Despite the executive orders by President Muhammadu Buhari and other policy measures adopted to stimulate economic growth in 2019, the economy failed to soar as expected by many Nigerians
By Goddy Ikeh
THE performance of the Nigerian economy in 2019 has been seen and described differently by some stakeholders as a significant year, which in many ways has reshaped the capital market for years to come, while the manufacturer’s CEOs Confidence Index, MCCI, identified inadequate electricity supply and the duo of multiple taxation and overregulation amongst others, as challenges confronting operations in the country in the outgoing year. And the survey conducted by NOIPolls in December 2019 to gauge the perceptions of Nigerians on how well the country has fared in 2019 particularly on some key socio-economic areas, revealed that Nigerians believe that the country has not fared well in the following areas; the Health sector (79 percent), Electricity supply (66 percent), Job creation (65 percent) and the Economy (64 percent).
But in his progress report on the Nigerian economy in 2019, Buhari said in his 2020 budget address at the National Assembly that the economic environment remained very challenging globally and that it reflected the uncertainties arising from security and trade tensions with attendant implications on commodity price volatility.
He noted that the Nigerian economy recorded nine consecutive quarters of GDP growth and that annual growth increased from 0.82 percent in 2017 to 1.93 percent in 2018, and 2.02 percent in the first half of 2019. According to Buhari, the continuous recovery reflects the Nigerian economy’s resilience and gives credence to the effectiveness of our economic policies thus far.
“We also succeeded in significantly reducing inflation from a peak of 18.72 percent in January 2017, to 11.02 percent by August 2019. This was achieved through effective fiscal and monetary policy coordination, exchange rate stability and sensible management of our foreign exchange.
“We have sustained accretion to our external reserves, which have risen from $23 billion in October 2016 to about US$42.5 billion by August 2019. The increase is largely due to favourable prices of crude oil in the international market, minimal disruption of crude oil production given the stable security situation in the Niger Delta region and our import substitution drive, especially in key commodities.
“The foreign exchange market has also remained stable due to the effective implementation of the Central Bank’s interventions to restore liquidity, improve access and discourage currency speculation. Special windows were created that enabled small businesses, investors and importers in priority economic sectors to have timely access to foreign exchange.
“Furthermore, as a sign of increased investor confidence in our economy, there were remarkable inflows of foreign capital in the second quarter of 2019. The total value of capital imported into Nigeria increased from US$12 billion in the first half year of 2018 to US$14 billion for the same period in 2019.
On the performance of the 2019 budget, Buhari recalled that the 2019 ‘Budget of Continuity’ was based on a benchmark oil price of $60 per barrel, oil production of 2.3 mbpd, and an exchange rate of N305 to $1. And based on these parameters, the federal government projected a deficit of N1.918 trillion or 1.37 percent of Gross Domestic Product.
As at June 2019, Federal Government’s actual aggregate revenue (excluding Government-Owned Enterprises) was N2.04 trillion. This revenue performance is only 58 percent of the 2019 Budget’s target due to the underperformance of both oil and non-oil revenue sources. Specifically, oil revenues were below target by 49 percent as at June 2019. This reflects the lower-than-projected oil production, deductions for cost under-recovery on supply of premium motor spirit, PMS, as well as higher expenditures on pipeline security/maintenance and Frontier exploration.
Daily oil production averaged 1.86 mbpd as at June 2019, as against the estimated 2.3 mbpd that was assumed. This shortfall was partly offset as the market price of Bonny Light crude oil averaged US$67.20 per barrel which was higher than the benchmark price of US$60.
Additionally, revenue projections from restructuring of Joint Venture Oil and Gas assets and enactment of new fiscal terms for Production Sharing Contracts did not materialize, as the enabling legislation for these reforms is yet to be passed into law.
The performance of non-oil taxes and independent revenues such as internally generated revenues were N614.57 billion and N217.84 billion respectively.
Receipts from Value Added Tax were below expectations due to lower levels of activities in certain economic sectors, in the aftermath of national elections. Corporate taxes were affected by the seasonality of collections, which tend to peak in the second half of the calendar year.
He disclosed that in spite of the delay in capital releases, a deficit of N1.35 trillion was recorded at end of June 2019, representing 70 percent of the budgeted deficit for the full year.
Buhari noted that despite these anomalies, the federal government was able to meet its debt service obligations, current on staff salaries and that overhead costs had also been largely covered.
But the survey published by the NOIPolls in December said the National Bureau of Statistics, NBS, reported that the nation’s Gross Domestic Product, GDP, grew from 2.12 percent in the second quarter of 2019 to 2.29 percent in the third quarter of 2019 indicating an increase of 0.17 percent, but that despite this increase in the nation’s GDP, the average Nigerian is yet to feel the impact of this increase in the GDP.
It noted that the Director-General, Budget Office of the Federation, Ben Akabueze, stated that for Nigerians to effectively feel the impact of economic growth, the rate of Gross Domestic Product growth must be higher than the population growth.
The survey findings on the economy showed that 64 percent of the respondents stated that the nation has not fared well in this area in 2019 despite the marginal increase recorded in the county’s GDP in quarter 3, 2019 as reported by the National Bureau of Statistics.
“On the contrary, 68 percent of Nigerians reported that the country has fared well in the area of Agriculture while 58% reported that the country has fared well in the Education sector. The poll also revealed that 79 percent of Nigerians disclosed that healthcare delivery has not fared well in 2019, while 66 percent lamented over epileptic power supply in 2019. And that 65 percent of Nigerians complained about lack of job in the country and this could be as a result of the high rate of unemployment and under-employment in the country as well as the thousands of Nigerians who join the labour market on a monthly basis.