Nigeria's new president, in office for less than a month, is pushing to put Africa's largest economy on a reform track that investors have eyed for decades, fuelling excitement that money could flow to a nation that many had deemed uninvestible.
President Bola Tinubu's bold actions, including removing restrictions on the naira currency that allowed it to hit a record 790 to the dollar and subsidy removals that tripled petrol prices, could take stress off the battered finances of Africa's largest economy.
But investors, burned by previous reforms that ultimately proved hollow, say it will take time to build trust and listed myriad questions over the final shape of the economy.
"The reaction is one of, 'finally'," said Tunde Ajileye, a partner at Lagos-based SBM Intelligence. "If this stays, then it would mean that (Tinubu) had been able to remove the two subsidies that have crippled Nigeria fiscally and monetarily for the last decade."
Tinubu is from the same party as predecessor Muhammadu Buhari, dubbed "Baba Go-slow" for his pottering pace - taking six months to appoint cabinet members.
By contrast, Tinubu lifted fuel price caps days after taking office on May 29, suspended controversial Central Bank chief Godwin Emefiele some 10 days later and on Wednesday removed FX restrictions.
The tangle of multiple exchange rates for everything from international school fees to food imports created foreign currency shortages and hobbled investment due to issues getting money out.
"Just the fact that you have seen quite a bit of movement in a relatively short space of time has gotten a lot of people in the market excited," said Goldman Sachs economist Andrew Matheny.
Nigeria's international dollar bonds and the country's stock market have been boosted by the speedy reforms.
BACKLOG, AND BURNED BEFORE
Investors, though, remained wary, citing years of damaging currency controls; Goldman Sachs pegged the backlog of FX demand at a staggering $12 billion.
"We are still to see whether this will allow the FX backlog to clear, where the new market rate will stabilise, whether this will catalyse inflows into the country and ... that there will be no issues pulling money out of the country," said John Mumo, a partner at Blakeney, an Africa-focused equities fund management firm.
Joe Delvaux, a portfolio manager at Europe's largest asset manager Amundi, said it could take months or more to lure longer-term cash.
"Ultimately, you also have to keep in mind that the biggest provider of FX will still be the CBN," Delvaux said.
"We need to see that the system works."
Tinubu will also have to tackle the perennial corruption that has hobbled the country for decades. Nigeria is ranked 150 out of 180 in Transparency International's 2022 corruption perceptions index - and has been on a downward trend since 2016.
Investors also worry about low tax receipts and falling oil output - structural reforms that will take far longer to sort.
Some are also hoping to see a more orthodox interest rate policy. Inflation hit a near 20-year high of 22.41% in May and a weakening naira will amplify price pressures. Meanwhile interest rates, which Tinubu has said he would like to see fall, were hiked by 50 bps last month to 18.5%.
"Investors will need to see positive real rates and evidence that they will be able to repatriate their earnings before local currency debt is back in play," said Patrick Curran, senior economist at Tellimer.
Investors also worry about low tax receipts and falling oil output - structural reforms that will take far longer to sort.
Some are also hoping to see a more orthodox interest rate policy. Inflation hit a near 20-year high of 22.41% in May and a weakening naira will amplify price pressures. Meanwhile interest rates, which Tinubu has said he would like to see fall, were hiked by 50 bps last month to 18.5%.
"Investors will need to see positive real rates and evidence that they will be able to repatriate their earnings before local currency debt is back in play," said Patrick Curran, senior economist at Tellimer.
Friday, June 16, 2023
President Tinubu stuns wary investors with quick reforms
Thursday, June 15, 2023
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Nigerian President Bola Tinubu defends the recent decision to remove the popular petrol subsidy. Tinubu acknowledged that the move would impose an extra burden on citizens but he maintained that the money saved would be diverted to development projects and improving public services. The subsidy kept petrol prices cheap for decades in Africa's biggest economy but it became increasingly costly for the country.
Tallest man of Nigeria dies at 47
Afeez Agoro, popularly known as Nigeria’s tallest man has died. In a phone conversation with a female relative who did not want her name mentioned, it was confirmed to Daily Trust that the entertainer is dead. In an emotion-laden voice, when asked about Agoro, the lady simply said sobbing, “It is true. He is gone. He is dead. Please, I will call you back.” Then she hung up the phone.
It was gathered that Agoro died at a Lagos hospital on Wednesday evening, after a prolonged battle with Acromegaly, commonly known as gigantism.
Born Afeez Agoro Oladimeji on December 13 was previously recognised as the tallest man in Nigeria. At 2.25 metres (7 ft 5 in), he stood shorter than his 2.41 metres (7 ft 11 in) compatriot, Abiodun Adegoke, who is likely the tallest man in Nigeria.
Agoro was born in Sabo Yaba, Lagos State, as the last child of three children for his mother who was the second wife of his late father.
It was gathered that he had normal growth until he developed an ailment at the age of nineteen and when taken to a hospital, he was diagnosed with Acromegaly, known commonly as gigantism, which made him grow vertically at a very rapid rate. Agoro unsuccessfully tried to combat the ailment and stood at 7’5″ which made him among the tallest people in Africa.
As an entertainer, in 2003, upon graduating from the Lagos State Polytechnic, Afeez Agoro went for his compulsory one-year National Youth Service Corps (NYSC) scheme in Kolokuma Local Government Area of Bayelsa State, Nigeria. Agoro later had the opportunity to feature in movies and in August 2018, I Am Agoro, a Reality TV show which centred around his life and what it feels like living as the tallest man in Nigeria aired exclusively on Linda Ikeji TV.
Inflation rises to 22.41% in Nigeria
Nigeria's annual inflation rose to 22.41% in May on a year-on-year basis from 22.22% in the previous month, its bureau of statistics said on Thursday.
Food and non alcoholic beverages were the biggest drivers of inflation, the bureau said.
Inflation has remained elevated in Africa's biggest economy, eroding savings and incomes, and prompting the central bank to hike interest rates to their highest level in nearly two decades.
On Wednesday, the central bank moved to liberalize foreign exchange trading, capping a dramatic day that saw the official naira rate devalued by more than a third.
By MacDonald Dzirutwe, Reuters