Despite Uncertain Business Environment, Analysts Hail Buhari’s Economic Recovery Initiatives


L-R: Chief Executive Officer, Renaissance Capital, Igor Vayn; Former Minister of National Planning, Shamsudeen Usman,; Vice President, Yemi Osinbajo; Chairman, Honeywell Group, Oba Otudeko; and Chief Executive Officer (Nigeria), Renaissance Capital, Temitope Popoola, at Renaissance Capital’s 7th Annual Pan-Africa 1:1 Investor Conference in Lagos

Olaseni Durojaiye

Analysts at Renaissance Capital have hailed the economic recovery initiatives of President Muhammadu Buhari’s administration insisting that the economy was on recovery mode.

But they also maintained that the nation’s foreign currency policy was not investment friendly and deterring investors.

While not ruling out the need for devaluation of the naira, the analysts said what may eventually trigger the need to devalue the naira is if oil price continues to slump and maintain a southward trend for a long time. They added that failure to devalue in the circumstance would force investors to “change their views” about the country.

Besides, few hours before the removal of oil subsidy and the review of pump price of premium Motor Spirit (PMS) last Wednesday, they maintained that removal of fuel subsidy was “sensible considering fiscal pressure on government.”

The top management of the leading investment and advisory firm made their position known during the just-concluded 7th Renaissance Capital Investor Conference in Lagos at the weekend.

Those who spoke included: Chief Executive Officer, Renaissance Capital, Igor Vayn; Chief Executive Officer Renaissance Capital Nigeria, Temitope Popoola; Global Chief Economist, Renaissance Capital, Charles Robertson and Global Head of Investment Banking, James Friel.

Also, the analysts commended government’s anti-corruption crusade and the efforts to return peace and normalcy to the North-east, where Nigerian troops are battling Boko Haram insurgency.

While noting that Nigeria hold prospects for investment they added that the current administration’s economic recovery initiatives would lead to economic recovery and growth.

Underscoring the importance of foreign investments, they added that absence of foreign investments will slow the pace of economic recovery and growth.

“I think Nigeria is getting it right. In terms of ease of doing business, reforms, Nigeria is doing great; being among top 100 places to do business should be the target for Nigeria. So also is the focus on electricity, especially the expansion of the transmission leg; all of these are positives for Nigeria.

“Fuel subsidy removal is sensible, considering the fiscal pressure on government. Government should be spending on infrastructure; not on fuel consumption.”

“But the currency situation remains a challenge; it is deterring investors. It is not like investors don’t like Nigeria; they‘re not allowed to invest. Investors need to know if they can freely move their investments whenever they want to, but we can’t guarantee that,” Vayn stated.

Responding to a question on deregulation, Vayn stated that “what will trigger deregulation is if oil price stays low for a very long time. If oil price stays low for a long time, Nigeria will have to devalue; and if devaluation does not happen then, investors would change their views about Nigeria,” he added.

Expatiating further, another member of the team, Yvonne Mhongo, stressed that “from meetings that we’ve had with government officials, government hasn’t foreclosed devaluation; but they’re considering other exciting ideas.

He stated that the current administration was demonstrating commitment towards improving the ease of doing business in the country with its anti-corruption fight as well as efforts to fight insecurity especially in the North-east of the country. He added that there was verifiable commitment to improving ease of doing business in the country via reforms and government policies.

He noted government’s anti-corruption fight and the efforts to tackle insecurity particularly in the North-east region and added that these were indices that encouraged investing in the country.

Robertson stated that, “investors want Nigeria to succeed; they want to invest in Nigeria. Investors that want to come to Nigeria are ready to diversify into different buckets of investment portfolios.

“But they want to see strong growth; they want good government policies. They want to see sustainable currency policies because they want to be here for the long haul,” he stated.

He further stated that sectors that investor could venture into include Healthcare, Financial services and Financial technology, Agriculture processing and textile as well as steel industry.

Earlier in his welcome address, Popoola noted that as we all know, it’s been a tough year for emerging markets, a tough year for Africa in general, and in some ways, an especially tough year for Nigeria in particular.

According to him, “There is no denying that Nigeria has been through some pretty dramatic changes in the past 18 months. The oil price has fallen. The impact this has on external accounts and government revenues has been analysed many times over; we know it’s large. But conceptually, what does it mean for Nigeria? Well, oil was never going to make us rich. Extract 37 billion barrels of oil and spread it across 170 million people – it’s enough to add $1,500 per head, perhaps taking us across the threshold of “upper middle income” status…

“The other major change in Nigeria is political. A new administration has arrived, and with it the rules of the game have changed. The age of impunity is over. Unfortunately, this change has coincided with shift in economic policy too; away from the free market economics we all know and naturally assume is best. The system that is developing in its place has met with a lot of skepticism, and has come with some unpleasant by-products. Tax enforcement will need to be broadened. A regressive fuel subsidy will need to be removed. The budget deficit will grow and alternative sources of financing will need to be sought.

“All of these things have contributed to an increasingly negative narrative. You don’t need me to tell you how hard that make it to sell Nigerian equities. But what does it actually tell us about the country’s long-term prospects? As much as I’d like to tell you that Western style democracy and free markets are the answer, there’s still plenty of evidence pointing the other way.

Just look at the last 10 years in Africa. Two of the most successful development stories, Rwanda and Ethiopia – what the IMF would call “inclusive growth” – have taken place in the context of systems which are neither politically free nor all that market-oriented. Cote d’Ivoire, a country that was in open civil war as recently as 2010 and in default on its international debt, is now the fastest-growing market in Africa and consensus favourite among the same investors who held the defaulted papers.”