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View on Nigeria from CIO of the Duet Africa Fund

by | Apr 1, 2015

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Ayo Salami

Ayo Salami

On Nigeria’s recent election and its implications for the markets, Ayo Salami, CIO of the Duet Africa Fund (assets under management USD5.5bn), said: “The one key risk priced into the market was post-electoral violence or a stand-off between political rivals. So Jonathan’s conceding the election- which is unprecedented in Nigeria’s history- removed this risk overnight.

“Markets usually like continuity rather than change but on this occasion the markets will react positively.


“The problems with the Naira will remain because they are inextricably linked with the weaker oil price and falling revenues. However, we believe with this ‘risk compression’ (Jonathan’s conceding), the currency is close to fair value now and should not depreciate further.

“In terms of economic policy, we didn’t get much debate on the election stump.

“If we go back 20-30 years, Buhari’s previous approach to the economy was very interventionist. Back then, legislative and executive power was combined and concentrated under military rule. Those powers are now separate so it will constrain his Government’s freedom of action.


“Buhari broadly set out an eight point action plan, most of which are sensible and difficult to argue against. But he didn’t explain how he would pay for his campaign promises in the current low oil price environment.

“One of the most exciting developments could be replicating the revenue raising success we have seen in Lagos State across the country. Nigeria’s tax take as a proportion of GDP is just 12-13%, much lower than the 20-25% you would expect for an emerging market economy at a similar stage of development. A big chunk of the economy is just not being taxed!

“Key to achieving this will be the role played by his Vice President Professor Osinbajo (who was a cabinet minister in Bola Tinubu’s Government in Lagos state). Mr Tinubu was a key backer of Buhari’s presidential bid and is largely credited with helping him win the nomination of the APC. Lagos state has seen great success in developing and tapping IGR- or Internally Generated Revenue.  We will have to see if this success can be repeated across Nigeria. If he can diversify tax revenues away from the country’s overreliance on oil, this will improve the country’s long term economic prospects to no end.”



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