Nigeria is a nation that should be doing far better economically than it has been and there are no shortages of reasons why this is true. However, the country has just experienced a rare event: a peaceful transition of power to a new leader through the democratic process.
There was no coup this time and relatively little violence before, during and after the vote that elected President Muhammadu Buhari, a former general who once came to power in one of these coups. While this inspires hope with some analysts, he has a major task before him.
The most obvious asset in Nigeria, oil, is also something of a curse. Nigeria’s budget dependence on oil reserves exceeds 90%. When the price per barrel is high, the Nigerian economy has plenty to work with; but when the price per barrel is as low as it has been of late, the budget is strained. Furthermore, the Nigerian producers lost some of their most important markets as the U.S. buys little from them these days and European demand is likewise down.
Oil is also the center of corruption in the country—something the Buhari regime, like many that came before his, promises to be committed to rooting out. The country is regularly listed as one of the most corrupt in the world, which is not something that will be easily addressed. Buhari has a reputation of being clean and committed to dealing with this corruption, but the same can’t be said about the many political leaders elsewhere in the country, especially those in the oil sectors.
Additionally, the ongoing insurgency effort continues to weigh as a security concern in the oil areas, which is stoked by the problems that are visited upon the populations that live in the oil regions. These are the people who routinely attack the oil infrastructure, kidnap and intimidate workers, all generally inhibiting the development of this oil. The estimate is that Nigeria is only producing about half the oil it could due to these attacks. Boko Haram leaders have only stepped up attacks in recent months and recently affiliated with Islamic State forces. The Nigerian army has not been effective at combating this thus far.
According to a World Bank ranking, Nigeria ranks 170 out of 189 states assessed for difficulty of doing business. Every aspect of starting and running a business—from the arbitrary tax system to poor basic infrastructure—is hard, and there are far more disincentives than encouragements. Most foreign companies consider assignments here to be hardship posts and must pay more for those expats willing to give it a try.
For the sake of Africa, there is a strong desire to see Nigeria emerge as the nation it has the potential to be; but the task seems daunting at best. The enthusiasm for Buhari is genuine, but the corrupt patterns in the country look to be persistent.
- Chris Kuehl, Ph.D., NACM economist and co-founder of Armada Corporate Intelligence