NIGERIA president Muhammadu Buhari’s stern and evolving leadership of a country that he has himself termed “unruly” has captivated many watchers of Africa’s biggest economy and most populous nation, but by the time IMF chief Christine Lagarde jetted in, he was seemingly all mellowed.
Tough curbs on imports and foreign exchange controls in the face of plummeting global oil prices have left many within and outside the country grumbling, as Buhari’s moneymen determinedly held the line against the deep, and often savage, criticism. But the president has been recently saying he is open to the idea of a currency devaluation—a topic that had until now anathema to both his political and economic agenda.
“I don’t support devaluation. Personally I don’t want to,” Buhari said last week. “I need to be convinced.”
A week earlier, the president had, in anticipation of the IMF visit, for the first time signalled he was open to the idea, saying the central bank was tweaking the management of foreign exchange and would introduce “some flexibility” to encourage inflows.
Lagarde will have done much to further convince him, as she both backed him economically (and politically) while soothing the nerves of both investors and neighbouring countries which are key trade partners.
All that was needed was a bit of “flexibility”, she said in public messages after she met Buhari and his officials behind closed doors Tuesday in Abuja as part of a four-day visit to the country and Cameroon, saying this would help lift poor Nigerians.
”Nigeria with a vibrant and large economy still has to deal with a lot of poor people with a lot of inequality. Those two components should always be the drivers of reforms. Whether it is looking at subsidies, and how they are structured and how they can be phased out; whether it is monetary policy and the flexibility needed, and how all that impact on the poor. All of those are additions, which we completely recognise and support.”
The country’s currency has been all but fixed at 197-199 per dollar since early March, with the central bank curbing foreign exchange trading and introducing import controls after the naira dropped to a record low and oil prices plunged, battering the economy. The government relies on crude exports for about two- thirds of its revenue, even if oil receipts are only 14% of the country’s GDP, services having become the main player in the economy.
Given the dip in revenue, and the IMF’s reputation as a tough lender of last resort, Lagarde was quick to highlight that Nigeria would be just fine, leaving Buhari on strong political ground while signalling to investors and trade partners that any kinks would be ironed out.
“Let me be very clear: I’m not here nor is my team here to negotiate a loan with conditionalities, we’re not programming negotiations,” she said.
No IMF programme needed
“Frankly, given the determination and resilience displayed by the presidency and his team, I don’t see why an IMF programme is going to be needed,” she told reporters in Abuja, even as she bristled at suggestions that the IMF was generally anti-poor, terming such views as “outdated”.
An IMF team will next week review the country’s recently-presented budget, providing the sought-for hard numbers and advice on policy direction. Nigeria last month unveiled a 6.08-trillion-naira (about $30-billion, 27-billion-euro) budget, increasing investment on capital expenditure to stimulate growth and lower dependence on crude exports
Africa’s number one oil producer has seen revenues dive over the last year because of the fall in global crude prices, causing a cash crunch that has forced it to tighten spending.
GDP growth has stalled to under 3%, while inflation is nudging 10%, setting many on edge given the country’s economic importance and market attractiveness.
Lagarde also said the talks had touched on the need to find different revenue sources for the country while increasing its competitiveness.
Buhari has made reviving the flagging economy one of his key priorities alongside cutting endemic corruption and government waste, and improving transparency and accountability. He has already hauled big names to court—his party symbol is a broom, signalling a sweeping-clean of the country’s much-dusty public slate.
Lagarde said the priorities were “very ambitious goals that need to be delivered upon”.
Analysts say the commercial health of the region is a priority for Lagarde’s trip. She is due to end her visit by meeting finance ministers from the six member countries of the Economic and Monetary Community of Central Africa (CEMAC), delivering a speech on January 8.
“There was mention of the reform agenda, what Nigeria might do to cope with this period of oil price weakness, but also the policy response from Nigeria and the impact on surrounding countries,” said Razia Khan, Africa economist at Standard Chartered Bank in London.
“One of the ways that Nigeria has chosen to deal with the pressures of weaker oil prices is control the demand of imports, by restricting the foreign exchange market,” she told news agency AFP.
“That has caused an impact on trade with neighbouring countries that will be a concern not just to Nigeria but also some of those countries that are very reliant on Nigeria.”
At the end of it, all will have breathed a huge sigh of relief, especially with oil prices expected to remain subdued into the year.