The structural problem with the Nigerian economy
It is also the season when politicians make election promises, sometimes based on deep reflection of the issues but sometimes just out of thin air.
Regardless of the motivations, it is useful to at least force them to provide answers on how they plan to tackle key issues, one of which should be on the state of the economy.
The recent story of the economy needs no reminder but here it goes.
We saw economic growth collapse from highs of seven per cent per year, to a recession with the economy shrinking by two per cent at its depth.
We have recovered a bit, but that recovery is still fragile with growth slower in the last quarter than it was in the previous quarter, and importantly, growth that is still slower than population growth.
What this means is, on the average, Nigerians are getting poorer. The average hides a much deeper problem though.
Even during the days of seven per cent growth, the economy was not creating enough jobs.
As expected, the recession worsened the job situation with unemployment up to above 18 per cent as at the last count in September of 2017, a combined unemployment and underemployment rate that is almost at 40 per cent, and a youth unemployment rate that is over 50 per cent.
Staggering numbers if you remember that we have a labour force that is over 85 million.
On the macroeconomic front, things have sort of stabilized.
The exchange rate crisis has ceased with the US Dollar to Naira exchange rate relatively stable over the last 18 months.
The Inflation rate which peaked at over 18 per cent has also dropped continuously until last month to just above 11 per cent.
Still higher than the single digit target but at least not as bad as a year ago.
The macroeconomic stability is held surreptitiously in place by the crude oil price.
Indeed, if the oil price collapses again then the economy will almost certainly be tossed back into the depths of the kind of crisis we saw between 2015 and 2017.
This speaks to what is indeed the key structural problem with the Nigerian economy.
A few weeks ago, the National Bureau of Statistics released its foreign trade in goods reports for the second quarter of 2018.
The keen watchers would have easily spotted the key statistic there: Crude oil and natural gas exports accounted for over 95 per cent of all exports.
Crude oil alone accounted for 83.5 percent. This means that if the crude oil price collapses, then it’s back to square one of the economic crisis games again.
You often hear politicians talk about how the economy needs to be diversified but that statement is not necessarily true.
The economy itself is diversified, or at least as diversified as most other countries.
Exports however are not, and that is where the structural problem is.
The combination of the need to engineer growth in sectors of the economy that create jobs and the need to diversify exports to reduce the risk of economic collapse from a crude oil that is always volatile means we can break down our economic policy question for politicians to a simple one: How are you going to promote export growth in labour-intensive sectors?
Are you trying to run for president? How are you going to promote export growth in labour-intensive sectors?
Are you trying to run for governor? How are you going to promote export growth in labour-intensive sectors in your state?
Are you trying to become a senator or a member or the house of representatives?
How is your legislative agenda going to promote export growth in labour-intensive sectors?
It is a question that all those running for office must answer and one that the electorate should not stop asking.
I know the answers will vary and figuring out if the answers the politicians give makes sense will be a challenge on its own.
But at the very least we must get them thinking about this question. If they have no good answer, then they really have no business running for any office.
Nonso Obikili is an economist currently roaming somewhere between Nigeria and South Africa.
The opinions expressed in this article are the author’s and do not reflect the views of his employers.
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