Nigeria Struggles As Buhari Wrangles With Budget, Naira

Recent pressure from the International Monetary Fund to devalue the currency appears to have been rebuffed by Nigerian President Muhammadu Buhari ©Patrick Hertzog (AFP)

When Nigerian President Muhammadu Buhari finally swore in his cabinet in November, nearly six months after taking office, he hoped to shake off his nickname "Baba Go Slow".

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But troubling errors in the budget of Africa's largest economy and the continuing free fall of the naira on the black market have both Nigerians and investors worried that Buhari still isn't moving fast enough to address a deepening economic crisis.

Since its peak in 2014, the global price of oil -- which accounted for two-thirds of the Nigerian government's revenue -- has plunged by 70 percent, decimating economic growth and the naira.

In response, Buhari announced a record ₦6 trillion (US$30-billion, €27 billion) budget promising to triple investment to stimulate growth.

Yet his budget proposal was pockmarked with mistakes, repetitions and, given the circumstances, extravagant demands.

The errors include the same purchases for vehicles, computers and furniture that are duplicated 24 times, totalling ₦46.5 billion.

This opens the door for graft, according to Oluseun Onigbinde, co-founder of BudgIT, a Nigerian transparency group.

"It clearly showed there was foul play," said Onigbinde said.

"Nigerians are in a crisis period with the price of oil dipping below US$30 dollars, so there should be a budget in line with the mood of the time," he added.

Buhari on Monday sacked the director-general of the budget office and appointed former banker Tijjani Abdullahi to take the helm.

Now there are serious revisions to be made before Buhari can sign off on the budget and inject Nigeria's sputtering economy with much-needed cash. It's a process likely to take months.

"We need more speed on this thing," Onigbinde said, "he (Buhari) should have moved faster when he got into power."

People hold placards calling on Nigerian President Muhammadu Buhari to keep electoral promises during a demonstration in Lagos to protest a 45 percent hike in electricity prices ©Pius Utomi Ekpei (AFP)

- Policy paralysis -

The budget confusion is yet another deterrent for investors already reluctant to invest in the country as a result of Buhari's monetary policies, which have caused a severe dollar shortage and the naira to hit unprecedented lows of ₦340 against the dollar on the black market.

Nigeria has frozen the naira at ₦197-₦199 to the dollar for almost a year in a bid to protect the poor, while the government has banned a wide range of imports -- including toothpicks and shovels -- to conserve foreign exchange reserves.

The policy has been criticized by international investors, who say pegging the currency and restricting imports is futile and only serves to suffocate growth.

Recent pressure from the International Monetary Fund to devalue the currency appears to have been rebuffed by Buhari, who declared last month "I won't kill the naira" and promised the country's economy will "stabilize soon".

"Investors aren't confident because there isn't a clear path forward," Rand Merchant Bank Africa analyst Nema Ramkhelawan-Bhana told AFP.

"As long as those budget delays are happening it means that the central bank is going to have to do the heavy lifting for the economy," she said, speaking from Johannesburg.

"The worst case scenario is policy paralysis, particularly what we've been seeing with the central bank and foreign exchange policy."

- Stoking inflation -

Instead of protecting the poor, the policy vacuum is stoking inflation on the streets of Lagos, Nigeria's commercial hub, where people bemoan the price of previously affordable staples.

"A plate of rice that was sold for ₦200 in December is now ₦350. Customers are complaining because they don't get the same ration like before," street food vendor Mary Idowu told AFP.

A 50 kilogram (110 pound) bag of rice that used to cost ₦9,000 now costs ₦13,000, while a bag of beans has gone up from ₦12,000 to ₦15,000, she said.

"Whenever I try to explain why prices are high, they flare up," Idowu said about her customers.

Rising food costs pushed the inflation rate to 9.6 in January -- above the bank's target range -- with no sign the pressure will ease anytime soon.

"Prices are rising, despite attempts to keep the official Nigerian naira exchange rate unchanged," said Standard Chartered Bank economist Razia Khan.

"It is unfortunate that our policy makers are very slow at responding to critical issues," said Lagos Business School political economy professor Pat Utomi.

"The government should realize it cannot continue to defend the naira because it does not have enough reserves to do so," he said.

"Ultimately, the naira will find its true value whether we devalue or not."