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2016-08_dc

D+C  e-Paper  August 2016 43 Comment Hard time to be president Nigeria’s economy is in a desperate state. Whether President Muhammadu Buhari will manage to turn things around, remains to be seen. In June, the national currency was unpegged from the dollar. The step shows that the government is aware of the chal- lenges, but does not prove that it is up to them. By Ibrahim Mohammed According to official data, Nigeria’s economy went into recession in this year’s second quarter, contracting by 0.36 %. The downturn has several reasons. The most important one is the low oil price on world markets. Problems are com- pounded, however, by violent unrest hav- ing reduced oil production in the Delta region by about one third. Inflation has been rising. Consumer prices are rising fast and so is unemployment. Many peo- ple struggle to make ends meet. The Boko Haram insurgency in Nige- ria’s north-east is primarily an issue of security and politics, but it obviously has a bearing on the economy too. For one thing, it requires military attention and, implicitly, government funds. For a long time, the Buhari administra- tion seemed to be in a state of denial about the state of the economy. The president apparentlyhopedthatitwouldbepossibleto lead the country out of the slump by clamp- ingdownoncorruptionontheonehandand letting the government play a commanding role in the economy on the other. Buhari headed Nigeria’s military gov- ernment in themid-1980sanddeclareshim- self to be a “converted democrat” now. Until recently, however, he had not backtracked from a 1980s approach to economic poli- cies. Back then, leaders of former colonies basically believed that they could develop and diversify the economy by ordering com- panies what to do. A fixed exchange-rate, in this context, was a matter of pride. Buhari won the presidential elections in 2015 because his campaign promises attracted many voters. He pledged to fight the all too common abuse of public office for private gains. Moreover, he said he would reclaim funds that had been lost to corruption. Nigerians are fed up with living in pov- erty while a small elite siphons off the coun- try’soilwealth.Alittlemorethan60%ofthe people were living in poverty at the begin- ning of this year, and that ratio has surely increased in the current economic crisis. It adds to the problems that Nigeria’s government must bring order to public finances. Last year, the president ordered the central bank to bail out 27 Nigerian states so they could pay outstanding sala- ries. The budgets of 36 states and almost 800 local governments have a tendency of sinking ever deeper into the red. Buhari is an unlucky president in one important respect: he assumed office when the economy started to deteriorate. It was not his fault that the oil price slumped, but it radically restricts his policy options. Last year, Vice President Yemi Osinbajo said that the new government was inheriting the economy in its worst moment in his- tory. Previous governments could rely on huge oil revenues, but the Buhari admin- istration must cope in leaner times. In a dramatic change of policy, Nige- ria’s central bank unpegged the naira, the national currency, from the dollar in June. Earlier, one dollar had officially cost 199 naira. Today, it costs 280 naira. The new currency regime has impor- tant upsides: ■ ■ First of all, it means that Nigeria’s for- eign-exchange reserves are not depleted as fast as they were when the govern- ment guaranteed an excessive exchange rate. Indeed, it was beginning to run short of dollars. ■ ■ The black market in which currencies were traded has lost its relevance. ■ ■ Nigerian exports become cheaper, and that trend should stimulate the economy. However, the new currency regime also has downsides. The most important is that imports are now more expensive, and consumer prices have risen even faster as a result. Moreover, Nigeria really has only one major export good: oil. It is traded glob- ally, and the national exchange rate has lit- tle bearing on the world market. Therefore, the devaluation of the naira will probably not have a huge impact on exports. Buhari has great policy aspirations. Peo- ple believe he is serious about wanting to endcorruptionandquenchingboththeBoko Haram insurgency and the Delta crisis. If he cannot get a grip on the economy however, he will struggle to achieve anything at all. Ibrahim Mohammed is a Nigerian journalist. [email protected] Protest at rising prices in view of fuel-subsidy cuts in Nigeria. Alamba/AP Photo/picture-alliance Debate

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