The new president's policies must provide the right business environment that favors investment in Nigeria.
I once called a taxi on a hot sunny day in Lagos—Nigeria’s financial capital—with the Uber app. It was my first time using the taxi service, and I was impressed to see a Mercedes Benz S500 pull next to the curb a few minutes later. The well-dressed driver had a worried look on his face. He turned to ask for my destination with a plea: “I hope you are not going too far sir. I don’t have petrol (as gas/fuel is commonly known in Nigeria). I could only get a gallon on the black market.” Thankfully, I was headed just a few blocks down the road.
Doing business in Nigeria is rife with peculiar risks and uncertainties. The business climate is scarcely stable, but investors with healthy risk appetites stumble over themselves to invest here. Stories of mouth-watering profits abound. With a population of over 170 million people, Nigeria is Africa’s most populous country and biggest economy. The economy has grown by an average of 7 percent for the last decade. It is expected to continue at a slightly lower trend of 4 percent due to the war against the militant group (Boko Haram) in the north east region and drop in global oil prices—which accounts for two thirds of the government’s income and foreign exchange earnings.
The country’s growth is, however, ghastly uneven—income disparity and poverty levels between the south and north of Nigeria is mindboggling. Working out of the financial districts in the southern state of Lagos, with its skyscrapers and posh residential districts, you will be forgiven to project Nigeria as Africa’s economic success story. A few hundred miles from Lagos to the northern state of Zamfara—during my yearlong mandatory national service—shattered this perspective. I was bewildered to see children covered in flies sorting out half-rotten food from trash cans into waiting plates. Here poverty isn’t just statistics; it is a way of life.
A recent report of World Bank experts pondered “how an economy of its size and wealth, maintained such high poverty rates.” These growth discrepancies show the deep failings of the Nigerian government. In most places, it simply does not exist. The economy for all its success is propelled by private investors who thrive despite numerous government hurdles. Were Nigeria able to replicate the spread of economic growth broadly across the country, it is likely to attain double digit growth figures and boost development on the continent far beyond its borders. This will not be easy, but the tide might be set to change.
Nigeria’s recent election—its most keenly contested—produced a new president-elect; Muhammadu Buhari, a respected former military dictator. But Mr. Buhari faces an uphill task. Low oil prices have left the government unable to fund its budget. The currency (Naira) also crashed to record low levels with external reserves falling below $30 billon from a peak of over $60 billion. For a country largely dependent on imports, the drop is fuelling a rise in commodity prices.
However, the APC—Mr. Buhari’s party—enjoys some goodwill. The party has governed Lagos for 16 years, and made remarkable strides to revamp the city’s infrastructure, funded by an overhauled tax system and the introduction of business friendly laws. It also has a depth of proven technocrats within its ranks; like the state’s current governor. Mr. Buhari will be wise to tap these resources in his attempt to replicate similar development on a national scale. His government needs to expand Nigeria’s tax base—to replace the shortfall from slummed oil prices—and remove the ruinous fuel subsidies which have become a fraud scheme.
He was elected on his ambitious campaign pledge to curb massive corruption. As a dictator nearly three decades ago, he attempted to clean the corrupt system with brute force. He was removed for his trouble a few months later in a coup. His new stint in charge will pitch him against a more enshrined system. He will require tact, not force, to deliver on the aspirations of millions from the poorer regions who voted him into power. Ultimately, ensuring an even distribution of growth and development across the country will decide his legacy. Improved security and the removal of the sharia law system in the north will be a good start to make its vast arable lands and teeming labor force irresistible to investors.
Nigeria is any investor’s dream. It houses an abundant mix of cheap labor, natural resources and energetic entrepreneurs. It also borders trade routes through the Atlantic Ocean and has a huge local market. Opening up the economy will usher unprecedented growth. Mr. Buhari only assumed office a few days ago, but optimistic investors are already itching to dig in. The markets rallied to a four year high following news of his election victory.
A few months before I left Zamfara, I offered a young boy (Hassan) some food while he fiddled through a trash can. He returned every day after to clean in exchange for a stipend. He did not ask for much—just a shot at survival and perhaps some human dignity. These are the ones Mr. Buhari cannot afford to let down. His policies must provide the right business environment that favors investment and propels employment to our most vulnerable citizens.