Nigeria’s poor economy and the blame game

A declaration the other day by President Muhammadu Buhari, after a meeting with the 36 state governors that the Nigerian economy is in a bad shape, though worrisome did not come to many as a surprise.

This newspaper did call attention recently to the deteriorating state of the economy in a number of editorials including ones on ‘2018 Budget Deficit and the Debt Service Gains’ (July 2, 2018), ‘Truth about Nigeria’s Economic Growth’ (July 9, 2018), ‘Halt Nigeria’s Rising Debt Profile’ (August 27, 2018), ‘Nigeria’s Uncertain Economic Outlook’ (October 23, 2018) among others.

It can also be recalled that at the last annual meetings of the International Monetary Fund, IMF/ World Bank held in Bali, Indonesia, the growth prospect for Africa, was predicted to be sluggish for 2018 and 2019.

It was also reported that contrary to an earlier IMF/World Economic Outlook report released in July 2018 that the Nigerian economy was projected to grow by 2.1 per cent in 2018, this growth rate was downgraded to 1.9 per cent, due to unfavourable developments in the economy.

It is largely surprising that the President could proclaim that, under his watch, for over three and half years, the economy would be in such a very bad shape.

He even urged Nigerian to “still tighten their belts and prepare for tougher times ahead.”

The question to ask Nigeria’s leader is why this is so in spite of all the promises made to the electorate as far back as 2014, while on the campaign trail, on the glorious future that awaited the average Nigerian, in spite of little available resources.

It is quite instructive that these promises were made when the economy had started experiencing a downturn and oil prices had crashed to about $60 per barrel then.

The euphoria that greeted such promises made the Nigerian public to give the then candidate of “integrity” capital a chance to turn the country into a paradise. Hence, the former head of state became President and since then, the many promises to the electorate have become a mirage of some sort.

The common excuse, given by the administration, for its non-performance, as generally expected, which now appears to be a 2019 campaign slogan, is the “rot left behind by 16 years of misrule” before 2015. It may be proper to interrogate this seemingly unfounded cliché of the administration.

Within the 16 years of “rot”, Nigeria experienced an unprecedented debt relief that reduced public debt from about $36 billion to manageable levels, among other positives that could be built upon.

Though there were obvious gaps in economic governance in the delivery of public goods to the population as well as pervasive corruption over the 16-year period, the problems of Nigeria cannot be totally blamed on the happenings of that period.

At that meeting with the governors, the President resorted to his pastime of blaming the current economic problems on the past 16 years. This appears preposterous.

Though the President had recently stated, before this meeting with the governors that he would no longer focus on what happened in the past, it appears he has no other alibi for the poor economic performance of his government in the past three and a half years.

Even during the last Vice Presidential debate, The Vice President, Professor Yemi Osinbajo kept on hammering on “16 years of rot,” as if that is the major selling point of the administration for re-election.

What really are the stylised facts on the current poor state of the Nigerian economy? First, the country’s balance of payments position entered into a deficit position to the tune of about $4.5 billion in the third quarter of 2018, from a surplus of $505.9 million in the previous quarter.

This is according to a recent report of the Central Bank of Nigeria, CBN.

In the same vein, the current account balance, which was in a surplus of $4.45 billion in the second quarter, ran into a deficit $3.105 billion in the third quarter.

These figures clearly indicate increased payments for imports over the period relative to receipts from exports.

The CBN report also indicate that earnings from crude oil and gas account for a whopping 94% of total export earnings with non-oil export receipts decreasing by almost 50%. This calls to question, the much celebrated “diversification” success story of the administration.

The surplus earlier recorded in net current transfers also decreased by 1.2%.

Other results show that investment flow declined by 45% while portfolio investment inflows decreased significantly to a mere $1.79 billion in the third quarter from $4.23 billion the previous quarter. These are worrisome.

Second, the latest National Bureau of Statistics (NBS) data indicate that inflation is now trending upwards rising to 11.28%, year-on-year in November, from 11.26% the previous month.

Food inflation, which affects the masses more directly also increased to 13.30% in November from 13.28% the previous month.

The urban inflation rate of 11.61% was recorded to be higher than the rural inflation figure of 10.99%, as would be expected.

Other indicators also reveal that over the past three and half years, the economy of the sub-national governments have been surviving on “handouts,” from state budget support to bailout funds, to Paris Club refunds, to infrastructural development funds and so on.

The question to ask is whether this trend is sustainable in the running of the subnational governments in the country.

Does this not suggest that, as the Americans would say, we are “kicking the can down the road,” or in other words, postponing the doomsday? Does this not suggest that the country should give the concept of “economic restructuring” a chance?

The situation has not been helped by the downturn in the price of crude oil internationally with prices less than $60 per barrel while the 2019 budget bench mark for crude oil was set at $60 per barrel. What is going on? Are we planning on a miracle happening in the international oil market even when Qatar, a prominent member of OPEC has given notice of its exit from the oil cartel? Added to this is the declaration by the Director-General (DG) of the Budget Office, Mr. Ben Akabueze, less than two weeks after the President’s meeting with the governors, that the level of independent revenue is now embarrassingly low with institutions such as the PPPRA, CBN, NPA, NIMASA, FAAN, NIPOST and NCC among others being the major defaulters.

The Federal Government is thus going through serious financial challenges, according to the chief executive of the Budget Office. That the 2019 budget is threatened by revenue challenges is indeed worrisome.

The other worrisome issue is the unsustainable level of public debt, which appears not to be matched by commensurate infrastructural development.

A situation where over 50% of revenues are used to service debts leaves very little for developmental purposes.

Though the external reserves situation has improved from the $28.5 billion inherited from the past administration to about $42.92 billion, it has been matched by increased external indebtedness, which seemingly takes away the shine from that success story. It is like a case of borrowing to increase reserves.

Nigeria, under the current administration, needs to get its acts right.

The declaration of Nigeria as the “poverty capital of the world” by the World Economic Forum and the poor state of human capital development are all manifestations of very poor economic policies over the past three and half years.

The World Bank Human Capital Index ranked Nigeria as 152 out of 157 countries globally, which is a very sad commentary on the posture of the government on developments in health and education sectors of the economy.

Nigeria has been tagged the “worst place to have a baby” as well as the country with the highest out-of-school children globally.

If peoples’ belts are already tight in view of these stark realities, one begins to wonder what it would look like if belts are further tightened.

With population projected to grow at almost 3% annually, Nigeria is set to become the third most populous country by 2050.

If the current economic growth rate of less than 2% is not increased and adequate investments made in human capital, Nigeria is set to become an undernourished, unhealthy and high unemployment rate country in the not-too-distant future. A stitch in time saves nine.

What is the way forward? The President himself, in his address to the governors, has inadvertently questioned his current economic policy framework.

He called on the governors to “come together, think and re-think” on the way forward. Aside from the need for an economic policy review, government needs to come clean on its management of public resources.

What happened to the Stamp Duties collected since the inception of this administration? What about the much widely publicised recovered loot? What is being done with the low remittances by NNPC to the Federation Account, which led to the stalling of the Federal Allocation Accounts Committee, FAAC, meetings earlier in the year? What is being done about the humongous amounts being reportedly paid as subsidies for fuel? These and many other questions are begging for answers.

In this new year, which will usher in campaigns for leadership recruitment, the country needs strategic thinking, realistic development plans and concomitant sound management of the economy.

In this age of the big data, Nigeria needs leaders and managers who can promote measurable goals and discipline of execution.