26 May

Two years in, how has the Buhari government fared?

On May 29, 2017, the Buhari administration will have spent two years in charge of Nigeria, reaching the halfway mark in running with the mandate Nigerians collectively handed to them in the 2015 General Elections. Just as importantly, President Buhari’s party, the All Progressives Congress, would have spent two years with the majority of seats in the two chambers of Nigeria’s National Assembly, apart from being the ruling party in 24 of Nigeria’s 36 States.

In the lead up to the 2015 elections, the Buhari Campaign made 171 promises to Nigerians, at different campaign stops, and in several documents, forming the basis of a social contract between the incoming government and the people whose votes they desperately sought. SBM Intelligence curated these promises back in 2015, and has since released two reports comparing actual performance to the expectations set by President Buhari’s campaign.

The first report was released at the 100-day mark of this administration; and the second, a year ago when the administration reached its first year. This report seeks to provide an updated performance review, at this administration’s midpoint. It also makes a comparison to the previous review, to determine if there have been improvements over the past year.

We started our 2016 performance review report by quoting President Buhari’s declaration during his 2016 Workers’ Day address that: “Tough times will soon be over”. We closed the first part of that report by saying, “Clearly, Nigeria cannot afford the same dismal performance in the next 12 months,” a reference to the poor assessment of the President’s first year. From every indication, it appears that the President’s declaration did not hit the mark and our warning went unheeded. The fact that government officials were chased out of the 2017 Workers’ Day parade in Abuja, is a graphic illustration of what Nigerians think about the administration’s job performance.

The table below provides a summary of key economic indicators over the period:

Index May 2017 May 2016 May 2015 Variance (2017 – 2015) Improved/Declined?
Inflation 17.24% 13.70% 9.20% 8.04% Declined
GDP Growth Rate -0.52% -0.37% 3.96% -4.48% Declined
₦/$ Exchange Rate (Official) 305 197 197 108 Declined
₦/$ Exchange Rate (Parallel) 385 350 220.50 164.50 Declined
Foreign Reserves ($bn) 30.8 27.1 29.6 1.2 Improved
Oil Production (mbpd) 1.48 1.4 1.65 -0.17 Declined
FAAC (₦bn) 467.8 409.3 281.5 186.3 Improved

Nigeria’s economic growth over the last five years has been driven by growth in agriculture, oil & gas, telecommunications, financial services and real estate. 2014’s statistical “rebasing” exercise which propelled Nigeria to a $500 billion+ economy also slowed future growth numbers. However, many sectors have remained vulnerable to shocks, especially the financial services sector. With economic growth slowing globally, the downward trend in crude prices and production volumes and the government policy actions or inactions have not helped with overall macroeconomic stability. When the GDP numbers are recalculated using today’s exchange rates, it drops to below $300 billion.
A drop in government revenues has created a climate of debt-ridden federal government and states unable to fulfil their basic commitments, let alone fund badly needed infrastructural programmes – a situation which has placed the federal government under even more pressure. Abuja is still unable to adequately fund its own budget and at the same time invest in power & road infrastructure, healthcare and education, nor can the government spend on social welfare programs which was promised during the election campaign.

The most recent figures released by the Nigerian Bureau of Statistics (NBS) show that Gross Domestic Product (GDP) declined by 0.52% in Q1 2017, albeit at a much slower pace than in the last 3 quarters, from Q4 2016 numbers which the NBS revised to a 1.73% decline. This means that Nigeria is still in a recession, but the slow-down in negative growth rates presents hope that the worst is behind the country and it can return to growth in Q2 2017. Both the oil and non-oil sectors of the economy experienced growth during the quarter, whereas, in 2015, the non-oil sector recorded positive growth rates all year long. Most worrying is the fact that Agriculture which accounts for 21% of Nigeria’s GDP while still growing, has slowed down significantly from almost 5% growth in the past. Economically however, the Buhari Administration needs to understand that its biggest challenge is not diversifying an already diversified economy, but diversifying government revenues. This will mean widening the very limited tax net while delivering on the promise to cut the cost of governance drastically. It is particularly untenable that in the face of dwindling government revenues, the cost of running government has continued to increase to record levels

Asides improvement of the economy, three of the most important drivers of the Buhari’s electioneering campaign were Anti-Corruption, Accountability in Public Service and Reduction of Cost of Governance. On the first two of these, there was marginal improvement by the government in comparison with its delivery in the first year but the scorecard is still too poor to definitively proclaim any significant progress. On Anti-Corruption, a low 33% performance score was recorded when measured against the promises, even though it is an improvement on the 17% recorded in the administration’s first year. This attests that the jostling between the government’s executive ability and the National Assembly is impacting on the Buhari administration’s ability to deliver so-called ‘dividends of democracy’ to Nigerians.

The Buhari administration has come under an unwelcome spotlight over two marquee issues: FOREIGN EXCHANGE POLICY & POWER REFORM.

The administration has somewhat softened its ‘strong naira policy’ in its second year although the Central Bank of Nigeria (CBN) had stopped short of floating the currency The announcement in June 2016 of a currency float which was initially met with delight from investors and the market, turned to be the start of a multi-exchange rate system that bred a mix of frustration and confusion while doing little to achieve the CBN’s intent of reining in the distortionary effect that short sellers and black marketers were having on the national currency. The Acting President, Yemi Osinbajo has indicated his dissatisfaction with the CBN’s FX policy, a move which might indicate that the primary reason for the current policy stance – the lack of political will to inflict short term and politically costly economic reform while reaping longer term benefits – might finally be crumbling.

The administration has had to deal with some unexpected (at least, from its perspective) push back from key players in the power sector. A simmering confrontation between power generating companies (GENCOs) and power distribution companies (DISCOs) has stalled the implementation of key portions of the government’s power sector reform agenda. At the heart of this are two of the crucial underlying issues dogging Nigeria’s power sector for years. On the one hand, there has been a shortage of the primary fuel that most of the country’s electrical installations run on – gas. Nigeria’s gas architecture, as currently designed, incentivises export and the struggling GENCOs have yet to secure gas supplies from either the NLNG or foreign sources at rates which they deem competitive enough to keep their operations solvent. Nigeria privatised its electricity sector in 2013, aiming to end decades of blackouts which have hampered economic growth. Most of the plants it sold were gas-fired, operating below capacity due to inadequate gas supply. Officials say demand for gas in Nigeria will rise to an estimated 3 billion standard cubic feet (SCF) per day by 2017 from 1.2 billion SCF per day in 2015, ten times the 300 million SCF of eight years ago. Nigeria has the world’s ninth largest proven gas reserves at 187 trillion SCF.

There may be some positive development in this space. The NNPC said in April that it wants to more than triple gas supply for local use by 2020, and the CEO of the Nigerian unit of US multinational General Electric said construction work on a gas turbine assembly plant in Calabar is expected to be completed in December 2017 with operations to start in the first quarter of 2018. A second and even more important issue is the debt load of the DISCOs which they have blamed on the unwillingness of end-consumers to pay market–priced electricity rates. An upward revision of electricity tariffs in late 2015 and a policy which permitted the DISCOs to cut-off long term debtors, which include government agencies and institutions, has done little to ameliorate an increasingly bleak picture. Coupled with the government completely exiting the distribution infrastructure space – which it still owns – it should the reform of the country’s biggest headache.

A principal element that will unleash the economic potential of Nigeria is the building of key infrastructure. While the campaign promises of the APC recognised this, the execution in the last two years leaves so much undone, with only 8% performance in such a critical category. It is also worrying that Job Creation, Housing and Social Welfare are in negative territory, for a country with a very large youth population, high population growth and an increasing percentage of people living in abject poverty. Today, there are no social safety nets and more and more people have fallen into poverty as a result of economic decline over the last two years.

Two key areas that affect Nigerians today and have significant impact on our future as a country, have also seen lacklustre performance from the Buhari Administration. Education has a mere 3% performance while healthcare has actually deteriorated by 8% over the last two years. When measured against events like the avoidable deaths due to meningitis, it is clear that this deterioration is already impacting Nigerians on the ground.

The government needs to bring those who are complicit in the mismanagement of funds meant for the IDPs to book. A situation where Nigerians have escaped Boko Haram and are subject to unspeakable conditions under the care of the government is unacceptable as it only creates a willing pool of recruits for the terrorists for rewards as basic as food and shelter. Situations where the government is seen to be more sympathetic towards citizen deaths in other countries but unconcerned when Nigerians are killed or dying avoidable deaths, only enforce an impression that the government does not care for its own citizens.

Download the report (13 pages)