Economist magazine calls Goodluck Jonathan an ineffectual buffoon in new article

MORE than 30 years ago, a young general swept
to power in the fifth of Nigeria’s military coups
since independence in 1960. The country he
inherited was a mess: bled dry by pilfering
politicians within and hammered by falling oil
prices without. Last year that general,
Muhammadu Buhari, became president again—
this time in a democratic vote. The problems he
has inherited are almost identical. So are many
of his responses.
In the eight months since Mr Buhari arrived at
Aso Rock, the presidential digs, the homicidal
jihadists of Boko Haram have been pushed back
into the bush along Nigeria’s borders. The
government has cracked down on corruption,
which had flourished under the previous
president, Goodluck Jonathan, an ineffectual
buffoon who let politicians and their cronies fill
their pockets with impunity. Lai Mohammed, a
minister, reckons that just 55 people stole $6.8
billion from the public purse over seven recent
years.

Mr Buhari, who—unusually among Nigeria’s
political grandees—is said to have just $150,000
and a couple of hundred cattle to his name,
abhors such excess. As military ruler he jailed,
fired or forced into retirement thousands of
bureaucrats whose fingers had been in the till.
This time, the Economic and Financial Crimes
Commission (EFCC) has arrested dozens of
bigwigs, including a former national security
chief accused of diverting $2.2 billion. The EFCC
has a poor record of securing convictions; but a
single treasury account has been introduced to
try to stop civil servants siphoning off cash.
And agencies which may not be remitting their
fair share to the state are having their books
trawled by Kemi Adeosun, the finance minister.
Such measures are doubly important because
the economy is swooning along with the oil
price. The sticky stuff directly accounts for only
10% of GDP, but for 70% of government
revenue and almost all of Nigeria’s foreign earnings.
Oil’s price has fallen by half, to $32 a barrel, in
the months since the new government came to
power, sending its revenues plummeting. Income
for the third quarter of 2015 was almost 30%
lower than for the same period the year before,
and foreign reserves have dwindled by $9 billion
in 18 months. Ordinarily there would be buffers
to cushion against such shocks, but Mr
Jonathan’s cronies have largely squandered
them. Growth was about 3% in 2015, almost
half the rate of the year before and barely
enough to keep pace with the population. The
stockmarket is down by half from its peak in
2014.
Domestic oil producers are feeling the pinch
worst. Many borrowed heavily to buy oilfields
when crude was worth more than $100 a barrel,
and are now struggling to pay the interest on
loans, says Kola Karim, the founder of Shoreline
Group, a Nigerian conglomerate. This, in turn,
threatens to create a banking crisis. About 20%
of Nigerian banks’ loans were made to oil and
gas producers (along with another 4% to
underperforming power companies). Capital
cushions are plumper than they were during an
earlier banking crisis in 2009; but, even so, bad
debts are mounting and banks that are exposed
to oil producers may find themselves in trouble.
“It wouldn’t surprise me if one or two went
down,” says a senior banker in Nigeria.
The government’s response to the crisis has
been three-pronged. First, it is trying to
stimulate the economy with a mildly
expansionary budget. At the same time, it is
trying to protect its dwindling hard-currency
reserves by blocking imports. Third, it is trying
to suppress inflation by keeping the currency,
the naira, pegged at 197-199 to the dollar. Only
the first of these policies seems likely to work.
The budget, which includes a plan to spend
more on badly needed infrastructure, is a step in
the right direction. Although government
revenues are under pressure from the falling oil
price, Mr Buhari hopes to offset that by
plugging “leakages” (a polite term for theft) and
taxing people and businesses more. That seems
reasonable. At 7%, Nigeria’s tax-to-GDP ratio is
pitifully low. Every percentage point increase
could yield $5 billion of extra cash for the
coffers, reckons Kayode Akindele of TIA Capital,
an investment firm. Mr Buhari also plans to
save some $5 billion-$7 billion a year by ending
fuel subsidies—a crucial reform, if he sticks with
it. Even so he will be left with a deficit of $15
billion (3% of GDP) that will have to be filled by
domestic and foreign borrowing.
Yet his policies on the currency seem likely to
stymie that. The central bank has frozen the
naira at its current overvalued official rate for
almost a year. The various import bans (on
everything from soap to ballpoint pens) are
supposed to reduce demand for dollars, but
have little effect. Businesses that have to
import essential supplies to keep their factories
running complain that they have been forced
into the black market, where the naira currently
trades at 300 or more to the dollar. Several
local manufacturers have suspended operations.
International investors, knowing that the value
of their assets could tumble, have slammed on
the brakes and some have pulled money out of
the country just as their dollars are most
needed (see chart).
Nigeria is fortunate in having low levels of
public debt (less than 20% of GDP), but it is not
helped by high interest rates, which mean that
35% of government revenue goes straight out of
the door again to service its borrowings. It
would not take much to push it into a debt
crisis.
Frustratingly, this crunch is one that Nigeria has
been through before—under the then youthful Mr
Buhari. Then, as now, he refused to let the
market set the value of the currency. Instead he
shut out imports, causing the legal import trade
to fall by almost 50% and killing much of
Nigeria’s nascent industry in the process.
Between 1980 and 1990, carmaking fell by
almost 90%. Today, as in the 1980s, the
president is making a bad situation worse.