September 2015: Waiting for Buhari

An air of expectancy – hints of hope laced with strong traces of trepidation – hangs over global financial markets and the wider political economy. Muhammadu Buhari, the leader of Africa’s largest economy, Nigeria, is keeping the population and the investor community waiting an unconscionable length of time as he laboriously assembles his cabinet. The all important post of finance minister is still vacant, more than five months after Buhari’s landmark election in March. In the US, the ‘will-they-won’t-they?’ saga over a potential interest rate rise by the Federal Reserve enters a further round. Ahead of the 16–17 September meeting of the policy-making Federal Open Market Committee, opinion is evenly split about whether the Fed will go ahead with the first rate hike for nine years. In similar fashion, no one can predict the outcome of the turbulence on Chinese financial markets.

The political and financial stormclouds over China, foreshadowed by OMFIF’s July–August edition, have now burst – with effects that could either soon subside or, alternatively, produce a long-term downturn for the world economy. In Europe, too, political and financial activism is on hold. General elections are taking place in Greece, Portugal and Spain before the end of the year; the European Central Bank awaits concrete results from its €60bn-a-month bond purchase strategy; and the International Monetary Fund makes up its mind whether to participate in the latest €86bn Greek bail-out package. Underlining the scale of the challenge facing his country’s new leader, Kingsley Chiedu Moghalu, former deputy governor of the Central Bank of Nigeria, outlines Africa’s problem of ‘capitalism without capital’ and sets out ways of overcoming it. Anthony Robinson investigates the background to a controversial Russian–South African nuclear deal. John West explores the wider implications of Chinese investment in Africa.

Darrell Delamaide, in his monthly dispatch, reports on an undercurrent pushing the Fed towards higher interest rates this month, despite the stock market nervousness. George Hoguet writes on the options for investors seeking to capitalise on the opening of Iran after the nuclear deal with the US, and opines that investment in multinational companies which may profit from Iranian connections could be the most propitious route. Philip Turner and Jhuvesh Sobrun from the Bank for International Settlements, and Ana Stupnytska from Fidelity, dwell on the problems for emerging market economies caused by the build-up of exposure to dollar debt as the US currency rises on world markets.

Hani Kablawi describes the global need for prime collateral – the subject of an OMFIF report published this month in conjunction with the Bank of New York Mellon. Denis MacShane laments the mutual miscomprehension between Russia and the West. Antonio Armellini outlines how uncertainty over a further Greek confrontation with its creditors could influence the debate over a possible British exit from the European Union. George Hoguet reviews a post-mortem to the financial crisis – Unintended Consequences: Why Everything You’ve Been Told About the Economy is Wrong by Edward Conard – and highlights precepts for improving the climate for investment and risk-taking in the US and elsewhere – all issues the Fed will be pondering deeply as the 16–17 September decision time approaches.

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