Economy, Featured
The failure of the APC-led federal government to accept responsibility for its inability to manage the economy, seek assistance in tackling the worsening security challenges, the impunity among the political class and the docility of Nigerians may further delay the country’s pandemic recovery and achieve resilient and sustainable growth.
By Goddy Ikeh
IN his inauguration address to the nation after winning the 2015 presidential polls, President Muhammadu Buhari noted that “No matter how well organized the governments of the federation are they cannot succeed without the support, understanding and cooperation of labour unions, organized private sector, the press and civil society organizations. I appeal to employers and workers alike to unite in raising productivity so that everybody will have the opportunity to share in increased prosperity.
“My appeal for unity is predicated on the seriousness of the legacy we are getting into. With depleted foreign reserves, falling oil prices, leakages and debts the Nigerian economy is in deep trouble and will require careful management to bring it round and to tackle the immediate challenges confronting us, namely; Boko Haram, the Niger Delta situation, the power shortages and unemployment especially among young people. For the longer term we have to improve the standards of our education. We have to look at the whole field of medicare. We have to upgrade our dilapidated physical infrastructure,” he said.
According to him, no single cause can be identified to explain Nigerian’s poor economic performance over the years than the power situation. “It is a national shame that an economy of 180 million generates only 4,000MW, and distributes even less. Continuous tinkering with the structures of power supply and distribution and close on $20b expanded since 1999 have only brought darkness, frustration, misery, and resignation among Nigerians. We will not allow this to go on. Careful studies are under way during this transition to identify the quickest, safest and most cost-effective way to bring light and relief to Nigerians.
“Unemployment, notably youth un-employment features strongly in our Party’s Manifesto. We intend to attack the problem frontally through revival of agriculture, solid minerals mining as well as credits to small and medium-size businesses to kick–start these enterprises. We shall quickly examine the best way to revive major industries and accelerate the revival and development of our railways, roads and general infrastructure.”
Unfortunately, a close look at these promises, it is difficult to score Buhari and his All Progressive Congress-led federal government a pass mark in any of these sectors. But some stakeholders have been gracious enough to commend the federal government for completing some of the rail projects, rehabilitation of some the country’s airports and some road projects started by the previous government of the Peoples Democratic Party, PDP. And they were quick to state that it was difficult to name any major infrastructural project started and completed by the APC government.
And following this development, Nobel laureate, Professor Wole Soyinka, has blamed this ugly development and the impunity among the political class on the docility of Nigerians.
Speaking at the 24th edition of the Wole Soyinka Lecture Series organized by the National Association of Seadogs (Pyrates Confraternity) held via zoom with the theme National Conference Against Impunity on Wednesday, August 4, 2021, Professor Soyinka said every Nigerian should take responsibility for allowing impunity thrive in the country, adding that the country was paying for not being able to protest and denounce impunity in the country. The Nobel Laureate, who noted that all the dire events that have overtaken and overwhelm Nigeria were traceable to impunity, pointed out that the topic was timely considering that it was instructive for Nigerians and that it was not late to reverse the trend.
“I would probably expect that from different perspectives in terms of timing, there might be disagreement I am absolute certain that we would agree that one of the major reasons for the dilemma we are undergoing in this country right now is that we permitted, we nurtured, we even encouraged either by actions or inactions, the mindset of impunity both in leadership and among the people.
“We ourselves are equally guilty. We ourselves allowed it. We watched it happened. We didn’t take to the streets to protest it, to denounce it, to warn of the consequences. Oh yes there were warnings here and there but they were not concerted and structured. So it is not too late to reverse the trend. But at least we must first begin a frank, honest and objective dialogue,” the Vanguard newspaper report quoted Soyinka as saying.
But following the dwindling fortune of the Nigerian economy, the former Governor of the Central Bank, CBN, Professor Charles Soludo had warned that unless the Buhari administration embarked on long-term structural economic measures to salvage the nation, the economy might hit the red line.
Soludo, who was the Guest Speaker at the 4th Progressive Governance Lecture, organised by the 23 APC governors in Kaduna in August 2016, lamented the state of the economy, saying that Nigeria had now been listed 13th on the list of failed or fragile State under the current world economic index. “The topic that I have been assigned to speak on is Building the Economy of States, Challenge of Developing Inclusive and Sustainable Growth. At a time like this, I don’t think there is a better topic to be addressed”.
He warned that until the federal government decides to address the critical problems confronting Nigeria’s economy, the future would be bleak. “Growth in Nigeria and the states will not be inclusive if we don’t break the dynasty of poverty and maximize the states and Nigeria’s comparative and competitive advantages. Most of the APC States happen to be in the north. One fundamental fact of our economy is that there is partial and individual concentration of wealth and poverty,” he said.
According to Soludo, much of the frontline states, 11 of them, are in deep poverty. “That is also coincidentally the states with the highest rate of population growth. Those happen also to be the states where you have desertification that is encroaching massively. Productivity level of agriculture in those states is down by about 20 per cent. What is the implication of all this if we are talking about inclusive and sustainable growth?
“The Nigerian economy faces both challenges and opportunities. The first big challenge to highlight is that Nigeria is a fragile state. Nigeria was ranked number 54 in 2005 of failing states. Look at the countries ahead of us: Somalia, South Sudan, Southern African Republic, Sudan, Yemen, Syria, Chad, Congo, Afganistan, Haiti, Iraq, Guinea, Nigeria and Pakistan,” local media reports quoted Soludo as saying.
However, the Vice President, Professor Yemi Osibanjo, who was among the guests, attributed the challenges facing Nigeria as problems inherited from previous administrations in the country, saying that the Buhari Government will do everything in its capacity to take the nation’s economy out of the woods.
“I believe that the collapse in oil prices is a blessing and an opportunity for a new beginning. And this is predicated on the fact that I believe that the trajectory that we have gone through before was not a sustainable path. And therefore, with the collapse of oil prices, it is a clarion call for us to press the reset button and start afresh on a more sustainable path,” he said.
But five years after, the fortunes of Nigerians have not changed, rather all the indices are pointing to the negative. For instance, political and economic outlook of the Economic Intelligence painted a gloomy picture of the state of affairs in Nigeria. The Country report on Nigeria released in July noted that “instability is chronic in some areas, and inflation and unemployment accentuate the problem. The government will halt its pro-market reform agenda to avoid aggravating the situation, with long-term implications for critical inputs such as electricity supply.
“The government aims to roll out coronavirus vaccines to 70% of the population by end-2022, but tight global supply, widespread anti-vaccine sentiment, instability and a lack of pharmaceutical storage facilities mean that mass inoculation will take far longer.”
According to the report, protectionist economic policy will be used in an attempt to support local industry. It, however, noted that the methods employed, in particular by the Central Bank of Nigeria, will contribute to macroeconomic imbalances, notably high inflation and periodic hard-currency shortages.
“Near-term economic growth will be muted by high inflation and unemployment, and low nominal wage growth and consumption. Monetary policy will tighten from 2022. A current-account deficit in 2021 and low short-term interest rates will cause the naira to be devalued. The Economist Intelligence Unit expects the balance to turn to a surplus in 2022, and the naira will remain fairly stable until 2025, when we expect another devaluation. A policy of diversifying the economy away from oil and reducing imports through protectionism will be pursued. An Africa-wide free-trade agreement (to which Nigeria is a signatory) means that this strategy will have to be accelerated,” it added.
Some Nigerians have expressed concerns on the country’s huge debt stock. Commenting on the debt issue, Professor Kingsley Moghalu, a former deputy governor of the CBN observed that the rate at which Nigeria’s public debt has increased in the last six years is unprecedented, alarming, and unsustainable. “From $10.31 billion at the end of June 2015, the total external debt increased to $32.85 billion at the end of March 2021, which represents a 218 percent increase. The total outstanding public debt stock increased by 173 percent in the same period, from N12.11 trillion to N33.10 trillion. On average, over N3.6 trillion is being added to the public debt annually,” Moghalu said in July, 2021.
According to him, this massive borrowing, and the infrastructure investment that has been used to justify it, have grossly underperformed. He lamented that instead of delivering economic growth, the economy has been twice in recession, and when out of it, growth has been underwhelming at 2 percent at best. “And rather than the debt-funded infrastructure projects creating ample number of jobs for the citizens, the national unemployment rate has increased to 33.1 percent while youth unemployment has reached 42.5 percent,” he said.
He warned that the country is now on a dangerous, debt-induced fiscal cliff. “Put simply, the Government of Nigeria is mortgaging the future of our country’s youth. We have to stop further borrowing and start to manage the current obligations in order to avoid a sovereign debt default or, at best, a costly restructuring. Further borrowing will lead to a disastrous debt bubble bust.
“As alternatives to debt, the government needs to focus on increasing domestic revenue, by expanding the tax base – not by increasing tax rates as has been done with the value added tax (VAT) – and by introducing reforms for ease of paying taxes while abolishing multiple taxation. Taxation requires the government to maintain a social contract with the people. At the minimum, the government must restore security to the country so that citizens can go about their business, assured of their safety,” he added
Despite the concerns expressed on borrowing binge, on July 15, 2021, the Senate approved the federal government’s 2018-2020 external borrowing rolling plan of $8.3 billion and 490 million euros. President Buhari explained that the loan will be sourced from multilateral and bilateral institutions and the issuance of Eurobonds in the international capital market. Donor funded projects under the plan, according to the President, will be financed through sovereign loans from the World Bank, African Development Bank (AfDB), Islamic Development Bank, French Development Agency, and the China EXIM Bank. Others include, the China Development Bank, European Investment Bank, European ECA, KfW, IPEX, AFC, India EXIM Bank and the International Fund for Agricultural Development (IFAD). According to President Buhari’s letter, the projects and programmes to be funded by the plan are based on technical and economic evaluation that will promote employment generation, social protection and poverty reduction.
In addition, Nigeria has been allocated about $3.35 billion as part of a historic general allocation of Special Drawing Rights, SDRs, of the International Monetary Fund, IMF. This allocation is a result of the approval of a general allocation of about SDR456 billion – an equivalent of $650 billion – by the IMF Board of Governors on Monday, August 2, 2021. The allocation is expected to boost global liquidity at a time when the world is grappling with the coronavirus (COVID-19) pandemic.
“This is a historic decision – the largest SDR allocation in the history of the IMF and a shot in the arm for the global economy at a time of unprecedented crisis,” said IMF Managing Director, Kristalina Georgieva.
But reacting the criticisms trailing the poor management of the country’s economy and other challenges facing the country, the minister of state for petroleum resources, Timipre Sylva, blamed the current economic crisis on the former PDP-led administration.
Speaking on Channel’s Television programme, Politics Today on Thursday, August 5, 2021, Sylva said:“What we inherited is like broken China (plate),” he said when asked about the state of the country’s economy. “Somebody broke the China and arranged it very well on the table as if it was not broken.
“So, you came into the room, and you thought there was a China on the table and you tried to pick it up, and it just fell into pieces in your hands; who broke it, is it you or was it already broken? That was the kind of economy we inherited; we inherited an economy that was already broken. We tried to pick up the economy and it scattered in our hands,” he explained.
Unfortunately, the APC government led by President Buhari, which promised Nigerians improved economy, fight against corruption and insecurity and restructuring the country’s faulty political structure during its campaign in 2015, has not been able to fulfil any these promises and it is still blatantly blaming the PDP for its incompetence and woeful failures.
– Aug. 08, 2021 @ 18:14 GMT |
Tags: Why Nigeria’s pandemic recovery may be delayed?
