Post-Elections: Nigeria’s Economy Picks Up Fast

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The general elections are over and Nigeria has a new president-elect in the person of General Muhammadu Buhari, who is to be sworn in on May 29, among other elected officers. Following the peaceful conduct of the elections, normalcy is beginning to return to the business circle as there is renewed confidence in the economy. Samson Echenim, Matthew Dike, Bukola Idowu, Olusola Bello and Samuel Abulude write.

Normalcy is beginning to return to Nigeria after the success of the 2015 general elections from which emerged a new president and a new political order. The year had started out slowly and almost inactive, except for occasional bumps in the business world mostly triggered by falling oil price and declining value of the local currency.

The postponement of the elections also saw a further delay in the burst of business activities as foreign investors held back on a cautious note in the first quarter of the year. Also, prior to the elections, many individuals had moved out of commercial centres which were believed to be flash points in the event of violence, thereby further crippling local business activities.

The fear by both foreign investors and local business operators were based on the various predictions of violence from within and outside the country as well as the violent turn previous elections had taken.

According to Okechukwu Maduako who hails from Nkwerre, in Imo State said, “life has no duplicate. When people were talking of violence before, during and after the elections, my wife was so worried that she could not sleep any more. She kept disturbing me on a daily basis that we should go home. According to her, it was better to die in our village than in another man’s land. You know the power of women. She called my elders in the village and they supported her. So, I had to travel with my wife and three children to the village. We returned recently after the governorship election. There was no opportunity for me to participate in the election”.

 Business Resumes

However, as the elections turned out to be without or with much less than expected level of violence, normalcy has returned and business has begun to pick up. According to the chief executive of the Financial Market Dealers Association of Nigeria (FMDA), Wale Abe, the volatility witnessed by the Nigerian economy just before the presidential election had witnessed calm immediately the winner of the elections was announced.

At the close of trading on April 14, 2015, the market capitalisation on the listed equities appreciated by N1.223 trillion to close at N11.941 trillion from N10.718 trillion it opened for the month of April. In the same vein, the NSE All-Share Index was up by 10.39 per cent to close at 35.043.44 basis points.

Most analysts noted that the success of the election had sent a possible signal to investors, stressing that increased foreign direct investment and foreign portfolio investment would drive economic growth. Foreign investors were skeptical on the Nigerian markets starting late last year, unnerved by political uncertainty before the vote as well as the sharp fall in the global price of oil which negatively impacted the currency, triggering devaluation in November.

Also post elections, the value of the naira which had soared to around N250 to the dollar at the parallel end of the foreign exchange market, gained strength and at a point was at par with the interbank rate of N197 to the dollar before stabilizing around N204.

 Investors Interest Triggered

Reviewing the elections, analysts at Meristem Securities Limited, said, “The voice of Nigerians seemed to have resounded loud and clear in the recently concluded presidential elections, as the people united to select their leaders, in spite of the overwhelming power of incumbency usually wielded in African elections.

They explained that given the significant international focus on the country, owing to Nigeria’s position as the largest economy and most populous country in Africa, coupled with the body language of foreign observers and stakeholders which, in their opinion, suggested a preference for Buhari’s candidacy, they expect a turnaround in the nation’s economic fortunes.

“This, we believe will be driven by increased inflow of foreign direct and portfolio investments into the country driven by improved perception of the country’s potentials by foreign governments, investors and rating agencies”, they added.

The chief executive officer of Highcap Securities Limited, Mr David Adonri, said: “The election is over and people have started gradually coming back into the market and other areas of the economy would also start gathering momentum”. He pointed out that the gains witnessed in the capital market is, according to him, “Expected to continue, as we foresee more investors expressing willingness to partake in this rebound”, he said.

FMDA chief executive, Wale Abe, explained that with the peaceful elections, “There has been a calming down of the volatility we had in the different segments of the market and the confidence level immediately came back which is a perception of the fact that the country was likely to fare better than where we were coming from”.

Adding that there has been a relative stability in the Nigerian market after the elections, Abe said: “We must take note of the fact that the APC has not come up with economic agenda but from the economic issues that formed part of the campaigns, we could deduce the kind of thinking of the party and that is to say that the economy will be managed better and we would be diversified away from oil.

 After Elections, What Next?

Speaking on the outcome of the election and expectation for the economy in 2015, the managing director of Wema Bank, Mr Segun Oloketuyi, recently said, measures to curb weakening exchange rates, implementation of the reform agenda, and administration of the 2015 budget should be put in place on time.

Others that will sharpen the election, he said, include declining oil prices, diversification of the economy, dampened global growth forecasts and passage of the petroleum industry bill.

Also the industry stakeholders foresee increased investment inflow into the economy. According to the director general of Lagos Chamber of Commerce and Industry (LCCI), Mr Muda Yusuf, what the country needs right now is a structural adjustment of the entire economy to reposition all the sectors for tangible growth and development. “This implies that we change the structure of our economy from what we have now to encourage industrialisation”.

According to him, this is the time for Nigerians to look inward to boost productivity in the economy. “Government should invest massively in infrastructure development to increase productivity domestically. We should realise the fact that our economy has been dependent on revenue from crude oil for a very long time, so the process of diversifying the economy cannot be achieved over night. It has to be done systematically and all hands must be on deck to turn the economy around in order to move the country forward.

“At present, our economy is facing the problem of weak productivity, locally. And for us to improve on domestic productivity, we need an enabling operating environment for industries to thrive and expand their operations. Once we are able to improve local productivity, the rate of unemployment and poverty in the country would reduce. As such, there is the tendency that the economy would experience more investments and income inflow”, Muda said.

The managing director and chief executive of Financial Derivatives Company Limited, Bismark Rewane, on his own part noted that while post-election violence had been a major risk factor for the country, Nigeria’s economy is set to rebound by the second and third quarter of the year. Particularly, he said the real estate industry which had witnessed a lull in the first quarter would begin to see a shift from supply towards a balanced market by the second quarter of the year.

Noting that the incoming All Progressives Congress (APC) led government will face resistance from “outgoing administration as patronage networks is dismantled”, he said, an attempt to politicise economic policy will slow the gains of the reform agenda of the outgoing government.

He however stated that the fiscal expenditure will remain dominated by recurrent spending as subdued outlook for oil will continue to drive fiscal deficit. Rewane also projected that the business environment might remain unchanged in 2015 due to infrastructure problems.

For stakeholders and investors in the maritime sector, genuine reform and development of the sector would begin with total rehabilitation of the Lagos seaport road. About 70 per cent of shipping and importation is done in the three major ports on the Kirikiri-Apapa axis of the Lagos metropolis. Despite this, the Oshodi-Apapa Expressway remains perennially gridlocked while the Wharf Road is fast dilapidating due to the heavy traffic of trucks and other heavy-duty vehicles that has greeted it following the abandonment of the expressway.

The founder of the National Association of Government Approved Freight Forwarders (NAGAFF) Dr Boniface Aniebonam tasked the president-elect, General Muhammadu Buhari, to focus on rehabilitating and opening up the roads leading to Apapa and Tin can Island ports to address the perennial gridlock on the port access road.

Aniebonam said the perennial traffic jam currently being experienced at the port had impacted negatively on cargo turnaround time and would persist until the roads were concretely repaired. For maritime capacity expert, Mr Lanre Badmus, the time to unbundle regulatory agencies in maritime is now. Badmus said the incoming Buhari-led administration should break away from tradition and jettison successive governments’ laissez faire approach to merchant marine, if it truly desires to create a modern and prosperous national economy.

“As a big trading country, one important focus is making Nigerian ports globally competitive. The incoming administration should consider the option of transforming Nigerian Ports Authority (NPA) into a state enterprise or corporation like PSA International of Singapore or Transnet National Ports Authority of South Africa. NPA Corporation Limited, wholly owned by the federal government of Nigeria, will be the main holding company for all government-owned ports and terminals, able to compete and invest in port related businesses within and outside the country”, he stated.

The burden of multiple taxation, high cost of aviation fuel and the urgent need to eliminate deep-rooted corruption in the aviation sector have topped domestic airline operators’ agenda for the president-elect, General Muhammadu Buhari.

The chairman of the Airline Operators of Nigeria, (AON), Captain Nogie Meggison, told journalists in Lagos recently that the burden of multiple taxation on local airlines, including value added tax (VAT) and packing charges imposed on Nigerian airlines operating in the country had been the major bane of growth of the industry.

Meggison, therefore, urged the incoming government to come to their aid by removing the airlines’ landing and packing charges that were imposed by different agencies of government, stressing that foreign airlines operating in and out of Nigeria were not paying the charges.

He also called on the incoming government towork on stabilising aviation fuel for local airlines, even as he noted that the government would need the co-operation of fuel marketers and airline operators to reach a friendly aviation fuel cost regime.

 

Source : Leadership

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