Opinion
Successful Presidential election in Nigeria – Africa’s shining moment
An important effort aimed at raising non-oil revenue mobilization has been spearheaded by Ngozi Okonjo-Iweala, Nigeria’s Coordinating Minister for the Economy. Given the strength of expectations regarding government delivery and the constraints on fiscal spending imposed by Nigeria’s low level of fiscal savings, these reforms will need to accelerate. With its low debt levels, Nigeria arguably has significant borrowing capacity in place.
But in a world of double rather than triple-digit oil prices, Nigeria will need to demonstrate more rapid progress in raising fiscal revenue, in order to preserve its borrowing capacity and its ability to invest in infrastructure for long-term growth.
Third, investor interest in Nigeria will return. Investors have been waiting nervously on the sidelines for elections to pass and political risk to diminish. They will be encouraged by the passage of the elections and investment dollars should flow in. This will happen despite the debate over ideal entry levels, which is largely determined by perceptions of continued risk to the foreign exchange rate. The promise of greater transparency will be key to the long-term sustainability of these investor flows.
Accompanying this, Nigeria will have to prove its ability to move away from its old oil-dominated economic models with all the baggage of the rentier state that accompanied it.
In the past, the key question facing Nigeria’s economy was how oil wealth should be shared. In the future, the key economic question will be how new, non-oil wealth will be created. In essence, this is the implication of Nigeria’s political transition.
Razia Khan is Head of Africa Macro Research, Standard Chartered Bank. This article was originally published at the Standard Chartered Blog
