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Is Nigeria’s economy really doing well?

By Sam Ohuabunwa
12 February 2018   |   4:21 am
The only defence offered by the Federal Government to Chief Olusegun Obasanjo’s letter to President Muhammadu Buhari (PMB) was to educate him on the great strides of the government on the economy.

Finance Minister, Kemi Adeosun

The only defence offered by the Federal Government to Chief Olusegun Obasanjo’s letter to President Muhammadu Buhari (PMB) was to educate him on the great strides of the government on the economy. The government asserted that Obasanjo must have been too busy to notice the wonderful works done by PMB on the economy with an implied presumption, that had OBJ been less busy and more observant he would have seen the signs of a bubbling economy instigated by the wonderful policies, programmes and projects being faithfully implemented across the length and breadth of Nigeria. In which case OBJ’s verdict would have been different and perhaps he would have advised PMB to seek re-election in 2019 and perhaps attempt a third term as he (OBJ) attempted.

The unassailable truth is that Nigeria’s economy is on the recovery mode. Nigeria’s economy that contracted for 5 quarters between Q1 2016 and Q1 2017 precipitating a recession, the first time in 25 years has begun to expand, hence our exit from recession from the 2Q of 2017. The lowest dip in GDP was achieved in Q 3 2016 (-2.34%) and the best recovery was at Q3 of 2017 (1.4%). Inflation has shown consistent monthly gradual climb down from a high of 18.72% in January 2017 to 15.3% in January 2018. Whereas interest rate has not shown significant drop but there is some moderation. Naira exchange rate against the U.S. Dollar that crossed the 500 mark in the parallel market about October 2016 has retreated to around 360 and supply to the market has improved. Our foreign reserves have continued to accrue, climbing from a low of $28 billion in February 2016 to the current high of about $40 billion at January 2018. The Nigerian stock market has shown very remarkable rally in the last year with total capitalization climbing to N19.6 trillion in Q4 in 2017 from a low of N13 trillion in Q3 2016. Capital importation which almost dried up by Q2 of 2016 at only $1billion has risen steadily to a high of $4.1billion in Q3 of 2017. All over, we can see that the siege on the economy has lifted.

But with all these, can we really say that the economy is doing well? First, any economy where the population growth is higher than the GDP growth cannot be said to be doing well. Because the doing well of an economy is essentially measured by the improved well being of the people. With higher population growth of about 2.7% growth against a lower GDP growth of 1%, it means that the GDP per capita is declining, despite some growth in the GDP. And with this, the standard of living of the average Nigerian is not any better even with our high foreign reserves. It is like a family of four children that does not have enough to eat but their father’s bank account is getting fatter. And when they complain of hunger, you flaunt their father’s big bank account. That’s what Obasanjo saw on the streets, citizens who are hungry, because our gross domestic output is not enough to quench their hunger.

Second is that in addition to having more mouths to feed, fewer people are able to contribute to the food basket. This is because the unemployment and under employment rates have not shown any improvement at all. In fact, the rates have worsened even as the economy was showing the nominal recovery we began to record in Q2 2017. In December 2015, total unemployment was 9.9%, worsening to 13.9% in December 2016 and remained in decline at 18. 8% in Dec 2017. This high unemployment has continued to combine with the generally high (though moderating) inflation rate to create high misery index of 70% in Q4 2016 which has gone higher at 77% In Q3 2017. It is this army of unemployed roaming and menacing our streets that Obasanjo saw, and which IBB has also seen that compelled them to write their patriotic letters.

It is an irony that an economy that is showing growth (even if only marginally) in GDP and accruing foreign reserves is having growth in unemployment. This is because the growth (both GDP & Foreign reserves) is driven essentially by recovery of oil prices and not by growth in the real output of the real or industrial sector. That is the bane of the economy. And thus when we combine the high population growth, the high unemployment/underemployment rate, the high misery index, we are arriving at high poverty rate. The massive devaluation of the Naira (officially from 197 to 310) without any accompanying rise in wages and the debilitating and unconscionable unpaid salary arrears  in States only worsened the poverty and it is this pervading poverty that many patriotic Nigerians are seeing and complaining about. It seems that the perquisites of office make it difficult for the senior government officials and the inhabitants of Aso Rock to understand the message from those who live among the people, even if they live in Hill tops.

Thus it is too early to flaunt achievements of this government on the economy. When a man digs a hole and walks into it, he should not expect applause, when he crawls out of it.  As at May 2015, when this present Government took over the reins, the economy though facing challenges of declining oil prices was still doing well, in comparative terms. When we consider all the parameters and standards of evaluating the economy- GDP growth (2.84% vs 1.4%) unemployment (9.9% vs 18.8%), poverty (53% vs 72%), misery index (62 % vs 77%) the facts are that the economy was in much better shape. Certainly those rates were not the best possible at that time, but they were much better than what we have even today.

There is therefore a lot of work that needs to be done to return the economy to the level it was when this government took over. It must at least achieve this ground zero and this will indicate a readiness to move forward. Now when the economy begins to show improvement in unemployment/ underemployment and poverty levels over the May 2015 Base line, it will be time to flaunt and brag on achievements on the economy. It is my hope that a consistent and faithful implementation of the Economic Recovery Growth Plan (ERGP) will in the medium term lead to reversals. The problem was that the plan came late, after the Administration had wasted nearly 18 months trying policies that had failed in the past.

Finally, let it be known that Nigeria’s economy can never do well with the level of insecurity and unhappiness in Nigeria today. Lives of Nigerians have become so cheap that the apparent failure of government to fulfil its primary responsibility of protecting lives and property puts the government in poor light and prevents the full optimization of national productivity. The high level of internally displaced persons and the disruption of agricultural activities in the Middle-belt are having a negative effect on both agricultural production and Gross Domestic Product. The continued nepotic and lopsided appointments by the Federal Government in defiance of complaints by marginalised states and geo-political zones of the country is causing so much unhappiness and unhappy people can never optimize their productive capacity. And PMB keeps denying this reality. Baffling!

• Mazi Ohuabunwa, OFR. sam@starteamconsult.com