Nigeria Prepares For Drastic Economic Changes
MICHEL MARTIN, HOST:
Now some important economic news from Africa. Last week, Nigeria's President Muhammadu Buhari took the unusual step of publishing a piece in The Wall Street Journal to explain why he was taking some drastic steps to restore economic growth to his country, Africa's largest economy, which has been rocked by low oil prices and terrorist attacks.
One of President Buhari's most attention-getting steps was his decision to stop pegging the country's currency, the naira, to the U.S. dollar and to allow it to be traded on the open markets. That begins tomorrow. Over the past year, the decision to hold the currency at an artificial level has had a serious effect on Nigeria's relations with the international economy. For example, United Airlines stopped flying to Nigeria because it was too hard to collect money from ticket sales.
Alexis Akwagyiram is Reuters' senior Nigeria correspondent, and he joins us now via Skype from Lagos, Nigeria, to tell us more. Alexis, thanks so much for joining us.
ALEXIS AKWAGYIRAM: Hi, Michel. Thanks for having me.
MARTIN: How are these steps being received?
AKWAGYIRAM: More than anything, there's a lot of shock, frankly, because Buhari has really dug his heels in on this. And for about the last year, since he took office in May, he has been adamant that as far as he was concerned any removal of that peg would be tantamount to killing the naira.
So there's, number one, been surprise. And number two, it's been welcomed all around, simply as being a commonsense solution to the problems that have been experienced in this country because Nigeria is going through its deepest economic crisis for decades. Beyond that, there has been a spike in attacks in the Niger Delta where the vast majority of oil in Nigeria is produced. So that's nearly halved all production in the last few months. So where's the money going to come from? He - you know, he needed to do something.
MARTIN: What do you think changed his mind?
AKWAGYIRAM: I think, ultimately, he probably felt boxed in because the country's dollar reserves were running dangerously low. And ultimately, the biggest thing is that he needed to fund the budget. Now, his spending plan is very ambitious. It's an expansion budget whereby he aims to stimulate other sectors - stimulate manufacturing so that he can switch Nigeria and make it more of an exporting country rather than an importing country.
Now, in order to fund that budget, the country needs to borrow. And investors were very, very wary of that peg. So investors were actually moving out - en masse out of Nigeria. As well as that, just the reliance on oil. Nigeria relies on oil for 70 percent of its national income. Now, obviously we've seen the price of oil go from about a hundred dollars per barrel in 2014 to around $40 per barrel. So already, there's a problem.
MARTIN: Before we let you go Alexis, how would you describe President Buhari's year in office? Americans might remember that his election last year was seen as a sign of the country's disgust with the status quo, with the ongoing attacks by Boko Haram, among other terrorist groups, as well as the ongoing corruption that was understood to have continued under the - his predecessor, Goodluck Jonathan.
AKWAGYIRAM: They've definitely seen it as change. And that's the ticket that he won the election on, a change agenda. The crucial thing is that I don't think that it's the change that Nigerians expected. They expected that he would bring about changes whereby life would get easier and better.
And rather, what's happened is that life has become harder for Nigerians because they felt the impact of low oil prices and, I mean, the Central Bank governor said that a recession now looks imminent. Now, that's not to say it's Buhari's fault. I mean, that's just the reality of the shock to the system where the country's so heavily dependent on oil, and look what's happened to the price of oil in that time.
MARTIN: Alexis Akwagyiram is Reuters' senior Nigeria correspondent. We reached him in Lagos. Alexis, thanks so much for speaking with us.
AKWAGYIRAM: You're most welcome. It was delightful. Transcript provided by NPR, Copyright NPR.