Nigerians Groan under Yoke of Economic Doldrums

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The four years of President Muhammadu Buhari economic programme leaves much to be desired, but analysts say things can still be turned around if there is political will

By Anayo Ezugwu

WHEN President Muhammadu Buhari assumed office on May 29 2015, there were hopes that his government would reignite the fading economy and lay the foundation for a fiscal federalism. But four years down the line, the economy remains in poor state. The economy under his watch has been characterised by high unemployment rate, poverty, insecurity, food scarcity, corruption and mismanagement.

Under his presidency, Nigeria’s unemployment rate increased from six percent in 2014 to 23.1 percent in 2018. This has created a bloated informal sector which contributes little to the GDP but houses millions of underemployed youths. Even Chris Ngige, the minister of Labour and Employment, on May 3, admitted that the unemployment rate is a source of worry. He said the figure could clinch 33.5 percent by 2020 and that the consequences better imagined, if the trend is not urgently reversed.

Ngige said the high unemployment rate of 23.1 percent and underemployment of 16.6 percent is a serious concern to the government.  “It is a worrisome status as the global poverty capital (World Bank, 2018); and concomitant high prevalence rate of crimes and criminalities, including mass murders, insurgency, militancy, armed robbery, kidnappings, drug abuse, among others.

However, Buhari’s response to increasing unemployment rate has been to provide credit to micro and small enterprises, especially in the agro-processing sector and youth skill development. But job creation by small enterprises usually takes time. And the number of jobs is never on the scale of large enterprises. The end result has been that most Nigerians feel economically marginalised in spite of his best efforts.

In his first four years, Buhari also failed to address the issue of poverty. Under his watch, Nigeria overtook India as the country with the largest number of people living in extreme poverty. About 87 million Nigerians, or half the population, live on less than $1.90 per day.

Osinbajo
Osinbajo

Also, economic growth has been lacklustre since his election in 2015. The president seemed to have failed to capitalise on the massive goodwill he enjoyed at the start of his tenure to push through decisive policies. Chukwuma Soludo, a professor of Economics and former governor, Central Bank of Nigeria, CBN, at the Realnews Magazine 3rd Anniversary Lecture on November 19, 2015, advised Buhari to leverage on his goodwill and diversify the economy from oil.

He also urged him not to use command and control economic system in running the economy and equally remove fuel subsidy. “For me, the ‘mistake’ to correct is to abandon or reform the ‘old Buharinomics’ of command and control economic system. Times have changed, and Nigerian economy is different. Let me illustrate with a few examples. First, there is this sense of ambivalence as to whether to remove petrol subsidy or not; and whether government is going to run refineries in competition with the private sector under a subsidy regime or deregulated pricing.

“I am convinced that PMB has the moral authority and legitimacy to quickly remove the subsidy and privatize the refineries. The fundamental case against subsidy removal is not economic: it is the fact that the citizens do not trust government to optimize the use of the proceeds for their welfare. If PMB does not deal with these issues now, I wonder when, if ever.

“Now that private refineries are coming up, it is time to privatize public ones. It should have been done years ago. The huge benefits are not only economic, but also an anti-corruption move. Let government produce a credible agenda of reforms for the sector and let us have another focused public debate on this subject. You may be amazed that even the so-called ‘man in the street’ now understands that it no longer makes sense. The fiscal cost of keeping it is unjustifiable and unsustainable,” he said. Unfortunately, Buhari is ending his first term in office without heeding any of the advise. The nearest he came to doing so was increasing the pump price of fuel at the gas station from N87 to N145 per litre.

The president’s failure to appoint ministers until after six months after assumption of office did the economy no favours, leaving economic management to only the Central bank of Nigeria, CBN.  This singular act virtually put the nation’s economy on hold for six months during which uncertainty prevailed that led to acceleration of capital flight and weakening confidence.

By the time the administration started showing some semblance of activity in 2016, the economy went into recession the same year, with a negative 1.6 percent growth rate. Inflation skyrocketed to worrying levels as the Naira tumbled and economic growth slowed. This led to currency crisis where $1 was exchanged for N500.

In any case, the CBN has moderated the inflation rate, which dropped to 11.25 percent as of March 2019 and equally stabilised the foreign exchange market, thereby ending multiple exchange rate regimes.

As Buhari’s first term in office comes to end, available statistics indicate that all the concerns raised by Soludo and other economists are still dominant in the economy today. For instance, International Monetary Fund, IMF, said Nigeria and other global oil players have spent a total of $5.2 trillion on fuel subsidy in the last five years.

Udoma
Udoma

Also Bloomberg in its recent report on Nigeria’s economy indicated that that foreign direct investment dropped from $5 billion in 2014 to $2 billion in 2018. According to the report entitled: “Nigeria’s Performance on Selected Indicators and Indexes” showed that debt to GDP increased from 12 percent in 2014 to 25 percent in 2018, while debt service to revenue increased from 27 percent in 2014 to 60 percent in 2018.

Likewise, the president’s ambitious plans to diversify Nigeria’s economy away from its dependence on oil have not yielded any result and the hopes of an agric-driven economy have been hurt by increased insecurity in across the country. This indeed showed why the Bloomberg report indicated that non-oil revenue to gross domestic product, GDP, remained unchanged since 2014. It showed that the non-oil revenue in 2014 was four percent and remained the same in 2018.

Nevertheless, it is not all doom. The Bloomberg report indicated that the  Buhari administration has improved the country’s World Bank Easy of Doing Business ranking from 147 percent in 2014 to 145 percent in 2018. Likewise, it reported that the World Economic Forum Competitiveness ranking from 127 percent in 2014 to 115 percent in 2018.

The Buhari administration has also made significant progress in the implementation of the Treasury Single Account, TSA. The TSA enables government to increase budgetary allocations for capital expenditure. In particular, implementing the TSA allows easier monitoring of public finances. The TSA has also helped plug leakages in government revenues while facilitating appropriation and operational controls, especially during budget execution.

In terms of budgeting, the administration has dedicated a greater portion of the federal budget to capital expenditure, in line with its infrastructure development drive. According to the Ministry of Finance, the government disbursed over a trillion naira for capital expenditure in the 2018 fiscal year, by far the largest amount in Nigeria’s history.

In a recent press statement, Femi Adesina, special adviser on media and publicity to the president, said the administration had put the Nigerian economy on firm and solid footing. He said the fourth quarter 2018 GDP report released by the National Bureau of Statistics, NBS, gave lots of cause to cheer.

According to him, the economy has recorded continued progress since it emerged from recession in 2017. “Current result shows a real GDP growth of 2.38 percent compared to 1.81 percent in third quarter of last year, representing the strongest growth since the economy slipped into recession in 2016. For more than five decades, Nigeria has paid lip service to diversifying the economy, from sole dependence on oil.

“The report shows that economic growth has continued to be driven by the non-oil sector, which grew by 2.70 percent in fourth quarter 2018, up from 2.32 percent in third quarter 2018. It represents the strongest growth in the sector since fourth quarter 2015. The non-oil GDP growth was driven by quarrying and other minerals, followed by telecommunications, agriculture, manufacturing, and construction. That is diversification in progress, real time, no matter what the naysayers may say.”

“While the non-oil sector actually drove GDP growth, the oil sector contracted with crude oil and gas GDP reducing by -1.62 percent. This shows that with good governance, focus, prudence and accountability, the life of the country need not depend on oil ad infinitum. The NBS report further shows that Services GDP growth recorded its best performance in 11 quarters, growing by 2.90 percent compared to 2.64 percent in third quarter 2018 and 0.10 percent in Q4 2017. Overall, while growth in the economy was moderated by the contraction in the oil sector, 39 out of 46 economic activities recorded positive growth in the quarter under review,” he said.

Zainab Ahmed
Ahmed

Also a report by the Institute of Chartered in England and Wales, ICAEW, stated that there were signs of a more broad-based economic recovery in Nigeria. The institute said the economy would grow by 2.5 percent this year. The report produced by Partner and Forecaster Oxford Economics stated that most African countries have a positive economic outlook, largely due to positive performance of traditional sectors.

Also, the IMF forecasts that the economy will grow by 2.1% in 2019. “Growth prospects for commodity exporters are weighed down by the soft outlook for commodity prices, including for Nigeria and Angola, where growth is expected to reach about 2.6 percent and 3.9 percent, respectively, in the medium term,” the report said.

Analysts at credit ratings agency, Fitch, predicted that Buhari is likely to maintain his previous policy stances. According to Fitch, with this the investors would remain keen on backing the government’s Economic Recovery and Growth Plan, ERGP. It also stated that the estimated growth across the four years of Buhari’s second term will be an average of 2.7 percent. But this may not bring enough succour because the growth is still less than Nigeria’s projected population growth rate.

By re-electing Buhari despite his unimpressive economic performance, Nigerians have given him a second chance to improve the situation. One of his re-election campaign catchphrases was ‘Next Level,’ signalling his determination to build on programmes initiated in the first term. These include conditional cash transfers to vulnerable citizens, school feeding programmes, giving young people critical skills, and implementing a micro-credit scheme for small traders and artisans.

But these initiatives, however noble, are not widespread and substantive enough to touch majority of Nigerians. Experts would want Buhari to plan for a massive stimulus package other than conditional cash transfers to jump-start the economy. They said this is particularly important given the fact that economic growth is going to be so lacklustre.

Babatunde Ruwase, president, Lagos Chamber of Commerce and Industry, LCCI, said there is need for a review of the power situation as poor power supply continues to pose challenges to business operators. “We acknowledge the efforts made by government to improve liquidity in the power supply chain, the drastic reduction in the debt owed to gas suppliers and generating companies, improvement in power generation, and the enhancement of carrying capacity of the transmission grid.

“We are also aware that the minister of power is promoting alternative models to fix the problem at the distribution end. But a chain can only be as strong as its weakest link. The distribution end is still grappling with numerous challenges, which limit the capacity to deliver power to end users. The power situation continues to pose challenges to business operators.

“There are complaints across all sectors about high energy cost, especially high expenditure on diesel. The situation has worsened with the increase in global crude oil price. Many businesses spend as much as 20-30 percent of their total operating cost on generating power. We propose that policies and incentives be put in place to encourage decentralisation and more off grid solutions,” he said.

Babatunde Ruwase
Ruwase

Auwal Musa, executive director, Civil Society Legislative Advocacy Centre, CISLAC, said Nigeria needs a sound economic team that will review and reform the economy. Besides, he said the country needs to reform the oil and gas sector to make it efficient, effective and productive to eliminate the corruption that has ravaged the sector.

“We need to aggressively diversify to agriculture to ensure that it takes its rightful place in the economy. Industrialisation should also be taken seriously because this is the base of development because we are currently getting from bad to worst in terms of industrialisation, and this is principally because electricity has collapsed, and our capacity to generate power is very low. If we must get out of the woods, we must make our industries functional, effective and efficient. With abundant human resources, we have immense potential to make this happen,” Musa said.

Similarly, Mansur Ahmed, president, Manufacturers Association of Nigeria, MAN, said: “When you are manufacturing, the first step is making an investment, so we want government to look at conditions that will make investments worthwhile. The investment climate is key and I think we all know this over the years.

“So, building infrastructure is one of the most critical responsibilities of the government for industries as a whole to be more competitive. One major constraints of the manufacturing sector in the country is that the cost of financing is very high. For instance, if you borrow funds to invest at 20 percent interest rate, you must make more than 20 percent for that investment to yield benefits,” he said.

Eze Onyekpere, lead director, Centre for Social Justice, said it would be imperative for the government to start with a deep, honest and dispassionate internal review of its economic performance over the last four years.“For instance, the budgeting system should be made more evidence-based, participatory, transparent and accountable to the needs of Nigerians.

“A more transparent and accountable process will increase faith in governance and galvanise the energy of a broad spectrum of Nigerians for national development. There is the need to identify key laws that need to be enacted, those to be reviewed and repealed and submit executive bills to the legislature very early in the life of the administration,” he said.

As Nigerians await the commencement of Buhari’s second term starting from May 29, the president is expected to move the country from economic doldrums to prosperity as part of the next level bargain. Only time will tell whether Buhari’s second coming will meet their   expectations.

– May 10, 2019 @ 17:25 GMT |

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