Nigeria’s newly elected president, Bola Tinubu, is gaining admirers in the market for the speed with which he is implementing a raft of positive economic reforms aimed at waking the sleeping African giant. SA’s eternal ditherer-in-chief, President Cyril Ramaphosa, would do well to heed Tinubu’s lessons.
Tinubu is a member of the same political party as his predecessor, Muhammadu Buhari, who was nicknamed “Baba Go-slow”, combining a term used across Africa for “father” with Nigerian slang for Lagos’ pervasive traffic congestion. Buhari took six months to appoint his cabinet.
Tinubu eliminated fuel price ceilings just days after assuming office on May 29, fired controversial central bank governor Godwin Emefiele 10 days later and repealed foreign exchange restrictions last week.
The tangle of numerous conversion rates for everything from international school tuition to food imports resulted in foreign currency shortages and hampered investment due to difficulties in withdrawing funds. Just ask MTN how much this has constrained its ability to repatriate profits from its Nigerian subsidiary.
Nigeria’s reformist president continues to move at pace and a few days ago replaced the security chiefs he inherited. His reform narrative is building up a head of steam. His currency reform remains among the most drastic so far.
Stipulated rates
RMB analyst Oyinkan Samuel told me last week this decision, announced by the central bank, aims to address the issues of arbitrage and speculation that plagued the previous system.
“Previously, individuals with foreign exchange liquidity were hesitant to sell at the stipulated rates due to the widely held belief that the naira was overvalued. Under the new framework, the market will operate on a willing-buyer willing-seller basis, allowing anyone with FX demand to submit requests to their banks.
“Orders will now be filled at the prevailing rate sourced by the bank, with a narrow spread ... ushering the exchange rate to 756.61 naira to the greenback as of [June 21’s] close.”
That weakened further to 820 naira to the dollar at Sunday’s close, so clearly short-term pain is inevitable (for the likes of MTN, MultiChoice and Nampak, which face risks to their assets, profits and cash balances in the immediate aftermath), but in the long term this is a hugely positive act of market-friendly liberalisation from a leader who understands the importance of building a narrative. After all, he did the same thing while governor of Lagos from 1999 to 2007.
In an interview in 2009 conducted by Princeton’s Mamdouha S Bobst Center for Peace and Justice, reflecting on his tenure, Tinubu revealed a shrewd understanding of how to reform particularly stubborn, corrupt and derelict systems of government.
Tinubu was trained by then Haskins and Sells (now Deloitte) in Chicago, out of the Illinois practice office, before he joined Mobil. He understands business.
“There was tremendous decay in the infrastructure: traffic, chaos, unmanageable,” Tinubu told his interlocutor. “And the state [was] going bust with ... completely disorganised transportation system; disintegrated infrastructure and near bankruptcy; perilous financial situation that required re-engineering. Antiquated accounting system, lack of transparency.
“Understand, I saw the fact that ...there was indiscipline. There was also a great deal then of dishonesty. There was lack of accountability, corruption, not seeing themselves as agents of growth, not seeing themselves as true servants of the people, not recognising the fact that the population expects much from them and they must be treated as a customer in the business of governance.
“If you are rude to the public how do you expect them to respond to your need positively? Without serving that need, if you create corruption ... how do you expect the public to pay the taxes that will improve you over time? You can’t complain of lack of good pay, lack of good working environment, if you are not even changing yourself.”
Diagnosis
But he set about implementing a programme of reform that essentially centred on diagnosing what needed to change, working with the private sector and communicating it broadly within the public service and his cabinet, to build an army of allies in implementing the reforms, and by linking performance to improved pay and not the other way around, with zero tolerance for corruption. A simple enough formula, anchored on swift action and execution.
Ramaphosa’s supporters would point to Operation Vulindlela and limited success in energy reforms and a stunted rail liberalisation as successful examples of similar success. They would be wrong, of course, because after five years his cabinet still consists of fiefdoms.
This feeds back into a conversation I had with Ninety-One CEO Hendrik du Toit recently in which he bemoaned the lack of coherence in government.
“You cannot have ministries being empires of individuals,” Du Toit lamented. “Whoever is on top of government — the president, deputy president, the cabinet — need[s] to pull people in line and say: this is our three-point or four-point plan and everyone sticks to that plan, and you can’t run your little department differently.”
Just look at the economically critical departments of trade, industry & competition, and mineral resources & energy. Both are headed by paper tigers, intent on pursuing agendas that undermine the very reform SA needs if it is to emulate the waking giant that is Tinubu’s Nigeria.
• Avery, a financial journalist and broadcaster, produces BDTV’s ‘Business Watch’. Contact him at badger@businesslive.co.za.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.