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Nigeria has just published a much-anticipated – and much-delayed – plan for economic reforms needed to steer the country out of the worst economic crisis it has faced in 25 years.

The World Bank has been waiting for a year for this plan so that it can consider whether to grant a loan to the cash-strapped government to finance its spending plans. Now that the plan has been published, the bank and other international lenders such as the African Development Bank will be looking for signs of reform – most critically, a commitment to change its much-criticised management of the currency.

Though the central bank officially abandoned a currency peg last June, it has since burned through billions in foreign reserves in order to stem a further decline in the value of the naira. This has led most economists, investors and observers to conclude that the government has not embraced the “market-determined” exchange rate it pledged to adopt.

In a country that has never been short of plans and blueprints, the question is whether this one will be implemented, said Manji Cheto of Teneo Intelligence. “Will the World Bank approve it? Possibly. There isn’t much to fault with the plan. It just depends on whether the bank believes that Nigeria will be able to implement this plan this time round.”

A number of the policy priorities outlined in the plan, such as asset sales to lessen the strain on the budget, have already been flagged – if not formally proposed – by government officials in recent months.

The biggest issue – on whether a shift is in the works that could restore confidence in Nigerian authorities’ management of the currency – is not answered by the plan, say some analysts who are parsing the 140-page report.

Here are some short first takes:

Razia Khan, chief Africa economist at Standard Chartered:

“A lot of attention was focused specifically on whether the [plan] would endorse foreign exchange liberalisation or not. The fact that this has not been made front and centre of the economic recovery plan will disappoint many. While the wording on FX liberalisation suggests that this is still work in progress, and broadly adopts the need for flexibility, that will not, in itself, provide enough direction to markets.”

Charlie Robertson, chief economist at Renaissance Capital:

“It’s good to have a sensible framework in place, but investors want to see implementation…Nigeria is often long on plans, but short on implementation. The latter will decide whether or not investors return to Nigeria. This is the year markets need to see change, before the political cycle begins next year ahead of 2019 election.”

John Ashbourne, Africa economist at Capital Economics:

“The text explicitly calls for a “stable (market reflective) exchange rates and sustainable fiscal and external balances…this is very encouraging.”

One informed observer in Abuja, the capital, noted a paragraph in the plan that he thought signaled a future shift on one of the most controversial aspects of the central bank’s policies in the 21 months since Muhammadu Buhari took office: restrictions on the allocation of dollars for importing goods it said Nigeria should produce ample supplies of locally (emphasis the FT’s):

“In 2015, it introduced a ban on forty-one (41) goods and services from accessing foreign exchange in the inter-bank foreign exchange rate market. It is instructive to point out that this is a temporary policy measure that would be reviewed with a view to removing the market restrictions over time.”

When it comes to time, the International Monetary Fund last month urged Abuja to act “urgently” to implement “a coherent and credible package” of reforms.

Gerry Rice, IMF spokesman:

“Urgency is needed in implementing a coherent and credible package of monetary, fiscal and structural policies as the window for bold reforms is closing as the 2019 elections are approaching fast.”

Copyright The Financial Times Limited 2017. All rights reserved.
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