Last month, Nigeria re-elected Muhammadu Buhari as president, subject to a legal challenge from the opposition party that is unlikely to succeed. Although Buhari’s record in office fell short of his 2015 promises – mainly on the economy, security and corruption – he regained power by a comfortable margin. There is no clear reason to expect a change of course in his second term.

The weakness of the economy during Buhari’s first term has been only partly due to the slump in global oil markets in 2015-16.  His economic decision-making was slow and opaque, and generally favoured close state control over private enterprise and the status quo over reform. Foreign direct investment has fallen to 0.5 percent of GDP according to the latest official data, 90 percent below the level expected in a growing emerging market. Buhari relies more on a small group of close advisors, nearly all from his home region in northern Nigeria, than he does on his cabinet, much of which does not share his ideology. President Buhari is not expected to announce policies or a new cabinet for his second term before his inauguration on 29 May.

 

 1. NEW CENTRAL BANK GOVERNOR? 

Godwin Emefiele’s tenure as the governor of the Central Bank of Nigeria (CBN) ends in June. There has been no statement yet but Buhari is expected to replace Emefiele with his own nominee. Emefiele, a former banking executive, was appointed by the previous head of state but quickly aligned himself with Buhari. He restricted the money supply and regulated the foreign exchange market in order to support the value of the naira, whilst distributing state funds to support small business and farming projects. Critics of Emefiele say that his tenure undermined the CBN’s independence and damaged economic growth.

 2. LACK OF MOVEMENT ON PETROLEUM REFORM 

The failure to pass the long-delayed Petroleum Industry Bill (PIB) during Buhari’s first term looks likely to continue in his second. The first part of the wide-ranging bill, breaking up the state-owned Nigerian National Petroleum Corporation (NNPC) and creating an independent regulator, was passed by the National Assembly in 2018 but rejected by the president because it diluted state control over Nigeria’s strategic industry. The next stage of the PIB was to increase taxes on the oil producing companies which were fixed a quarter of a century ago when the oil price was far below current levels. Further delay may benefit the oil industry at the treasury’s expense.

The passage of the PIB must begin again from the start in the new term of office, requiring amendments by a newly elected National Assembly and political will from the presidency. A recent directive from the president’s chief of staff underlines Buhari’s preference for state involvement in oil and gas over a greater role for the private sector. The order withdrew Royal Dutch Shell’s licence to operate one of its largest oil blocks in Nigeria and transferred it to the production division of NNPC. Shell was negotiating to sell the block to a large Nigerian company whilst the Department of Petroleum Resources was unaware of the executive decision.

Emmanuel Kachikwu, a former director of Exxon Mobil Nigeria, is expected to step down as minister of petroleum at the end of this term.

 3. UNSUSTAINABLE FUEL SUBSIDY AND POWER PRICE CAPS 

Nigeria imports nearly all its fuel, but much of it is sold to marketers by the government at a subsidised price. Last year this subsidy cost the government NGN 2.95 trillion (over USD 5 billion), a large proportion of its total budget and up 50 percent on the previous year. The government’s growing fiscal deficit makes this subsidy unsustainable, and it could rise further if the oil price or demand increased. Removing the subsidy would be unpopular with the low income population which made up a large part of the pro-Buhari vote. With the election over, he is in a stronger position to cut the subsidy and to close the state’s loss-making and malfunctioning oil refineries. However, there is no sign that he accepts the need to do so.

Nigeria’s power sector was partially privatised under the previous president Goodluck Jonathan but the electricity tariff remains capped by the government at uneconomic rates. This has resulted in severe losses for the privately-owned distribution companies, and the transmission infrastructure is still in state hands. Until these factors change, both the public and businesses will continue to live without regular power supply from the grid.

 4. ARBITRARY REGULATION 

A series of large fines and tax demands imposed on big businesses, both foreign and locally owned, by Buhari’s government have harmed investor confidence. The demand for USD 8 billion following alleged forex violations by leading mobile network operator MTN came originally from the attorney-general but has been dropped. The government is now pursuing tax claims against the oil companies, starting with a USD 20 billion charge against Shell, Chevron, Exxon Mobil, Total, Eni and Equinor.

Protectionist trade policy look set to continue after a ban on textiles imports was imposed in February shortly after the election. Import bans tend to result in increased smuggling activity, particularly in agricultural crops whose local output is limited by bad infrastructure and insecurity, especially the inter-communal violence in the fertile Middle Belt region.

 5. THE POWER SHIFT TOWARDS 2023 

The governing All Progressives Congress (APC) is a complex multiregional coalition, and its financial backers will soon start planning how to retain power at the next elections without the northern Buhari as their flag-bearer. Nigeria’s south-west has so far only nominated the vice-president – the very able Yemi Osinbajo – but is expected to claim the right to choose the next leader. If the APC’s various factions fail to agree, there could be a high level of defections or even another political realignment before the next election. Buhari’s political allies from the north will seek maximum benefit during his remaining years in office.

Amidst these shifting pressures, the president’s influence looks set to decline: he is in his late 70s, recently suffered serious ill-health and cannot run for office again. Policies such as curbing corruption and building a stronger non-oil economy will take second place to the needs of the 2023 campaign.