Year of Harsh Economy for Nigeria

Fri, Dec 25, 2015

By publisher

7 MIN READ

BREAKING NEWS, Business, Featured

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| By Anayo Ezugwu |

FOR many Nigerians, the year 2015 was characterised by economic hardships and challenges. The year started with unending pipeline vandalisation which led to fuel scarcity that has persisted in the country till December. The fuel crisis which worsen just before the 2015 general elections lasted for about three months as the federal government and oil marketers fought over the payment of fuel subsidy.

The past administration of former President Goodluck Jonathan through Ngozi Okonjo-Iweala, former minister of finance, accused the marketers of blackmailing the federal government. She said that a total of N150 billion was paid to oil marketers as subsidy claims, even though the marketers claimed that government owed them N200 billion and refused to load products unless the government cleared the backlog.

Hence, the situation became a campaign issue which the All Progressives Congress, APC, former opposition party took advantage of. The APC promised that if elected into office, it would end fuel scarcity and subsidy payment. This was not so because by October, Nigerians were still witnessing long queues and spending hours trying to get fuel as a result of the oil marketers refusing to lift products over subsidy claims.

This prompted President Muhammadu Buhari to send N465.64 billion supplementary budget to the National Assembly on November 18, to enable government pay the marketers the outstanding subsidy claims. The breakdown of the supplementary budget showed that N413.36 billion would be for fuel subsidy payment while N10.62 billion was earmarked for the payment of outstanding severance gratuity. The budget had been passed since December 1, but the queues persisted almost to the end of the year at the petrol stations.

The economy in 2015 also was also marred by persistent power outages across the country with the distribution companies, Discos, still giving its customers estimated bills. The year actually started with the power supply dropping to 2000 megawatts from 4000mw. Chinedu Nebo, former minister of power, had attributed the drop to incessant gas pipeline vandalism and sabotage from the then opposition APC. He said more than 200 incidences of crude oil and gas pipeline vandalism were recorded within six months.

Nebo alleged that the sabotage of the pipelines by vandals had constrained gas supply to the power plants, a development that had seriously affected electricity supply. This, he said, was the major constraint to adequate power supply across the country, stressing that 81 percent of power being generated in the country was from thermal generation plants, which were dependent on gas.

For a while, it appeared that the APC-led administration had partially succeeded in restoring steady power supply in some parts of the country, but after initial two months, power supply nosedived to another abysmal level causing outcry in some quarters. As if that was not bad enough, the government’s mandate to the Discos to fix prepaid metres in every household in the country, remained was yet to be carried out.

The economic situation was made worse by cash crunch as a result of government decision to operate the Treasury Single Account, TSA. While the Central Bank of Nigeria, CBN, said the movement of federal government funds from commercial banks to the CBN would not have any major negative impact on the liquidity conditions of the banks, there were fears that there would be no money for banks to grow the economy. Godwin Emefiele, CBN governor, said that the apex bank would continue to closely monitor the money market to ensure that the policy did not in any way affect the industry and that it had the muzzle to play its roles as a catalyst for the economic development of the nation.

There was also the issue of foreign exchange restriction for the importation of certain items considered unnecessary and unhelpful to the nation’s macro-economic development. Defending the measure, Emefiele said the foreign exchange access restriction has helped to re-open factories that had closed down due to the inability of their products to compete with the dumping of foreign goods in the country.

But Charles Soludo, former CBN governor, faulted the implementation of the TSA by the federal government as well as the policy regime of foreign exchange restrictions. Speaking at the third anniversary lecture of Realnews Magazine, Soludo stated that while the TSA could restore sanity and transparency into Nigeria’s financial system, the initiative could be better deployed as according to him, concentrating the cash at the CBN when needed in the economy was not sound economics.

Soludo also faulted the policy regime of foreign exchange restrictions being implemented by the CBN including the ban on 41 items from having access to foreign exchange and the debate on whether to further devaluate the naira or not, arguing that such policies would actually cause the economy to implode, worsening unemployment and increasing poverty level.

The foreign exchange policy of the Central Bank of Nigeria made the JP Morgan to delist the country’s currency from its bonds on September 30, while Barclays also threatened same. This notwithstanding, others things that happened in the economy during the year are:

The continuous fall in the price of crude oil at the international market also affected the flow of money.

As of Thursday, December 10, oil price fell below $37 a barrel after new data showed that the Organisation of the Petroleum Exporting Countries, OPEC, has not reduced the oil its s pumping in the international market. OPEC production rose by 230,000 barrels a day in November and the news pushed oil prices back below $37 a barrel for the second time with a week. Last time oil was cheaper than that was in the depths of the recession in February 2009. It reached a peak of nearly $108 per barrel in June 2014.

The federal government proposed N6 trillion budget expenditures for 2016 and many Nigerians remained skeptical on where the government would get the cash to finance the budget. The appropriation bill was predicated on the oil benchmark of $38 per barrel, and with crude oil production of 2.2 million barrel per day. Thirty percent of the entire budget would be for capital expenditure.

But Kemi Adeosun, minister of finance, promised that the government would raise the money through proper accountability by all ministries, departments and agencies, MDAs.

On Friday, December 11, Adeosun released a circular calling on all MDAs to remit 80 percent of their operational surpluses to the Consolidated Revenue Fund account. The order also called upon all MDAs to reduce operating costs as much as possible, in keeping with President Buhari’s efforts to reduce wasteful government expenditures.

Despite the economic challenges in 2015, statistics from the National Bureau of Statistics, NBS, on November 15, showed that the Gross Domestic Product, GDP, grew by 2.84 percent year-on-year in real terms in the third quarter of the year. This was contained in the country’s GDP report for the third quarter of 2015.

The figure was higher by 0.49 percent points from growth recorded in the preceding quarter, yet lower by 3.38 percent points from growth recorded in the corresponding quarter of 2014. The report said that real GDP increased by 9.19 percent, quarter-on-quarter.

The NBS on November 15 said inflation rate in Nigeria increased by 9.3 percent year-on-year in October. The NBS made this known through its October 2015 Consumer Price Index, CPI. The report shows that CPI gauges the average change over time in the prices of goods and services that are consumed by the people in their day-to-day living. The CPI stated that the October inflation rate was marginally lower from the rate recorded in September, which was 9.4 percent.

— Jan 4, 2016 @ 01:00 GMT