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In Nigeria, newly appointed officials signal shift in economic policy

- December 1, 2015
Kayode Fayemi, Nigeria’s new minister of of solid minerals development, shakes hands with President Muhammadu Buhari after taking an oath of office during a swearing-in ceremony in Abuja, Nigeria, Nov. 11. (Afolabi Sotunde/Reuters)

Although he was elected in March of this year, Nigerian president Muhammadu Buhari did not name his Cabinet ministers until 5 p.m. on Sept. 30 — the day of his self-imposed deadline. The most striking thing about Buhari’s Cabinet appointments is that they demonstrate a shift toward economic diversification away from oil. This has major implications for how neglected sectors like mining may be given a boost, but also how Africa’s largest economy will be run over the next few years.

How did we get here?

Buhari’s government follows 16  years of rule by the People’s Democratic Party (PDP). PDP administrations headed by Olusegun Obasanjo, Umaru Yar’Adua and Goodluck Jonathan tried to push Nigeria’s economy into the world’s top 20, with varying — and ultimately unsuccessful — results. The last Cabinet (under Jonathan) included former executives from the World Bank, Goldman Sachs and Shell, and Nigeria became Africa’s largest economy, albeit amidst severe inequality.

As I wrote with a colleague in a briefing about the recent elections in Nigeria, Buhari and his All Progressives Congress (APC) party emerged victorious in 2015 thanks to an effective campaign strategy, a latent economic crisis in the wake of the collapse in oil prices, egregious government corruption, and the devastating Boko Haram insurgency. Popular disenchantment translated into the defeat of his predecessor, Jonathan.

Even before his election, Buhari prefaced every speech with an objective of diversifying Nigeria’s economy away from dependence on crude oil — Nigeria’s main export commodity — toward agriculture, solid minerals and industry. He also emphasized achieving food self-sufficiency, tackling grand corruption and containing the Boko Haram insurgency.

But Buhari is not the first Nigerian leader to profess an economic diversification agenda, a long-elusive goal since independence. As global development discourse shifted to be less averse to industrial policies, Jonathan’s government launched a national industrial revolution plan in Jan. 2014, following similar efforts by Rwanda and Ethiopia.

After his election, Buhari largely focused on restructuring the army and rallying international support to contain the Boko Haram insurgency. An emphasis on combatting corruption is also evident, with investigations of former governors, the former security chief and other high profile individuals underway. The strongest indicators that Buhari intends to follow through on his campaign promise to diversify Nigeria’s economy, however, are his Cabinet appointments.

Which Cabinet appointments signal Buhari’s commitment to economic diversification?

A “government of local professionals without superstars” is how a Nigerian senator described Buhari’s ministers. There is a conspicuous absence of a seasoned macroeconomist given the towering profile of previous ministers such as World Bank economists Ngozi Okonjo-Iweala and Mansur Muhtar. However, three appointments signal a priority of improving the business environment: Tunde Fashola, the dynamic former governor who successfully tamed Lagos with urban renewal and governance reforms will head the power and infrastructure ministry; Okechukwu Enelamah, chief executive of a private equity fund, will head the industry and investment ministry; and Abdulrahman Dambazau, a retired general with a doctorate in criminology will head the interior ministry.

The Cabinet appointment with perhaps the greatest potential impact on economic diversification in Nigeria is that of Kayode Fayemi to the ministry of solid minerals. The former governor of Ekiti state, Fayemi initiated significant governance and economic reforms and analysts assessed Ekiti state under Fayemi had a reputation for high accountability and effective social spending. During his tenure, political violence in Ekiti declined sharply, state revenue was up, and state debts were down.

The ministry of solid minerals has been neglected for decades, despite Nigeria having over 34 mineral resources in commercial quantities. Of these, only 13 are being mined and processed, often illegally, unregulated and at a small-scale. The sector’s share of GDP has remained constant over the past decade of rapid growth, at no more than 0.3%.

What impact would developing the mineral sector have?

Developing the mineral sector can combat regional disparities in growth. Growth in Nigeria has largely been driven by high global oil prices, and subsequently the services industry has largely concentrated in the south (where there is oil), and Lagos in particular. Unsurprisingly then, southern states that have a higher concentration of activity in finance, ICT, real estate and other services have less poverty. As the map below shows, the states experiencing the highest poverty are in the North.

(Data: Multidimensional Poverty Index; Figure: Kim Yi Dionne)

(Data: Multidimensional Poverty Index; Figure: Kim Yi Dionne)

The mining sector could revive economic activity in many northern states, where mineral deposits are widely dispersed. Moreover, increasing northern economic activity can have follow-on effects for stability. For example, in the northern state of Plateau, analysts attribute intractable conflict to the collapse of livelihoods after the decline of the state’s once thriving mining and tourism industries.

Nigeria’s growth pole is centered on the city of Lagos, which attracts about 1.4 million economic migrants annually. The strain on infrastructure and scarce land is generating community tensions, potentially constraining the city’s future growth – commuters waste productive hours in traffic gridlocks for instance – whilst leaving much of the country behind. Nigeria could benefit from having additional “growth poles” in the north.

The mining sector could also counterbalance the importance of oil revenues at the national level. Oil rents extracted from the south (predominantly the Niger Delta) provide 70% of federal government revenue. The federal government controls over 90% of exports earnings. Delta residents agitate for a greater share of these rents that are shared with other states, but more than two-thirds of Nigeria’s states are so economically vulnerable that their dependence on these federal revenues effectively blocks meaningful reform of the current revenue-sharing set-up.

The states’ financial vulnerability was laid bare earlier this year when with the collapse of oil prices, more than half were unable to discharge basic fiscal duties like paying salaries. Since the non-oil service economy is concentrated in a few cities, most states have insufficient economic activities to generate tax revenue from.

Was Buhari’s Cabinet worth the wait? Time will tell.

Buhari’s Cabinet appointments signal a substantive commitment to diversify Nigeria’s economy. Nigeria has never lacked competent individuals in the highest echelons of public service, so the pivotal factor will be political leadership. Will Buhari remain committed to this vision or will Nigeria squander this opportunity again? We will have to wait and see.

Zainab Usman is a doctoral candidate in international development at the University of Oxford. Her research assesses the oil economy, economic reform and political institutions in Nigeria since the transition to democracy in 1999. Usman is also the co-convener of the Oxford University China-Africa Network (OUCAN). She tweets at @msszeeusman.


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