Buhari Presidency: Four years of bold economic reforms and growth
In the middle of last month, specifically February 12, 2019, when the nation was engrossed in the preparations for the national elections, the National Bureau of Statistics released the Fourth Quarter economic performance report for 2018. I was not totally surprised that our media, always fascinated by politics and its drama, did not report this sterling economic performance prominently. The report shows the strongest performance since the nation emerged from recession in 2017. The report highlights that GDP grew by 2.7% in the last quarter of 2018, and 39 out of 46 economic activities are now growing. Agriculture and manufacturing recorded strong growth, while the services sector recorded its best performance in 11 quarters. For the full year 2018, real GDP stood at 1.93% higher than 0.82% in 2017. It is notable that the performance of Real GDP has continued to be driven by the non-oil sector which grew by 2.70% in Q4 2018 up from 2.32% in Q3 2018, 2.05% in Q2 2018 and 0.76 in Q1 2018. This also compares favourably with -0.33% in Q4 2016 and 1.45% in the corresponding quarter in 2017. The growth of the non-oil sector in Q4 2018 represents the strongest growth in the sector since Q4 2015.
Particularly notable is the fact that the growth is driven by the non-oil sector which has recorded its strongest growth since the fourth quarter of 2015. In other words, the country has turned the corner and is now firmly on the path of growth. I should commend the Buhari administration, especially the Central Bank, Ministry of Budget & National Planning and all other institutions that have worked so hard in the last three years to pull the nation out of the worst economic recession and position for growth.
One of the early institutional reforms of the administration that has conduced to its impressive economic performance is the creation of the Ministry of Budget and National Planning (MBNP) in November 2015 by merging the erstwhile National Planning Commission (NPC) with the Budget Office of the Federation (BOF). The idea behind this was to ensure a strong link between planning and budgeting. Among other benefits, the merger has ensured that the national budgets are aligned with national plans. The synergy and resource optimisation in the new ministry have also been important factors in the successes recorded in the implementation of the Economic Recovery and Growth Plan (ERGP), the economic blueprint of the Buhari Administration.
Nigerians will readily remember the problems the Buhari administration faced soon after it assumed office mid 2015. They include:
Sharp drop in oil revenues – from N4, 076 billion in 2014 to N2, 512 billion in 2015 which further declined to N1, 439 billion by 2016. This was caused by the decline in oil prices from US$111 in June 2014 to an average of US$57 between January and May 2015. By January 2016, the oil price had fallen to US$30. The situation was compounded by low oil production caused by disruptions of oil production in the Niger Delta;
Due to these fiscal challenges, the Federal Government had to struggle to meet its commitments and many states were unable to pay salaries on a regular basis;
Investors and businessmen complained about the difficulties they encountered in doing business in Nigeria – indeed, in 2015,on the World Bank’s Ease of Doing Business, Nigeria ranked 170th;
Foreign reserves had dropped from $37.33 billion in June 2014 to $28.28 billion in December 2015 and further to $23.81 billion in September 2016. This was compounded by declining investor confidence which led to a near capital market collapse and a worsening balance of payments;
Inflation rose from 9.2% in June 2015 and peaked at 18.5% in December 2016 coupled with exchange rate instability as the naira lost value in the parallel market, ultimately falling to as low as N520/US$.
All this led to the economy dipping into recession by the second quarter of 2016 registering GDP contraction of -1.49% from where it dipped further to -2.34% by the third quarter. This was the dire economic situation that President Buhari inherited. In his inaugural address in 2015 the President acknowledged this dire economic situation and committed to reversing it in a careful, methodical, systematic manner. In the President’s words that balmy May afternoon: ‘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…’ The steps the Administration took to stop the economic drift and reverse the economic collapse were as follows: The first was the introduction of an expansionary budget in 2016. It was christened the 2016 Budget of Change.
Once an economy begins to decline, and goes into recession, the private sector is usually reluctant to invest. At such moments, government must intervene to boost the economy and restore confidence. This is precisely what the government did. The 2016 budget was therefore an expansionary budget which increased in size by over N1 trillion above the previous year’s. In addition, the government set aside 30% of the budget for capital expenditure – up from the 15% allocated to capital expenditure in the 2015 Budget.
This expansionary 2016 Budget of Change was accompanied by a Strategic Implementation Plan (SIP) which set out a number of initiatives designed to boost production and restore confidence. The SIP was followed by the introduction of a comprehensive Medium Term Plan – the Economic Recovery and Growth Plan (ERGP), 2017-2020 with the broad of objectives of restoring growth, investing in the people and building a globally competitive economy. The ERGP was developed after extensive discussions and consultations with the States, the National Assembly, the Private Sector and Development Partners. Essentially a national plan accepted by all segments of Nigeria, the ERGP outlines five key execution priorities: ensuring macroeconomic stability, achieving agriculture and food security, improving transportation infrastructure, ensuring energy sufficiency (in power and petroleum products) and driving industrialization focusing on SMEs.
Implementation of the ERGP is yielding very positive results. Oil production has improved to take advantage of the slight recovery in oil prices. The economy is now on a positive growth path after exiting recession in Q2 2017, and other macroeconomic indicators have also witnessed significant improvements. Real GDP growth has improved from -2.34% in Q3 2016 to 1.17% in Q3 2017 and to 1.81% in Q3 2018. The recent report by the National Bureau of Statistics (NBS) on GDP shows that Real GDP grew further by 2.38% in Q4 2018 – stronger than 2.35% growth inherited by the administration in Q2 2015. For the full year 2018, real GDP stood at 1.93% higher than 0.82% in 2017.
Equally exhilarating is that key sectors like manufacturing, agriculture, quarrying and other minerals and services are witnessing steady growth. While the manufacturing sector grew by 2.35% in Q4 2018 compared to 1.92% in Q3 2018, agricultural sector rose from 1.91% in Q3 2018 to 2.46% in Q4 2018. The Services sector recorded its best performance in 11 quarters, growing by 2.90% in Q4 2018 compared to 2.64% in the previous quarter. In addition, quarrying and other minerals grew by 20.95% in Q4 2018 as against 17.03% in Q3 2018.
The Inflation rate has been trending downwards from 18.55% as at December 2016 to 15.37% in December 2017 and further to 11.44% in December 2018. This is below the ERGP target of 12.42% for 2018. Stability has been restored in the exchange rate market bringing near convergence between the interbank rate (NIFEX) and the autonomous rate (NAFEX) over the past 12 months. There is sustained accretion to external reserves from $23.81 billion in September, 2016 to $43.042 billion as at 4th February, 2019. Capital inflows have improved by 56.7% from $1.82 billion in Q3 2016 to $2.86 billion in Q3 2018. The economy has witnesses sustained positive trade balance since Q4 2016, as the value of Nigeria’s export continue to exceed imports. As at Q3 2018, Nigeria’s trade balance stood at N681.27 million as against a deficit of N135.96 million in the corresponding quarter of 2016.
The Buhari administration is also making significant progress on the implementation of the various components of the National Social Intervention Programme (N-SIP). As at December 2018: 1,646,395 loans have been successfully disbursed under the Government Enterprise & Empowerment Programme (GEEP), with 1,302,793 of the loans given under the Trader Moni scheme; Over 9.3 million school children are currently being fed each day in 49,837 schools across 24 states under the Home-Grown School Feeding Programme. This programme has also provided direct jobs to 96,972 catering staff engaged under the scheme; 297,973 poor Nigerians in 217 Local Government Areas (LGAs) across 20 States, have benefited from the N5,000 Conditional Cash Transfer Scheme and 2,530 community facilitators have been trained; 500,000 graduates are benefiting from the N-Power programme while 20,000 non-graduates in the N-Build category are either currently in training or serving as interns . One of the key initiatives to facilitate the implementation of the ERGP, particularly to unlock private investments and create jobs, was the conduct of Focus Labs in key selected areas of the economy. This has led to a number of quick wins for the country including the establishment of Nigeria’s first Gold Refinery in Ogun State on December, 2018.
Etim, a journalist and banker, wrote from Uyo
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