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BREAKINGVIEWS-Nigeria's decent election lifts economic outlook

by Reuters
Monday, 18 April 2011 19:40 GMT

-- The author is a Reuters Breakingviews columnist. The opinions expressed are his own --

By Martin Hutchinson

WASHINGTON, April 18 (Reuters Breakingviews) - High oil prices have brought growth to Nigeria, but corruption and population increases have impeded takeoff. Goodluck Jonathan's genuine-looking win in Saturday's presidential election could change that and spur foreign investment -- as long as the chance to start cleaning up Nigeria's problems isn't wasted.

There are two big structural ones. First, population growth has overloaded the nation's infrastructure. At independence in 1960, Nigeria had a population of 39 million; today it is 155 million. In 2006, Nigeria's census estimated the country's adult literacy rate at only 54 percent.

Second, Nigeria's economic reliance on oil revenue has funneled cash through the government sector, making official corruption big business. Even though Nigeria has a balance of payments surplus of 14 percent of GDP and reported public spending is modest, the government runs a budget deficit of 6 percent of GDP. That suggests that the massive inflows of funds are mostly wasted.

Jonathan has promised cleaner government since he took office last year after his predecessor's death. What seems to have been a relatively above-board election, though marred by riots in the losing candidate's northern strongholds, suggests this was more than rhetoric.

With a fresh mandate, Jonathan should be able to make more changes. He needs to devote additional resources to education, raising Nigeria's literacy rate and the skill level of its citizens. Economically, he could do much worse than follow the example set by Chile, Norway and others, whose governments put commodity-related revenue into a protected stabilization fund when prices are high so that they are available to offset the loss of national income when the cycle turns.

There's also plenty of room to improve the climate for foreign investment. In some sectors, such as telecoms, multinational involvement is revolutionizing Nigeria's economy and offering opportunities for rural development. However in the energy sector there has been too much participation by corrupt state entities and resulting unrest in oil-producing areas. Jonathan has helped improve security, allowing oil exports to rise by 46 percent in 2010. Now, while prices for the black stuff remain in his favor, he must encourage foreign investment and stamp on corruption and waste.

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CONTEXT NEWS

-- Goodluck Jonathan won the Nigerian presidential election on April 16, with final results showing him gathering 22.5 million votes to 12.2 million for Muhammadu Buhari. Jonathan, the incumbent president since his predecessor died in May 2010, did well in the predominantly Christian south, while Buhari dominated in the Muslim north.

-- Riots occurred in a number of Nigeria's northern cities as results were announced, though observers called the election the fairest in the country for decades. Jonathan's People's Democratic Party won 123 of the first 218 National Assembly seats and 58 of the first 90 Senate seats on April 9.

-- The Nigerian Stock Exchange All Share index closed on April 18 at 25,429, up 1.6 percent. It is up 2.7 percent since the end of 2010.

-- Nigeria's GDP in 2010 was ${esc.dollar}207 billion, or ${esc.dollar}2,400 per capita on a purchasing power parity basis, with real growth of 6.8 percent. The International Monetary Fund's World Economic Outlook predicts GDP will increase 7 percent in 2011. The country's population is 155 million, growing at 1.9 percent annually. Inflation was 14 percent last year.

-- Nigeria ranks 134th on Transparency International's corruption perceptions index.

-- Reuters story: Many dead in Nigerian election protests [ID:nLDE73H0W8]

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-- For previous columns by the author, Reuters customers can click on [HUTCH/]

(Editing by Richard Beales and Martin Langfield)

Our Standards: The Thomson Reuters Trust Principles.

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