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Buhari’s Dismal Economic Record Means 7 Years of Pain for Investors

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Nigeria’s economy will not eclipse the highs it attained in 2015 until the year 2022, a 7 year gap that signals the dismal economic record under President Muhammadu Buhari.

Equities have gone nowhere since 2015, the year Buhari took office for the first term, with stocks measured by the Nigerian Stock Exchange (NSE) all share index lower today (28,344 points) than they were on June 01, 2015 at 33,456 points.

The International Monetary Funds (IMF) most recent World Economic Outlook updated in October 2020 forecasts that Nigeria’s gross domestic product (GDP) will not return to its pre Buhari highs until 2022.

Total size of the Nigerian economy which was equivalent to $492.43 billion in 2015, hit a low of $375.7 billion in 2017 as the country was just coming out of recession and is forecast to hit $531 billion only by 2022.

The 3 currency devaluations that have rocked the Naira since 2015 and a low growth environment are the major culprits.

Growth in Africa’s largest economy has averaged less than 2 percent since 2015 and it will have twice slipped into negative growth in the 5-year time period (2015 – 2020), including -1.6 percent in 2016 and a forecast of -4.2 percent this year.

The sluggish growth has meant a higher level of joblessness as more Nigerians become old enough to enter the labor force.

Unemployment surged to the highest in 10 years in the second quarter (Q2) as the coronavirus pandemic made it even tougher for Nigeria’s weak output growth to keep up with its fast-expanding population.

The jobless rate rose to 27.1 percent, according to a National Bureau of Statistics (NBS) report published in August.

That compares with 23.1 percent in the third quarter of 2018, which was the last period the agency released labor-force statistics.

Prices of staples are also rising fast, giving a double whammy of higher prices and low growth or Stagflation.

Consumer prices climbed 13.2 percent from a year earlier in August 2020, compared with 12.8 percent in July, the NBS said last month.

Bond investors are seeing negative real returns (below inflation adjusted) for the first time in a decade as yields on fixed income securities have collapsed following a push by the Central Bank to force banks into lending.

Every major pool of capital has been hit by the poor returns from Pension Funds whose assets are lower in dollars today than they were in 2015 to Private Equity (P.E) investors being forced to exit assets at a haircut, sources tell MoneyCentral.

The Real Estate market which usually offers some sort of hedge against inflation for investors is also largely illiquid today with no big ticket deals being done in commercial and residential space.

No new major malls have been built in the past 2 years in primary and secondary cities as the usual suspect anchor tenants such as Shoprite and Cinemas battle with falling margins and slow sales.

A foreign exchange (FX) scarcity that has hit businesses small and large is also a source of investor angst.

Domestic participants have accounted for 60.86 percent of transactions on the Nigerian stock exchange (NSE) so far this year, according to data from the bourse.

The naira traded at N386 per dollar in the Investor and Exporters (I&E) market on Tuesday, compared with a black-market rate of N461.

One bright spot has however emerged for Nigerian investors though amid the gloom of Buhari’s dismal economic record.

The country is currently undergoing a “crypto boom”, necessitating a move by the Securities and Exchange Commission (SEC) to issue new regulatory guidelines for the asset class.

According to data from Usefultulips, a Bitcoin (BTC) analytics data provider, Nigeria led Sub-Saharan Africa in terms of peer-to-peer (P2P) Bitcoin trading volumes on two major bitcoin trading platforms, Localbitcoin and Paxful.

For the 12 months up to September 2020, Nigeria accounted for a transaction value of $342 million, with the next closest SSA country, Kenya, reporting volumes five times less, at $70 million.

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