‘Be patient’ says Nigeria’s Okonjo-Iweala after APC criticises reforms
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Emerging Markets

‘Be patient’ says Nigeria’s Okonjo-Iweala after APC criticises reforms

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Bond investors have so far been happy to overlook Nigeria’s structural shortfalls. But opposition party APC warns that a lack of investment in infrastructure looks set to catch up with incumbent president Goodluck Jonathan

Nigeria’s economic growth and the international appetite for its sovereign debt has failed to bring jobs and economic security to a country still in dire need of more power, better roads and less corruption, the chief policy spokesperson for Nigeria’s main opposition party told Emerging Markets.

However, the government claims privatisation of key areas of the economy will bring benefits with time, and that investment has been directed towards the right sectors.

“Every functioning government that keeps its currency stable is able to have investors trade its bonds,” said Lai Mohammed of the All Progressives Congress, which is hoping to topple Goodluck Jonathan’s government in the February 2015 elections. “But I want to see one single foreign investor that has invested $20m into the real economy.”

The fact that Nigeria earlier this year, following a rebasing of its GDP, surpassed South Africa as the continent’s largest economy does nothing to alter the dire need for large-scale investment in infrastructure, a drastic reduction in corruption and a focus on reducing unemployment, said Mohammed.

“The current government inherited around 2,000MW of power and after 15 years we’re still struggling with under 4,000MW,” he said. “We think Nigeria needs access to 20,000MW. The roads are in complete disrepair. Many of the foreign companies that have relocated have done so because of the problems with infrastructure and transport.”

The 2014 Ibrahim Index of African Governance published on September 29, ranked Nigeria 37 out of 52, a “blow” to the government, Mohammed said. Meanwhile, falling oil prices have stopped foreign investment into Nigeria’s bonds and made efforts to create structural growth in the country more important than ever. Nigeria’s 2014 budget has a benchmark crude price of $77.5 a barrel. Brent crude was trading at $91.66 on Wednesday.

TRANSITION PERIOD

“The oil price is close to critical levels,” said Samir Gadio, head of Africa strategy at Standard Chartered Bank in London. “If at some point there are concerns around fiscal sustainability then outflows could accelerate.”

But Nigeria’s minister of finance, Ngozi Okonjo-Iweala, told Emerging Markets that the government’s widespread privatisation programme across sectors like power and telecoms would pay off.

“We’ve accepted the notion that over time Nigerian governments — not the present one — have not been able to deliver,” she said. “So we’ve privatised everything and it’s been done in the most transparent way. But there is a transition period for the power market to work and you need to give it time. It’s the same issue with telecoms.”

Meanwhile, Nigeria’s economy was one of the 10 fastest growing the world, she added. Although Okonjo-Iweala accepted there was criticism due regarding Nigeria’s poor ranking in the Ibrahim Index.

“We do need to look at the quality of growth,” she said. “But Nigeria has improved on a number of governance aspects. The issue is not the challenges but what you do about them.”

Time is not on Nigeria’s side, however. Despite rapid economic growth the country has limited reserves to survive a protracted period of low oil prices.

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