Nigeria in 2018 and flash points for 2019
At the start of the year we continued our recovery from a difficult period. The foreign exchange shortages which were the bane of the previous three years were all but forgotten.
The crippling fuel scarcities appeared to have been dealt with. Year on year Inflation appeared to have peaked and looked on a downward trend.
Finally, we had officially emerged from recession with the economy still struggling but at least the direction was looking up. So how did 2018 turn out from an economy perspective?
I sometimes get accused of being overtly negative, so I’ll start with the good stuff. The most impactful to the average Nigerian was the drop in inflation.
Between January 2018 and now inflation dropped from over 15 percent to just above 11 percent. A good thing.
Keen observers will note this “drop” was partly due to the way inflation is measured on a year-on-year basis, but even the month on month numbers were lower on average.
Although, inflation is still higher than pre-FX crisis levels, so we haven’t come through that episode unscathed.
The second positive thing is the peace in the Niger Delta which drove a recovery in crude oil production.
This, combined with relatively higher oil prices, provided much needed revenue to stretched governments.
The revenue boost meant that government finances should have been better in 2018 than they were in 2017. I say should because we don’t know for sure. The budget implementation reports have been conspicuously missing.
Despite all the good stuff all was still not well with the Nigerian economy. We recovered from recession, but growth has been tepid and even looked like it started to slow again.
Since the last quarter in 2017 the economy has actually grown at a slower rate.
That growth through 2018 so far was actually still slower than population growth. Which means on average, Nigerians were still getting poorer.
Speaking of poverty, in 2018 Nigeria became the official poverty capital of the World. Which meant we had allegedly overtaken India as the country with the most people living in poverty.
For context India has a population of over one billion people.
I say allegedly because the official government response to the poverty news was to say that the official data had not been released and once it was, we would see that their policies were reducing poverty.
Of course, the official data still has not been released. The unemployment numbers are also missing too. I’m not one for conspiracy theories but you have to wonder.
Some of the data that we have do not paint a good picture. Credit by banks and other financial institutions did not grow in 2018.
More credit typically means more economic activity and if that did not grow then we should be worried.
The government continued with their direct lending programs but those are minuscule compared to private lending.
The agriculture sector, which is a significant employer of low skilled labour and typically very resilient, slowed significantly.
In the second quarter the sector grew at just over one percent year on year, its worst performance in years.
Hopefully it’s just an anomaly but maybe the crisis in the middle belt and the north east are having a negative impact.
There’s a lot more but perhaps the saddest thing about 2018 was that we demonstrated that we did not really learn much from the oil price crash and the recession.
In terms of systematic problems with the Nigerian economy we are still overly dependent on crude oil with no signs of policy change.
There has been no push for non oil exports. No tax reform to refocus government revenue away from crude oil.
No “savings” by government to act as a buffer in the event the crude oil price crashes again.
The central bank was still fixing the exchange rate guaranteeing that another oil price crash will be just as damaging as the last one.
The federal government was still manipulating fuel prices with subsidies, now called under-recovery, allegedly topping N1tn in 2018, guaranteeing that another sharp adjustment in fuel prices will be just as damaging to the economy as it was the last time.
Then there is the debt issue added to the mix now. Long story short, whatever we did prior to 2014 that led to the recession, we are doing it again except this time we probably won’t have to wait for an oil price crash before we are forced act.
It is election season and all the candidates are going to gloss over the fact that 2019 is going to be another difficult regardless of who wins.
As usual we will wait until after the elections to face the music.
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