2020 Outlook: Nigerians should brace up for difficult year

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PRESIDENT Muhammadu Buhari
Buhari

AS Nigerians are still reflecting on their gains and pains of 2019, some economic analysts have predicted a difficult year with high food prices and high inflationary trend, but the FG is optimistic of attaining higher and more inclusive GDP growth this year in order to achieve its objective of massive job creation and lifting many of citizens out of poverty.

 

By Goddy Ikeh

Despite the harsh economic realities and the abysmal level of poverty in the country in 2019, Nigerians are, however, hopeful that 2020 will bring the needed succor and their expectations are therefore high.

The poll conducted by Nigeria’s leading survey and polling firm, NOIPolls Ltd, in December 2019, said that 70 percent of Nigerians are hopeful that there will be improvements in the economy, while 69 percent have job creation as their top priority and 62 percent are worried about poor electricity supply.

Although these are the key findings of the NOIPolls Annual New Year Poll, which gauges the expectations of Nigerians for the New Year, the other areas covered by the survey included education (55 percent), infrastructure (38 percent), healthcare (29 percent), agriculture (23 percent) and security (7 percent).

According to the result of the survey, many of the respondents lamented the increasing cost of goods and services in the country, especially food items, which the National Bureau of Statistics, NBS, blamed for the rise in the inflation rate to 11.85 percent in November 2019.  2020

But the priorities of the federal government in 2020 are not too far from the expectations of Nigerians for 2020. In his 2020 budget presentation to the National Assembly last year, Buhari gave the priorities as fiscal consolidation to strengthen macroeconomic environment; Investing in critical infrastructure, human capital development and enabling institutions, especially in key job creating sectors.

Others are incentivising private sector investment essential to complement the government’s development plans, policies and programmes and enhancing social investment programmes to further deepen their impact on those marginalised and most vulnerable Nigerians.

According to Buhari, the 2020 budget is expected to accelerate the pace of the nation’s economic recovery, promote economic diversification, enhance competitiveness and ensure social inclusion. “We are optimistic of attaining higher and more inclusive GDP growth in order to achieve our objective of massive job creation and lifting many of our citizens out of poverty”.

However, in spite of the promises made in the budget speech, the provisions made for some of these priority areas may not be able to meet the expectations of Nigerians. For instance, the allocation of N127 billion to the power sector, Universal Basic Education Commission N112 billion; Agriculture and Rural Development: N83 billion; Education: N48 billion; Health: N46 billion; Industry, Trade and Investment: N40 billion and Social Investment Programmes N30 billion can barely do much in tackling unemployment, poverty and power challenges in the country in 2020.

But the projections for 2020 by some Nigerian institutions and economic experts did not paint a promising picture for Nigerians.

In its economic review and outlook for 2020, the Lagos Chamber of Commerce and Industry, LCCI, projected a high cost of doing business in 2020.

Muda Yusuf
Muda Yusuf

Muda Yusuf, the director general of the LCCI, attributed the projected high cost to poor infrastructure, multiplicity of levies, excessive regulations, among others.

Yusuf stated that while the nation may have recorded improvement on the Ease of Doing Business Ranking due to some recent policy measures, the realities on ground would continue to differ if the highlighted challenges were not properly addressed.

According to him, the performance of the trade sector in 2020 would be shaped by the direction of government policies.

The report by the News Agency of Nigeria, NAN, quoted Yusuf as saying in December 27, 2019 that the manufacturing sector would continue to benefit from the Central Bank of Nigeria’s aggressive credit push. He, however, predicted that competition between foreign and local producers would fade on prolonged closure of land borders.

He projected that headline inflation would trend higher in 2020 and that it would be driven by the implementation of the new minimum wage and continued closure of the land border.

Yusuf noted that higher Value Added Tax rate of 7.5 percent and the early disbursement of funds for budget implementation, following the return of the budget cycle would also be contributory factors.

“We expect economic growth to remain subdued at around 2 percent by 2020 as consumer demand, as well as private sector investment, will most likely remain weak.

“We are of the view that failure by government to fix structural constraints with regards to fixing power challenges and rehabilitating deplorable road networks, will perpetuate the poor productivity and performance of the sector.

“In our opinion, continued protectionist measures of government will most likely limit growth in 2020.

“Elsewhere, the level of the country’s engagement in Africa Continental Free Trade Area, AfCFTA, scheduled to kick-off on July 1, 2020, will also impact the performance of trade sector.

“As a sustainable solution, it is imperative to fix the fundamental issues of high cost of domestic production, the prohibitive cost of cargo clearing at the Lagos ports, prohibitive import tariffs, high cost of logistics within the economy, and border policy capacity,” he said.

On the performance of the agricultural sector, the director-general projected improved credit flow to agriculture on the back of proposed increase in deposit money banks’ loan to deposit ratio to 70 percent.

However, from policy perspective, Yusuf expressed the view that prolonging closure of the land borders would further add impetus to agricultural output in 2020.

In addressing the Visa-on-arrival policy, the Yusuf expressed the belief that the policy would ensure continental economic integration between Nigeria and other African nations, particularly with regard to the Africa Continental Free Trade Area scheduled to start on July 1, 2020.

He, however, expressed the hope that steps to curtail security risks would be taken before implementation.

“We hope the necessary government agencies would take steps required so as not to expose the country to security risks and properly scrutinise those that would be coming into the country through the visa-on-arrival facility,” he said.

And to unlock the potential of the Nigerian economy, Yusuf proposed the promotion of economic inclusion through a right mix of fiscal, monetary and investment policies, regulations and institutions.

“The potential for growth of the Nigerian economy is immense, but we should not remain a nation of potential.

“In order to unlock these huge potential, we need to put in place appropriate policies, regulations and institutions.

“Investment is critical to the growth of any economy: this is even more so in an economy that is struggling with revenue and other resources.

“Growth in private investment will boost employment, impact on revenue, promote social stability and enhance the welfare of citizens.

“It is thus very fundamental that we create an enabling environment for investors, domestic and foreign, to create wealth and jobs for the country.

“There is also a need to deepen the consultative process between the policy makers and the private sector,” he said.

For the World Bank, job creation in Nigeria is weak and per capita incomes are falling. Local media reports quoted the Bank as saying in its latest Nigeria Economic Update, released in December 2019, that Nigeria’s Gross Domestic, GDP, growth rate for 2019 was estimated at 2 percent. Following the 2016 recession when the GDP grew at -1.58 percent, the country’s GDP had been growing below the population growth rate of 2.6 percent in the last two years.

The reports added that the World Bank said Nigeria needed reforms to accelerate economic growth, create new job opportunities and reduce poverty.

For Cordros Capital, an investment firm, Nigeria is entering a more challenging investment landscape in 2020. “This is because, the combination of geopolitical ambiguity, lingering global trade protectionism, and weak global growth should drive somewhat turbulent global markets,” the company said in its review and outlook released in December 2019.

It noted that “at home, an uncertain crude oil price outlook, rising fear of exchange rate devaluation given the recent precipitous decline in FX reserves, and a host of other factors (such as a polity that appears to already be in the mood for 2023) point to a volatile year ahead”.

“For the markets in 2020, the equities market performance is expected to culminate in a replay of the 2014-2016 period, wherein the market declined for three consecutive years, losing a cumulative 39.7%. For the fixed income market, the still substantial maturity profile in Q1-2020 is likely to see yields become depressed as local investors re-invest OMO maturities in an NTB market incapable of absorbing the volumes. That being said, the CBN will most probably keep OMO yields attractive to forestall capital reversals which could exert pressure on the foreign reserves,” the report said.

But addressing some of the issues raised by some Nigerian analysts, Buhari in his New Year letter to Nigerians, stated that the new Ministry of Police Affairs increased recruitment of officers and “the security reforms being introduced will build on what we are already delivering. We will work tirelessly at home and with our allies in support of our policies to protect the security of life and property”.

“Our policies are designed to promote genuine, balanced growth that delivers jobs and rewards industry. Our new Economic Advisory Council brings together respected and independent thinkers to advise me on a strategy that champions inclusive and balanced growth, and above all fight poverty and safeguard national economic interests,” he said.

According to him, a good example of commitment to the inclusive growth is the signing of the African Continental Free Trade Area and the creation of the National Action Committee to oversee its implementation and ensure the necessary safeguards are in place to allow us to fully capitalise on regional and continental markets, while the joint land border security exercise currently taking place is meant to safeguard Nigeria’s economy and security.

On power, Buhari said: “In the past few months, we have engaged extensively with stakeholders to develop a series of comprehensive solutions to improve the reliability and availability of electricity across the country. These solutions include ensuring fiscal sustainability for the sector, increasing both government and private sector investments in the power transmission and distribution segments, improving payment transparency through the deployment of smart meters and ensuring regulatory actions maximise service delivery.

German Chancellor Angela Merkel
German Chancellor Angela Merkel

“We have in place a new deal with Siemens, supported by the German government after German Chancellor Angela Merkel visited us in Abuja, to invest in new capacity for generation, transmission and distribution. These projects will be under close scrutiny and transparency – there will be no more extravagant claims that end only in waste, theft and mismanagement.

“The next 12 months will witness the gradual implementation of these actions, after which Nigerians can expect to see significant improvement in electricity service supply reliability and delivery. Separately, we have plans to increase domestic gas consumption. In the first quarter of 2020, we will commence work on the AKK gas pipeline, OB3 Gas pipeline and the expansion of the Escravos – Lagos Pipeline.

“While we look to create new opportunities in agriculture, manufacturing and other long neglected sectors, in 2020 we will also realise increased value from oil and gas, delivering a more competitive, attractive and profitable industry, operating on commercial principles and free from political interference,” he said.

He also assured that the new Ministry of Humanitarian Affairs, Disaster Management and Social Development will consolidate and build on the social intervention schemes and will enhance the checks and balances necessary for this set of programmes to succeed for the long term.

However, these promises of are not new to Nigerians, but what is needed now is the political will to execute these programmes and projects for the benefit and wellbeing of Nigerians

 

– Jan. 13, 2020 @ 18:35 GMT |

 

 

 

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