Nigeria just elected Muhammadu Buhari as its new president. When he takes office, he will have his work cut out for him as he inherits Africa's largest economy just as it begins the descent into a tailspin due to plunging oil prices.

According to a report by the Economist, Nigeria's economy has slumped significantly as oil prices have dropped. Oil accounts for 95% of the nation's foreign earnings, and two-thirds of its government's revenues. But, since June, 2014, oil prices have declined by half, draining Nigeria's coffers almost overnight and highlighting the spectacular financial policy shortcomings of the outgoing administration.

The plunge in oil prices has caused Nigerian currency, the naira, to take a similar plunge, dropping by more than 18% against the US dollar over the past six months. Given the heavy reliance on imported products, such a drop in value is painful news for Nigerians who find it much harder to afford daily necessities today than just a few months ago.

This has led the governor of Nigeria's central bank to raise interest rates to a record high of 13% in an effort to combat the plunging value of the naira. But, inflation (now at 8.4%) is still on the rise. Most analysts believe that it will reach the double digits over the next several months, while Merrill Lynch has gone so far as to project it to reach 15% before the end of the year.

While the Nigerian economy has grown by an average of 7% over the last decade, the IMF currently projects an expansion of just 4.8% for 2015. All of these negative indicators have caused many foreign investors to withdraw. This has further crippled the economy, with nearly one-third of the Lagos Stock Exchange's trading disappearing since last June. Nigerian capitalists have lost billions, and Standard & Poor has downgraded the country's credit rating to just a B+, four levels below investment grade.

The recent election made matters worse. While Buhari swept in on promises of cleaning up corruption, his election created a great deal of uncertainty. That uncertainty led to further jitters among investors, and further economic contraction. Optimistic investors hope that Buhari's administration will be able to make good on his promises, which has prevented a complete collapse in investor confidence.

Still, the damage incurred may mean a long road to recovery. Moreover, Buhari will have to contend with non-economic concerns, such as the insurgency of Boko Haram, the Islamist extremist group causing havoc in the Nigerian northeast.

He must also combat widespread poverty conditions, address much needed infrastructure concerns, and work out serious budget deficits brought about by the drop in government revenues from oil. In short, Mr. Buhari will have his work cut out for him as soon as he has taken the oath of office.

Originally published via economywatch.com