The World Bank’s bad news about our economy
The bad news is that our national economy remains stubbornly defiant.
Past and present efforts to solve its inherent historical problems and cure it of its burgeoning weaknesses have not succeeded in changing the economic fortunes of this giant of Africa from being a potentially great nation to a great nation. And the World Bank continues to dish out the bad news to the chagrin of President Muhammadu Buhari who verily believes that his many policies and programmes combined have chained our rogue economy. Not so fast, apparently.
In its latest report, the November 2021 Nigeria Development Update, the World Bank paints the not unfamiliar grim picture of our economic situation and projects a not-too-bright future unless we stop waiting for miracles and act. The new report is sure to jolt our economic planners. I offer my commiserations.
To begin with, poverty in the land is increasing, not decreasing under Buhari who promised to take 100 million people out of poverty in ten years. The bank reports that eight million more Nigerians were added to the bottom pile of human progress and development called poverty in less than two years. This was not intended, I verily believe, to debunk the president’s claim that he took 10.5 million people out of poverty in six years.
The problem is that the mathematics of reducing or ending poverty tends to be rather complicated in all countries and climes. Where politics leaves off, reality sticks out. The constant to-ing and fro-ing of human progress, as in birth and death, changes the mathematical equation: thus less today is more tomorrow. This new World Bank report means that we now have some 108 million people officially classified as extremely in the land out of our estimated proud population of 206 million. It is bad news; very bad news.
The bank compared the revenue-to-GDP of 115 countries and found that Nigeria took first from the bottom among them. It performed worse than even Haiti. Talk of adding insult to injury.
The World Bank, as usual, has proffered some pieces of advice it believes that if taken and implemented by the federal government, could help the country inch it’s way up from its economic rut. To be sure, these are part of the frightful conditionalities, the cure-all devised by the IMF some two or three decades ago for all ailing national economies in the third world. It still follows the template and repeats the pieces of advice not taken or taken but poorly implemented by successive Nigerian governments and led our economy to where it is – floating on the sea of confused and contradictory policies. The World Bank has never cheered the managers of our national economy. It sees too many cases of good roads they refused to take.
The Bank finds fault with many policies and fiscal policies of the federal government. Let me deal with two important criticisms by the bank on the management of our national economy, namely, fuel subsidy and the debt burden. The removal of fuel subsidies is a familiar IMF prescription. It has repeatedly advised every government since the downturn in the economy in the 1980s turned our country from a nation of sartorially elegant people decked out in expensive designer clothes from Davies of Edgewear Road, London, and other high-end foreign shops into a nation of second-hand clothes and tokunboh vehicles.
It was, and remains, a contentious issue between the bank and our political leaders. The bank refuses to quiet down on it because it remains unshaken in its wisdom that the subsidy regime is an unnecessary burden on the national economy, not least because corruption has thwarted its intended positive objectives. The bank also believes that the options in its implementation are not just wrong but wholly unhelpful to the poor it is meant to protect.
According to the report, “Nigeria is the only country in the world with a universal price subsidy that applies exclusively to PMS. Universal price subsidies for liquid fuels are almost always regressive, as the rich consume far more fuel than the poor.”
The Bank’s quarrel here is that “PMS subsidies are especially regressive because PMS is used primarily in light and medium-duty vehicles, which are rarely owned by the poor.” It points out that because “raising PMS prices tends to have minimal adverse effects on poor households, governments worldwide have typically prioritised eliminating PMS subsidies over those that apply to other fuels.”
But Nigeria refuses to go along with the rest of the world. It chooses to eliminate “all subsidies for liquid fuels other than PMS.” This option does not benefit the poor, the primary reason for the subsidy regime, because “the poorest 40 per cent of Nigerians consume less than 3 percent of the total PMS consumption in Nigeria.”
The Bank’s second source of informed worry about our economy is the debt burden that is now much heavier than ever before. At the last count, this came to a frightening 41 trillion Naira. We are spending other people’s money, usually, the option least resistant to hard-headed thinking. The Bank is worried, and we should be too, that “if current debt accumulation levels are maintained, the country’s debt-to-GDP ratio will hit 40 percent by 2025.” That is less than four years away.
The federal government does not only take loans from our foreign do-gooders with oodles of funds they can use for purposes of their economic diplomacy and friendship, it also freely helps itself to overdrafts from the Central Bank of Nigeria. This, the Bank disagrees with. It says, the problem is that “Faced with a widening budget deficit, policymakers have increasingly turned to costly CBN overdrafts (also known as Ways and Means financing), which are not properly integrated into the fiscal accounts.”
Perhaps we need not panic now, according to the Bank, because the “debt burden remains manageable for the time being.” But if we fail to “..break the cycle of low growth and rising public debt,” the future of our national economy might be gloomier than it is now. It is bad news.
The economy occupies the most critical part of our national progress and development, as indeed it does in all countries. Without it, our country cannot even exist. The national economy makes progress possible. If it is healthy, the nation is healthy. If it is sclerotic, the nation is sclerotic and is forced to resort to the begging bowl; its citizens are thrown into the cauldron of poverty. Our descent from an oil-rich nation into the lowest depth as the poverty capital of the world grates on our collective nerves as citizens. Yet, we are unable to staunch the flow of the bad news.
To be fair, it is not for lack of trying by our political leaders that we continue to sink into the marsh of poverty. Valiant past and current efforts to set the economy on the path of unimpeded development have been repeatedly thwarted by poorly-conceived, high mortality of policies, inconsistent policies and the cynical promotion of politics at the expense of the economy itself. That fuel subsidy has defeated every government because it is not, contrary to the World Bank view, a bad economic decision. It is a contest between political correctness and economic correctness. The former always wins because political correctness wins elections and brings governments into being. Economic correctness is in the realm of political promises. Everyone who seeks the people’s votes promises to cure our ailing economy and right the wrongs in our social development.
When Buhari assumed office as president in 2015 he declared that fuel subsidy was over. We applauded him. We acted too soon. The reality in which the fuel subsidy is entangled soon confronted him; he blinked and quietly backed down from his intended shock to the system.
When Buhari sought the nomination of ANPP to run for president in 2007, he published a 71-page manifesto, titled The Buhari Programme, with the theme, “Security, Stability, Prosperity.” Under economic development, he made this telling observation: “The economic well-being of the Nigerian people is today in its worst state since the mid1980’s. Even though the Nigerian government is said to be enjoying income from crude oil sales at unprecedented price levels, the economic condition of the average Nigerian has continued to worsen.
“This deteriorating situation, if it continues, will portend great danger for the Nigerian democratic experiment in no distant future. The proportion of our population that is unemployed will continue to rise, per capita income and consumption will continue to decline, and poverty, already at dangerous levels nationwide, will accelerate with all the attendant consequences of social discontent and national insecurity.”
He saw it all coming. Six years and more in the saddle show no signs that he can fix it. If Buhari loses sleep, it must be because he cannot understand how the worst, the very worst, has happened under his watch as president.