Nigerian President Consolidates Bank Accounts to Reduce Corruption and Borrowing

February 10, 2016Nigeriaby EW News Desk Team

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President Muhammadu Buhari has approved a measure that consolidates state bank accounts under the central bank, according to Reuters. The move not only reduces the amount of borrowing, but also hampers graft and corruption by allowing the government to keep a watchful eye on the treasury. Nigeria is an oil-producing nation that has suffered immensely due to lower oil prices, forcing the government to make reforms.

Nigeria relies on oil exports for over half of its revenue stream, but lower oil prices are not the sole reason why the state is not making enough money. When Buhari took office in May of 2015, he found treasury coffers virtually empty. This is partially because some of the redirection of oil funds into private hands.

Authorities have recovered a large share of the missing funds after numerous investigations, but deep-rooted corruption will forever remain a barrier to stronger growth as long as it remains unaddressed. Buhari campaigned on an anti-corruption platform, and he is living up to his word thus far by changing the public account system.

Impactful Changes

Reform is a necessary part of Nigeria striving to get its economy back on track, but the African nation has to rely on concessions from certain parties to turn the economy around. Authorities have been looking to international bodies to lend money to Nigeria at concessionary rates of 1.5 percent to help finance infrastructure projects.

Nigeria has been in talks with China's Exim bank and the World Bank for alternative financing. Further, finance minister Kemi Adeosun stated that infrastructure investments will generate sufficient revenue to repay existing loans, and policymakers are looking to restructure old debt.

To repay previous loans, Nigeria hopes to revive its fledgling steel sector by leaving major operations in the hands of the private sector. This could yield additional income while helping Nigeria diversify away from oil. Diversification is key in Buhari’s growth agenda, and he aims to revitalize mining through coal, gemstone and gold exploration.

Wrong Turn

While diversification is an important step, switching over to commodities comes with an inherent risk because of the lower-priced commodity market and Chinese volatility. Many commodity-driven economies are suffering because of the price crunch and Nigeria risks falling into a deeper hole if policymakers pursue industries that do not offer enough revenue.

Nigeria would be better off in the long-term by bolstering the education system to create a stronger workforce that attracts more investors, while investing more funds in the STEM fields to secure a resilient economy that competes with other emerging markets.

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