leaving markets to essentially grope their way in the dark. Uncertainty tends to leave most investors, including even the most risk-happy, wringing their hands as their valuations swing all over the place. To further muddy the waters, the economy did not feature too highly during Buhari’s campaign, the focus understandably having been on corruption and insecurity.

In keeping with this, Buhari’s first moves have been on crushing the Islamist insurgency in the north-east, while several appointees of the previous regime have been sacked in recent weeks. But while the cross-border challenge of Boko Haram is well understood; for markets the sovereign risk has increasingly taken on a domestic hue, with any policy direction, especially on spending and raising revenue, only likely to be felt early 2016, almost a full year into Nigeria’s four-year electoral cycle.

Looking for angels

Buhari says the search for a new team has been delayed by the need to pick people who are not “compromised”. However, he was also backed by many deep-pocketed individuals, who will want to have a say in any new appointments. A military ruler in the early 1980s, his first cabinet was picked in 18 days.  

But as he juggles various interests and sifts through CVs, the president did take time to bat back calls to shed expensive fuel subsidies, saying the research he had received so far had “no depth”.

“When you touch the price of petroleum products, that has the effect of triggering price rises on transportation, food and rents.  That is for those who earn salaries, but there are many who are jobless and will be affected by it,” Buhari, who once oversaw a state oil firm, is reported to have said.

It is a position possibly informed by two things: His ruling coalition is seen as leftist, with its major backing having been from the more socially conservative north, and as such he would want to shield poor Nigerians from the vagaries of the market.

Subsidies are also about the biggest gains ordinary Nigerians see from their oil, with the well-connected creaming off most of the proceeds, in an industry that has suffered from chronic underinvestment in infrastructure and also come to be seen as a cash cow, from black market saboteurs to validly elected politicians.

As such keeping prices low buys him some more time, with many Nigerians still on a high after their historic revocation of the PDP-dominated social contract, which saw an opposition party dislodge the ruling party for the first time.  

However, what Buhari fears is already happening and may tax many Nigerians’ patience. The curb on hard currency financing on dozens of exports has led to increases of basic prices in the shops cutting consumer spending; unemployment figures are rising, while productivity has fallen. 

Arrears to the oil industry have led to shortages at the pumps-one standoff with importers in May hit consumers hard, with even the ever-present hum of electricity generators going momentarily quiet.  

The country’s balance sheet is also weak. Buhari in June said he has inherited “virtually” empty coffers from the previous government, blaming it on their “bad management”, while the stock market is down nearly 10% this year. 

Expected economic growth of 4.8% this year would be about half the average of the last 10 years, while increased resources on the war against terrorism are expected to further pile on the debt.

Buhari is asking the people, Africa’ most populous, to be patient as he cleans the Augean stables; decades of doing things unaccountably will take time to reverse. 

However, more debt means the state would naturally look to plug deficits and increased taxes (even hidden ones such as inflation) especially on firms are an easy route. This means both the employers and ordinary Nigerians will continue to struggle with the state’s reduced capacity to deliver on public services and infrastructure. 

While Nigerians are famously resilient, the stability truism remains: the state’s power is often derived from how much space it allows individuals and corporates to generate a profit. Right now, it is not too much. The clock may very  well have started ticking on Buhari.