….Rates Buhari’s Tenure As Challenging For Businesses, Nigerians
An analyst at Morgan Stanley, one of the leading global investment banks, Steven Quattry, has predicted that current reforms by President Bola Tinubu to reposition Nigeria’s economy on the path of sustainable growth may lead to a strong increase in the nation’s annual income, despite the challenge they pose for economic growth.
Specifically, the analyst, noted that the reforms could lead to a new consumer class and attract investment opportunities.
The forecast was contained in a post titled ‘Market Outlook: Nigeria’s New Dawn’ published on the bank’s website on Wednesday.
The post reads, inter alia: “Prior to the May 2023 election of new president Bola Tinubu, two sets of policies had inhibited the country’s growth. The first was fuel subsidies, which cost a whopping $10 billion in 2022 and primarily benefited middle- and high-income members of the population: Only 3% of all subsidized fuel was consumed by the poorest 40% of Nigerians.
“The second was a complex currency regime, which led to an overvalued currency and curbed much-needed foreign investment, as foreign direct investment fell by 60% under Buhari.
“In response to the economic challenges, Tinubu has acted quickly to revive growth. During his inaugural address, he declared an end to fuel subsidies. Days later, he put an end to the overvalued currency by unifying the exchange rates. The incoming administration intends to grow the economy primarily via private investment and is aiming for 6% real GDP growth per year.
“This could lead to a strong rise in incomes, which, combined with a young and fast-growing population, could usher in a new consumer class and a number of investment opportunities”, it added.
Appraising the former President Muhammadu Buhari’s tenure, the investment bank analyst added that the interventionist policies of former president triggered economic bottlenecks and hindered the private sector’s ability to grow.
Specifically, Quattry identified two major policies multiple foreign exchange rates and fuel subsidies, noting that the average Nigerian has experienced an incredibly difficult time in the last eight years, with annual income shrinking by 32% from $3,222 to $2,200 under Buhari’s administration.
The analyst maintained: “Yet for the average Nigerian, the last eight years were incredibly difficult. The interventionist policies of former president Muhammadu Buhari namely, multiple foreign exchange rates and fuel subsidies—led to economic bottlenecks and hindered the private sector’s ability to grow.
“The country was one of the fastest-growing economies in the world from 2001 to 2014, but during Buhari’s term grew only 1.4% on average a poor showing, considering the 2.8% growth in the working-age population.
“Over that same period, the average Nigerian saw their annual income shrink by nearly a third, from $3,222 U.S. dollars to $2,200. By contrast, Kenyans saw their incomes rise by more than 40%”, Quattry added.
The analyst projected that mobile banking and consumer segments remained two sectors that could interest investors following the ongoing reforms of the current Nigerian government.
For instance, he pointed out that the telecommunications sector offered a unique opportunity due to the country’s low mobile data penetration and usage levels.
This is even as he noted that there was also an opportunity for providers of telecommunications-led mobile-money services, which are still in the early stages of growth as Nigeria.
In the area of consumer segments, Quattry predicted that there would likely be a rise in investable opportunities as a rise in GDP per capita will provide households with sufficient income for essential needs and more discretionary purchases.
Similarly, he projected that with a significant rise in GDP per capita, “Nigeria could help the consumer goods market grow 150% from an estimated $240 billion in 2023 to about $603 billion in 2030.
“This could present investment opportunities in several sectors, including packaged food and beverages, household and personal care products, education, healthcare and even durable goods like appliances and transportation”, the investment banker added.
In addition, he noted that the export of services offered Nigeria untapped opportunities as Nigeria has the ability to replicate East Asia’s manufacturing success.
Quattry further clarified in the post that “in the next two to three years, once the current administration has succeeded in reversing the harmful policies and economic malaise of the past eight years, Nigeria could witness a sharp upturn in economic growth. This is likely to present investors with opportunities in local equity markets, especially in the telecom, consumer goods and durables sectors.
“In the long term, the new administration’s challenge will be devising sound policies in education and training to unleash Nigeria’s human capital potential, perhaps its greatest asset. Tinubu and his team of technocrats have a unique opportunity to introduce policies to free up the economy and attract foreign investors looking for sustained growth”, he added.
