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Business, Economy

Nigeria counts losses as delay in ministerial appointments hits investors

There are signs of growing discomfort among investors over the delay in Nigerian President Muhammadu Buhari’s appointment of cabinet ministers and it is taking a toll on businesses and the economy.

More than a month after Buhari was sworn in for a second four-year term in the month of May, local and foreign investors are in the dark over who heads which ministry, particularly key positions like finance as well as industry, trade and investment.

Being a developing country with a history of policy inconsistencies and a public sector that is larger than life, foreign investors typically interface with high-level government officials – a category ministers fall under – to set an investment in motion. This way, they hope to get some assurance over the safety of their investment dollars.

The uncertainty over the identity of Nigeria’s next batch of ministers has led some foreign direct investors to hold off on potential big-ticket deals while portfolio investors are beginning to redirect cash to other countries that are ready for business, two chief executive officers of leading financial houses told BusinessDay.

According to them, some foreign government agencies and Development Finance Institutions (DFIs) are also staying away or not engaging because there are no ministers.

“There are people who are currently negotiating to invest in the country but they are waiting to see those that would be appointed to engage with them,” one of the CEOs whose investment firm manages over a thousand foreign clients said.

“Whenever we engage with investors, they are curious about knowing who the new minister of finance and who the new minister of trade and investment would be,” another CEO confirmed

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A six-month delay in the appointment of ministers during Buhari’s first term formed part of the recipe for an economic recession in 2016 after it contributed to a steep decline in foreign investment.

Total foreign investment into the country nearly halved to $5.1 billion in 2016 from $9.6 billion in 2015, and was down 75 percent from $20.8 billion in 2014, according to NBS data.

Many Nigerians and international observers had expected President Buhari to hit the ground running in his second term.

“There is nothing to suggest that we have learnt the lessons of 2015,” an independent economist who consults for one of Nigeria’s state governments said on condition of anonymity.

“It adds like an extra 50 basis points on the country’s risk premium,” the economist said.

Yields on Nigeria’s benchmark 10-year Federal Government bond have ticked upwards, albeit by a mere 4 basis points to 14.39 percent as at July 2, from 14.35 percent at the end of May.

Traders say yields have reacted more to the movement in oil prices and the stability in the naira than the delay in ministerial appointments.

The performance of Nigeria’s publicly-quoted companies has been woeful. Stocks are down an average of 6.5 percent since the beginning of 2019. Blue chips from Dangote Cement to Guaranty Trust Bank have been hit by negative investor sentiment no thanks to the perceived lack of urgency in the implementation of reforms needed to boost economic growth.

“These delays are becoming the norm in Nigeria and it shows how unserious we are as a nation,” a former public official told BusinessDay.

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The delay slows down the pace of critical reforms since action typically comes from the ministerial pool, not civil servants who want things to remain as they are to extract rent.

“That gives the impression that we are not keen on implementing the reforms that will open up the economy,” the former government official added.

At 2 percent, the economy is growing at a rate below that of the population (2.6 percent). It means per-capita GDP is on the decline which the IMF expects will last eight years if Nigeria continues to hold off on critical reforms in power and the oil sector.

Some sources, however, told BusinessDay that President Buhari is set to release a list of nominees to the Senate.

They blamed the delay on the inability of the Senate to constitute its principal officers, especially the election of the Senate Leader whose responsibility it is to announce such requests from the President.

BusinessDay findings show the President had on Monday invited the two senior special assistants in charge National Assembly Matters, Ita Enang (Senate) and Umar Yakubu (House of Representatives) to a closed door meeting.

The meeting, BusinessDay gathered, was summoned ahead of Tuesday’s resumption of the National Assembly for full legislative business.

Although the list is ready, our correspondent at the Presidential Villa was told, the President has kept the names of nominees as a top secret.

For President Buhari, forming a cabinet might not hold much weight for the economy going by a statement he made in an interview with a French TV station France 24 in 2015, where he argued that “ministers are noise makers”.

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However, if examples from other countries are anything to copy from, it took South Africa’s President Cyril Ramaphosa only 96 hours from the day he was sworn in to appoint a cabinet.

Immediately the 66-year old president announced the naming of the ministerial cabinet, it sent a signal of his readiness to hit the ground running. The South African rand reacted positively, gaining some 0.5 percent against the dollar, after an initial loss of 1 percent prior to the announcement.

By LOLADE AKINMURELE & MICHAEL ANI, Lagos, & TONY AILEMEN, 

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