The Sunday Mail
THE shelves of the Visible Difference corner-shop are half empty, where once they were weighed down with oil, biscuits and soap.
Yusuf Hassan, who has proudly run this little business in the northern Nigerian city of Kano for two decades, stands forlornly in front of them.
“Everything is so expensive now,” he says with quiet frustration.
“I almost closed the shop. I have had to borrow money just to pay rent.”
The economy soon to be inherited by Muhammadu Buhari, who was elected last week as Nigeria’s president, is in a bad state.
It is Africa’s biggest, with huge reserves of hydrocarbons, an attractive market of 170 million people and a fast-growing services sector.
But its continued dependence on oil is a big problem. The resource still accounts for 95 percent of foreign earnings and two-thirds of government revenue.
Since June prices have declined by half, draining coffers and highlighting the failure of the outgoing government to save during the boom years.
Oil’s plunge, in turn, has sent the local currency, the naira, into a tailspin.
It has fallen by 18 percent against the dollar over the past six months – grim news for an economy that imports everything from milk to cars.
After talking about interest-rate cuts when he took office last year, Godwin Emefiele, the governor of the central bank, reversed himself and hiked rates to a record 13 percent in November in a bid to defend the plunging currency.
Yet inflation, now at 8,4 percent, is still rising, prompting complaints from the likes of Mr Hassan.
It will reach double digits in the coming months, says Razia Khan of Standard Chartered, a multinational bank.
Analysts at Merrill Lynch, an investment bank, reckon that rates could reach 15 percent before the end of the year.
Over the past decade the economy has grown by an average of almost 7 percent a year, but the IMF projects an expansion of just 4,8 percent this year.
Jittery international investors have pulled out in their droves, wiping almost a third off the Lagos Stock Exchange’s main index since oil prices started their fall.
Big Nigerian businessmen like Aliko Dangote, whose conglomerate accounts for a quarter of the market’s capitalisation, have lost billions of dollars as it plunges.
Just before the elections, Standard & Poor’s downgraded the country’s credit rating to B+, four levels beneath investment grade.
The elections have made matters worse.
The political uncertainty contributed to foreigners’ anxiety. The refrain “after elections” has been echoing around the hotel bars where rich Nigerians talk shop.
An official in the finance ministry suggests that politicians on both sides accelerated the naira’s fall by converting huge sums into dollars.
(Such high-value foreign notes, the theory goes, take up less space in the suitcases they use to haul cash around on the campaign trail to buy support.)
Mr Buhari has pledged to crack down on corruption – a mammoth ambition. Optimists hope he will get to grips with other problems as well, including chronic under-investment that has left Nigeria with clogged roads and patchy power.
But the new government will have little wriggle room. It will have to borrow more to make up for the shortfall in oil revenue.
Public debt is low, at 12 percent of GDP – but so is non-oil revenue to service it. As it is, the government is paying 9 percent of its revenue in interest.
A 500 billion naira ($2,5 billion) bond matures this month, and must be refinanced.
The cost of fuel subsidies has at least fallen along with the price of oil.
But more budget cuts will be needed.
Road-building and other construction may be frozen because there is no money to pay contractors.
Mr Buhari will need to pay for his promised campaign against Boko Haram, the Islamist insurgency that is plaguing the country’s north-east.
He is also likely to extend a costly amnesty, expiring this year, which has maintained relative calm in the Niger delta, the source of much of Nigeria’s oil.
Poverty is still widespread and severe.
It makes you wonder why Mr Buhari wanted the job. – The Economist.
