* Nigeria still without a cabinet four months after election
* MSCI Nigeria index down 15% in 2019, defying frontier
rally
* Civil servants with little authority left in charge
* Payment delays frustrate contractors
By Karin Strohecker, Alexis Akwagyiram and Libby George
LONDON/LAGOS, July 4 (Reuters) - The failure of Nigeria's
president to appoint a cabinet four months after winning a
second term has stymied the country's stock market, prompted
foreign investors to trim holdings and threatened growth
prospects for Africa's largest economy.
Inaugurated on May 29, Muhammadu Buhari, Nigeria's
76-year-old former military leader, faces a long list of
challenges including tepid economic growth, high unemployment
and a decade-old Islamist insurgency.
Government activities, which almost ground to a halt ahead
of February's election, slowed further after his victory,
leaving foreign investors trying to gauge how much of a hit the
stock market will take from the hiatus.
"It is massive," said Andrew Brudenell, lead senior
portfolio manager for frontier markets equities at Ashmore
Group. "Even when oil prices were back up at $70 heading to $80
again, the stock market did not do anything. They (stocks) just
continue to trickle down as people give up on their
investments."
The stock market in Nigeria, Africa's top oil producer, has
failed to keep up with frontier markets peers, a subset of
smaller and often riskier emerging economies. The MSCI Nigeria
index has dropped more than 15% since the start of the year,
making it one of the worst performing markets in the index, even
as the wider MSCI Frontier Market index rallied nearly 10%.
Nigerian politics often move at a glacial pace. Buhari took
six months to swear in a cabinet after the 2015 election - a
delay critics contend contributed to the slow response to low
oil prices that pushed Nigeria into a recession in 2016.
But some investors said they had hoped that as the
incumbent, he would move more quickly. Senegal's Macky Sall and
South Africa's Cyril Ramaphosa both appointed ministers within
days of being sworn in as president this year.
THE BIG VOID
Since the dissolution of Buhari's first cabinet in late May,
senior civil servants, who oversee day-to-day operations but
lack authority to approve major decisions, have run Nigeria's
government departments.
Civil servants do not approve capital expenditure, which
means contractors are not getting paid.
"The process of payments is challenging and extremely time
consuming," said one large government contractor, who asked not
to be named.
Civil servants also do not take leading roles in deal-making
in the all-important oil sector, a fact that has slowed
negotiations with Saudi Arabia, a source close to the talks told
Reuters. Saudi Arabia is considering investing millions of dollars
into revamping the state oil company's ailing refineries – a
years-long target for the petrol-importing country. It is also
mulling construction of an entirely new refinery and investing
in liquefied natural gas (LNG).
The political void has affected investors of all types.
"You want to see that: a) people are in control and b) work
on behalf of all stakeholders - including foreign shareholders,"
said Julian Mayo of Fiera Capital. "I don't think really any of
that applies in Nigeria at the moment."
WHY CHANGE?
Buhari has offered no public explanation for the delay.
Some insiders say it stems from a desire to avoid delegating to
ministers.
Members of his first-term cabinet complained they lacked
access to Buhari and did not know what was expected of them,
said Clement Nwankwo, director of the Policy and Legal Advocacy
Centre, an Abuja-based think-tank.
"Whether his approach is related to his military background,
I don't know. It just seems to be who he is," Nwankwo said.
Buhari's spokesman, Garba Shehu, declined to comment on this
but rejected suggestions that delays over cabinet appointments
had adversely affected government operations.
"Normal running of government is going on because the
permanent secretaries (senior civil servants) are running the
ministries until the ministers are appointed," he said.
Shehu said Buhari would likely submit cabinet nominees to
the upper house of parliament in July. Picks must be vetted by
security services and then approved by parliament. But the
legislature is expected to go on leave in July and not return
until September.
Some observers question how much difference new ministers
will make in an administration in which power is concentrated in
the hands of the president and a close circle of confidants,
including chief of staff Abba Kyari.
"I don't see any reason why that would necessarily change,"
said a Western diplomat, who did not want to be named.
Buhari has made other key appointments: He confirmed central
bank governor Godwin Emefiele for a second term and appointed a
new head of the state oil company. Bucking a trend of one-term governors, Emefiele said he will
keep the controversial managed float of the naira, which
investors and the International Monetary Fund have asked Abuja
to scrap.
That policy prompted many overseas investors to quit
Nigeria in Buhari's first term.
"Across the board everyone is saying they don't see any
prospect for real policy change," said a U.S.-based fund
manager, speaking on condition of anonymity.
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Nigeria and frontier stocks. https://tmsnrt.rs/2YwBARL
Nigeria's economy https://tmsnrt.rs/2FSMr1f
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