Bloomberg has said that President
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Dismantling Nigeria’s foreign exchange controls will doubtless cause at least a short-term rise in inflation. Yet doing so will not only draw foreign investment and make the economy more productive and competitive, but also cut off a conduit for corruption.
Buhari can cushion the blow for Nigeria’s poor through targeted cash payments -- an approach Nigeria has used in electronically delivering subsidies to poor farmers. That same mechanism could also shield the poor from the regressive impact of an increase in Nigeria’s value-added tax -- which is relatively low but a potentially valuable source of additional government revenue.
There are other ways to stimulate the economy, of course. But Nigeria’s Senate rejected Buhari’s three-year spending blueprint and an ambitious campaign to borrow $30 billion abroad because they lacked details. Meanwhile, his reluctance to sell off state-owned assets has undermined other efforts to raise revenue.
To be sure, Buhari faced ugly circumstances when he took office in May 2015. The plunge in oil prices had left the economy reeling and government coffers bare, and attacks by Boko Haram were ravaging the country. Yet while some progress has been made fighting both terrorism and corruption, Buhari’s rigid leadership style has made the country's economic problems harder to solve.
Buhari’s election and pledges of good governance rightfully raised expectations across Africa. To fulfill those hopes, however, he will have to demonstrate more flexibility.