State of Nigeria's economy under President Buhari

Pressure is mounting on Nigerian president Muhammadu Buhari’s as he struggles to fix sub-Saharan Africa’s largest economy.

As oil prices keep on falling, time is not on the president’s side. Pressure on both Nigeria’s state coffers and the naira has increased significantly since Mr Buhari took office nearly eight months ago:

Slowing growth rate – to under 3% in the third quarter of 2015, less than half the pace of a year earlier, and barely matching the nation’s population growth. Or soaring inflation – up to 9.6% in December, well above the central bank’s 6-9% target. Or the plunge in the naira, now trading at 300 to the dollar in the so-called parallel market, well below the official rate of 197-199.

With the price of crude oil – the source of 90% of Nigeria’s foreign exchange – flirting with $30 a barrel, foreign investors are finding few positives in the Nigerian economy. President Buhari’s 2016 budget envisioned a massive increase in capital spending, an effort to shift Nigerian dependence on oil. But even if the extra money is found, such projects will take years to bear fruit.

According to FORBES, a devaluation of the naira will further stoke inflation, requiring a rise in interest rates further down the line. But the central bank is down to its last $28 million in reserves, just about enough to cover six months worth of imports.

Meanwhile badly-needed foreign investment remains on the sidelines, despite the promise of a growing Nigerian middle class and a new government committed to cleaning up corruption. But the chasm between the official and unofficial naira rates is unsustainable; most analysts expect a devaluation over the first half of the year. Only then will foreign investors begin weighing up a foray into Nigeria.

In spite of these challenges, the 12 MPC members today voted unanimously to retain the CBN’s benchmark rate at 11%, according to Emefiele, with no changes to the official naira rate. The central bank governor also defended last year’s controversial decision to restrict foreign exchange to importers of a range of goods, calling it a “positive” move.

His legacy as a central banker has yet to be determined, but Central Bank of Nigeria Governor Godwin Emefiele might want to consider using his not inconsiderable bluffing skills at the poker tables when retirement beckons.

Following this year’s first meeting of the CBN’s Monetary Policy Committee, Emefiele was keen to talk up the potential of Africa’s largest economy, telling reporters that he saw “wide room for optimism about the medium to long-term macroeconomic prospects.”

Will Emefiele still be at the CBN?  Or enjoying a late-in-life career at the poker tables?