The big news after the World Economic Forum in Abuja is the assumption of office by Nigeria’s new Central Bank Governor Godwin Emefiele, after a tumultuous spell that followed the controversial suspension of Sanusi Lamido Sanusi, with less than four months until the end of his tenure.
Before his appointment, Emefiele was CEO of Nigeria’s Zenith Bank. Widely described by local media as conservative, Emefiele is expected to depart from Sanusi’s outspoken and hyper-visible stance. While Sanusi never shied away from making his views known on everything from government spending to relations with China, Emefiele is likely to maintain a penchant for anonymity.
He has already announced some policy changes, while also expressing a commitment towards Sanusi’s trademark stance on exchange rate stability. Charges on cash deposits in banks, instituted by Sanusi as part of an aggressive cashless banking policy, have been removed. Emefiele also plans to bring down interest rates, even though it is not yet clear how he plans to do this. An air of uncertainty will continue to dominate as the new Governor gets settled and concrete signs of the direction of his tenure start to emerge.
One of the biggest challenges facing the managers of Nigeria’s economy will be controlling the impact of election campaign expenditure. Election cycles in Nigeria witness a surge in spending on advertising. The country’s fuel subsidy budget notoriously ballooned four-fold in the lead-up to the 2011 general elections. Inflation, brought down to a single-digit figure under Sanusi’s watch last year, will experience significant upward pressure.
The effects of the rebasing of Nigeria’s economy in April have started to manifest. Nigeria’s weighting on the 23-member MSCI Emerging Markets Index recently rose from 12% to 19%. Analysts have suggested that the rebasing will heighten interest in Nigeria’s bond markets. A bigger economy also means that Nigeria’s appetite for debt has increased. Debt-to-GDP ratio has dropped to 12%, from 20% pre-rebasing.
The Petroleum Industry Bill remains unpassed and chances of it getting the green light dim as the elections approach and campaigning overwhelms the legislators. The Minister of Petroleum Resources, Diezani Alison-Madueke, is involved in a last-ditch bid to convince Parliament to pass the bill, which will significantly alter the face the of oil industry.
Nigeria’s mounting security challenges are a major cause of concern, but the country’s immense opportunities – Africa’s largest population, a growing middle-class and growing consumer spending – mean that it cannot be ignored by any serious investor.
This much was clear from the enthusiasm on display at the World Economic Forum in Abuja in May. It was Nigeria’s first hosting opportunity in the forum’s 24-year history and was adjudged an overwhelming success – according to the organizers, attendance was at record-high levels – in spite of being overshadowed by security concerns and by the global outrage triggered by the abduction of more than 200 Nigerian girls from a boarding school in the country’s insurgency-hit northeast.
Chinese Premier Li Keqiang, who attended the forum, met with Nigerian President Goodluck Jonathan and signed a series of investment agreements in telecommunications, energy, agriculture and transportation.
Nigeria is currently China’s third largest trading partner in Africa; in 2013 trade between the two countries was in excess of $13 billion, up six-fold from a decade earlier. On the eve of the Abuja meeting, Chinese state media reported the signing of a $12.5-billion contract between China Railway Construction Corporation (CCRC) and the Nigerian Ministry of Transportation for the construction of a high-speed 1,385 kilometer railway line in Nigeria. It is not the first multi-billion dollar railway deal between Nigeria and China. Chinese companies are involved in the rehabilitation of the century-old line linking Lagos and the northern city of Kano, and a new light rail system in Abuja.
Agriculture Minister Akinwumi Adesina has said he’s expecting as much as $4 billion in private investments in the sector on the back of the most important meeting in African business. The World Economic Forum announced that the gathering resulted in $68 billion-worth of commitments to investments in Africa.
Against a backdrop of the forum’s themes of jobs and inclusive growth, there will be many be watching to see how the commitments translate into action. Only this will result in concrete benefits for Nigeria’s 170 million people.