“Whoever wins this election, loses.” Those were the words a foreign diplomat who has lived in Nigeria for 20 years used in depicting the arduous task ahead of Nigeria’s next leader and it is the reason many believe President-elect Bola Tinubu must hit the ground running from day one.
Tinubu, whose victory is still being contested in court, may have secured the weakest mandate of any Nigerian leader since 1999 on his way to victory, but he also landed what some describe as arguably the world’s toughest job.
In a week’s time, Tinubu will officially take the reins of an ailing nation that has been starved of badly-needed economic reforms.
The country’s economic rot has come to a head after years of warning signals and Tinubu will not have the luxury of papering over the cracks like several leaders before him.
His immediate predecessor, Muhammadu Buhari, borrowed to the hilt to keep the taps open on spending but that has left a huge burden for his successor.
Critics say there is little to show for Buhari’s excessive borrowing, but for Tinubu who inherits three times more debt than Buhari did when he was first elected in 2015, his concern will be how to boost revenues since he can’t borrow as much as Buhari did without worsening a precarious debt burden. Of every N100 that Nigeria earned in 2022, N92 was used to repay creditors, according to the International Monetary Fund (IMF), which predicts that the country’s debt service costs could swallow 100 percent of government revenues by 2026.
Tapping the central bank for bailout funds is also not an option for Tinubu, not after Buhari took an unprecedented and unlawful N22.7 trillion in the CBN loans, which have only just been controversially added to the country’s debt profile and converted to bonds repayable over decades.
Buhari also did Tinubu no favours by dragging his feet on unpopular and painful reforms that critics said could have been done after he clinched his second term ticket in 2019. One example of such reforms is the petrol subsidy removal.
Nigeria has resisted wise counsel and continued to subsidise petrol despite the fiscal mess it has created for the cash-strapped government.
Tinubu, who promised to halt the practice if elected, now has the unenviable task of biting the bullet and risking the ire of Nigerians, many of whom did not vote for him.
There’s also the difficult task of rebuilding investor confidence in the country’s broken foreign exchange market, where the gap between the official rate and parallel market rate is over 60 percent and legitimate businesses are forced to rely on the black market to meet their dollar needs. The system has spooked foreign investors and denied Nigeria’s FX market of much-needed liquidity. An investor who exited Nigeria last year likens the FX market to a “circus.”
“Investors frequently say they are increasingly struggling to continue to regard Nigeria as an investable country,” a former senior government official told BusinessDay.
Their inability to get investment returns out of the country will make it difficult to get approval for future investments, the person said. “This is a shame, as it takes away from the attractiveness of the country, despite the considerable opportunities.”
Private capital is not flowing into infrastructure
Nigeria is not attractive for private investments and that reality is laid bare in data showing that private investments in the country’s infrastructure is a paltry $14 billion. That compares with $27 billion for South Africa, $74 billion for Indonesia, $96 billion for Mexico, $155 billion for Turkey and $286 billion for India, according to data from the World Bank.
Too risky to handle
Investors demanded the highest return in four years from Nigeria to be holders of its debt last month, another signal that the country’s borrowing spree has come to a head.
The country’s risk premium has joined the league of countries with the world’s highest including Yemen, Syria, Venezuela, Sudan, and Lebanon, according to country risk premium ratings by Moody’s Investors Service and New York University.
The extra compensation investors demand to hold Nigeria’s benchmark 10-year bond rather than the 10-year US Treasury hit 11.8 percent in April 2023, the highest since 2019, according to data compiled by BusinessDay.
“Investor’s confidence in Nigeria’s market is currently at historic lows and the next government will struggle to raise capital,” said Damilola Adewale, a fixed income and currency research analyst familiar with sub-Saharan Africa. “For Nigeria, it means any security, especially bonds issued in the international capital market, would be priced at a high rate by investors.”
Nigeria is home to the world’s highest number of out-of-school children
A record 20 million children did not go to school in Nigeria last year, a stark sign of the government’s lack of investment in education. University teachers also downed tools and stayed away from classrooms for eight months in 2022. Education will need to get more attention if Tinubu is to succeed in creating jobs and boosting economic growth.
Nigerians are not as healthy as their peers
Nigeria has the lowest life expectancy of peer countries at 53.8 years. That compares with the average life expectancy of 60.4 in South Africa, 61.3 in Ghana and 67.4 in Ethiopia.
Nigeria has the highest unemployment rate in Africa
Nigeria’s unemployment rate is the highest in Africa and exposes the government’s reluctance to leverage the private sector as an engine for job creation and economic growth.
Inflation rising at blistering pace
Nigeria’s inflation problem is not unique to it but it remains one of the highest in Africa and has been above the CBN’s preferred target of between 6-9 percent since 2015.