– President Muhammadu Buhari’s medical vacation is generating reactions worldwide
– Popular international business website, CNBC has joined its counterparts in the foreign media questioning Buhari’s absence
– CNBC said Nigeria’s economy looks as sick as its missing and ailing leader
Popular international business website, CNBC in an article published on Sunday, March 5 described Nigeria as a major oil producer and African economic powerhouse whose economy appears to be as stricken as its ailing leader.
There have been so much focus on President Buhari’s health by the international media
Although Vice President Yemi Osinbajo is handling day-to-day management of the country, analysts say Nigeria’s mounting woes require steady leadership.
Like most OPEC member states, the former emerging market standout has found itself on the wrong side of oil prices that remain far too low to bolster an economy heavily reliant upon crude production.
The troubles of Africa’s largest economy have been exacerbated by a debilitating currency shortage. The International Monetary Fund forecasts Nigeria will only see “modest growth” of less than 1 percent this year, and inflation is running in the double digits. It all suggests relief for the beleaguered country appears far off.
READ ALSO: Buhari’s sick leave re-energizes Nigeria’s presidency – Reuters
“Shortage of foreign exchange is very severe,” explained Win Thin, global head of emerging market currency research at Brown Brothers Harriman. “Foreign investors today face very long delays in repatriating funds out of Nigeria.”
The shortages were first caused by lower oil prices, but policymakers ultimately made the situation worse.
“As such, markets are not clearing and there are shortages of FX,” Thin added.
Meanwhile, the scarcity and overinflated value of the naira is creating liquidity pressures in the financial system. Recently, the Central Bank of Nigeria (CBN) took measures to ease the situation.
“Exhibiting ‘Dutch disease’ type symptoms, Nigeria’s economy has been buoyed by oil-related inflows during the oil price boom,” Phyllis Papadavid, an analyst with the Overseas Development Institute, wrote in a recent report.
“Subsequent naira strength has coincided with a stagnant non-oil sector, which has been at the expense of a largely undiversified manufacturing sector.
“Looking ahead, CBN naira support at the current rate is consistent with overvaluation,” she said, adding that Nigeria needs to diversify its economy and allow its currency to float freely.
The new central bank policy should help increase availability of FX on the retail side of the market; it remains to be seen to what extent this will ease the backlog.
“The authorities do not seem keen to bite the bullet and let the naira find its own level as driven by market forces, and we see this continuing to put a damper on [foreign investment] and inward portfolio flows,” said Frank Kahumba, a Johannesburg-based senior analyst with Momentum SP Reid Securities, in a research note last month.
READ ALSO: Forex: Can CBN sustain the black market onslaught? – Omoniyi Akinsiju
Meanwhile, British weekly magazine, The Economist has stated that Nigeria’s best chance of reform in the short run is for President Muhammadu Buhari to stay longer in London.
President Buhari has been in London since January 19. The presidency had first announced that he was there for a 10-day leave. But he has since extended the leave on medical grounds.
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