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Nigeria’s three years of ‘change’ economics


Finance Minister, Kemi Adeosun

For a very long time in the President Muhammadu Buhari administration, the monthly federal allocation for the month of May reached N700 billion. Thanks to the resurging international price of crude oil, Nigeria’s near sole earner of foreign exchange, as well as relative peace in the oil-rich area that allowed steady production. But this means that despite the campaign for diversification, the journey is still far.
But the fall in price of this all-important commodity rocked the economy in the last three years of this administration and also, brought real intuitive test and level of policy correctness of the economic team. Perhaps, too, tests of individual strength of the team members. The scores have remained controvertible.
The administration, riding under the “change” mantra, offered hopes like never before and went about it like it already had the future in hand. Perhaps, there was extreme optimism. But three months after inauguration, the National Bureau of Statistics, in its report that included a month activities of President, showed that unemployment had gone up by 69 per cent.
It is on record that despite policy tweaks, the economy was confirmed recessed in 12 months of the administration, with inflation at over 18 per cent and exchange rate at about N520 per dollar at the parallel market segment. However, these indices have gradually reversed, though still far above the usual till date.The rate of unemployment has remained high and productivity level struggling to gain traction, a fallout of the recession, due mainly to the oil price crisis and policy choices.
A total of 7.956 million Nigerians became unemployed between January 2016 and September 30, 2017, according to data from the National Bureau of Statistics. This unemployment report survey for the third quarter of 2017 was released by the NBS on December 22, 2017.Assessing the earlier part of the administration, the Managing Director and Chief Executive Officer of Cowry Assets Management Limited, Johnson Chukwu, said in terms of policy decisions/pronouncements, the absence of an executive council for the long period meant that there were few categorical statements on key policy areas of the economy like health, education, agriculture, finance.

“This dearth of policy direction naturally led to withholding of investment decisions by both local and foreign investors, which in turn leads to further slowdown in economic growth. In fairness, President’s performance in his first 100 days was more apparent in two keys areas- anti-corruption and war against insurgents in the North-East…. The economy on the other hand received little attention,” he said.Ayodeji Eboh, who is now the Managing Director of Afrinvest Securities Limited, said the investment community was yet to gain certainty on the economic policy framework of the administration.
“Reforms were stalled by the absence of cabinet ministers needed to formulate, articulate and manage the reforms. This dovetailed a weaker investment climate as exhibited in bearish equity market and slower economic growth recorded in Q2:2015. “We believe economic reforms needed to be treated with more sense of urgency as the low levels of crude oil prices require deliberate effort to diversify revenue and economic structure…”, he said.

Shortly after taking office, he issued a presidential order mandating the immediate implementation of the Treasury Single Account (TSA) system, consolidating thousands of government accounts scattered across deposit money banks into a unified system that is transparent and easy to centrally monitor and track.
With the implementation of the TSA in September 2015, a scheme that many of his predecessors avoided, several leakages in public finance management were plugged and the process of sanitising the civil service that was filled with ghost workers took off.
The Minister of Finance, Mrs. Kemi Adosun, said that under the old system, it was common for government accounts to be converted into personal use, but under the TSA, it has become impossible, adding that the proliferation of accounts encouraged rent seeking and questionable practices.The Accountant General of the Federation, Alhaji Ahmed Idris, recently said the Federal Government has saved about N128 billion from bank charges for managing funds belonging to Ministries, Departments and Agencies (MDAs) through TSA.
He also said TSA now covers all budgetary or extra budgetary funds, including loans, grants and donations under the control of all the Federal Government’s entities, noting that the payment portal has recorded N8.9 trillion gross inflow to date with 1,674 MDAs enrolled.

External reserves
The nation’s foreign exchange reserves have grown to $48 billion (N14.7 trillion at N306/$), from a low of $23 billion as at October 2016. This is an indication of gains from the strict management of the scarce currency by the apex bank, but mostly the gradual resurgence of oil prices since August 2016, after hitting a low of about $30 per barrel.

As at May 28, 2015, Nigeria’s external reserves stood at $29.6 billion (N5.9 trillion at N199/$), with oil price settled at about $60 per barrel. The nation’s inflation level was about nine per cent. But the current reserves profile at $48 billion, when taken with 2015 scenarios would amount to N9.6 trillion at N199/$.Presently, the reserves value is impacted by a devaluation of N107 per dollar and inflation level at 12.48 per cent, when compared with 2015 exchange rates of N199 per dollar and inflation level at about nine per cent. With rising oil prices, the Excess Crude Account (ECA) is currently at $1.911 billion.

The favourable oil prices since the third quarter of 2016 helped the country’s exit from recession, alongside gains from agriculture, manufacturing and trade sectors of the economy. Nigeria’s oil output ramped up to an average of two million barrels per day from a low of 1.3 million in 2016, following government peace talks with militants in the oil-rich areas.


CBN intervention
Following the oil price-induced crisis through the foreign exchange market and the fiscal implications for the government, the Central Bank of Nigeria (CBN) stepped up its management of the dollar reserves and aggressive development interventions.These were part of the administration’s total strategy in tackling economic crisis that pushed the country to recession. The capital control policy of CBN excluded 41 items from accessing foreign exchange (forex) at the official window.Though difficult at the initial stage, in its first full year of implementation, the country was reported to have saved N217 billion ($600 million) worth of forex from rice importation.
CBN Governor, Godwin Emefiele, said the intervention in agriculture sector, particularly with the Anchor Borrowers Scheme, has been extended to 250,000 farmers in partnership with state governments at N55.526 billion.The intervention has led to a significant fall in imports of rice from several countries as at now, adding that Nigeria’s biggest rice exporter- Thailand, lost 99 per cent patronage from 1.2 million metric tonnes to only 784 metric tonnes by the end of 2016.

There is now a boost in local rice production, as emerging producers like Labana Rice Mills in Kebbi State are trying to keep pace with demand, now processing 320 tonnes of a rice a day. Also, from Kano State, UMZA rice has expanded its milling capacity substantially to the extent that with the recently recorded bumper paddy harvest, the company today takes delivery of over 100 trucks of paddy rice daily.“Psaltry International Limited (PIL), an agro-allied manufacturing company based in Oyo, produces starch. Before the policy, it had few customers and plenty of backlogged inventory. “Today, PIL boasts over 50 multinational clients, including Nestle and Unilever. The company has saved Nigeria $7 million in foreign exchange drawdown over the two years of the policy.

“Baton Nigeria has also taken advantage of the policy and is now producing high- quality, competitive toothpicks that are 25 per cent cheaper than their Chinese competition. “As part of the gains from the policy and in line with an agreement we reached with Unilever, the company, which left the country few years ago, will be commissioning a new Blue Band Factory in Agbara, Ogun State early next month,” he added.
Recently, CBN released the framework for N500 billion Export Stimulation Facility and N50 billion Direct Intervention Fund being under consideration for two years. The move, which is a fallout of series of engagements with the exporters and banks with CBN, would be looking at boosting exports of value added products in the non oil sector- cocoa, cashew nuts, palm produce, sesame seeds, solid minerals and rubber.

The launch of the Economic Recovery and Growth Plan (2017 – 2020) on April 5, 2017, has been rated one of the administration’s highs. At least, it gave the country a written direction in terms of economic policy. A Public Policy Analyst, Jide Ojo, described it as a welcome development, though belated.ERGP had brought together all the sectoral plans for agriculture and food security, energy and transport infrastructure, industrialisation and social investments together in a single document. The plan set a target of seven per cent growth rate for the economy by 2020.
“The administration also launched N500 billion Social Intervention Programmes in 2016, part of which is the NPower programme aimed at employing 500,000 graduates; homegrown School Feeding Programme and loans to artisans, among others.“Nigeria moved 24 places in the Ease of Doing Business in 2017. On June 29, 2017, the Vice President, Prof. Yemi Osinbajo, formally launched the Voluntary Assets and Income Declaration Scheme (VAIDS). The Scheme, which commenced on July 1, 2017, for a period of nine months has been extended till June 30, 2018. So far, Nigeria has aggressively grown its tax payers’ base to 19 million, being an addition of five million taxpayers into the system in just two years.
“Granted, Nigeria, under this administration, slipped into recession and technically exited it. Nigerian Stock Exchange has also been rated as one of the six best performing in the world and return on investment is said to be as high as 43 per cent. Inflation has also come down significantly from over 18 per cent in January 2017, to 12.48 in April, 2018.“The Anchor-Borrower Programme has allegedly added additional millions of rice farmers and cut down on importation of rice from 644,000  metric  tonnes 24 metric tonnes. The number of Integrated Rice Processing Mills has also been increased from 13 to 21 and 10 new ones were just approved. Apart from agriculture, mines, metal ore, electricity, gas, creative industry, have also recorded modest improvements,” Ojo said.
However, he warned that the soaring insecurity as orchestrated by the herders – farmers clashes, which have led to hundreds of death and loss of property worth billions of naira is a threat to food security and a serious dent on the records of this administration.

National budget
The nation’s budgeting system has been a cycle. From the beginning, the end has been determined. Even the “Change” government has not done much in it.From the recurring poor budget performance implementation since return to civil rule in 1999, to the misplacement of priorities, the “self-inflicted” three-year economic crisis has worsened.
“The fact that there is still the albatross of late passage of budgets is disheartening. News report has it that the National Assembly, which just passed the budget only transmitted it to the president for assent on Friday, May 25, 2018,” Ojo said.Granted, the Ministry of Finance celebrated the implementation of national capital budget in excess of N1trillion. However, many are still questioning the proof till now. 
“The poor implementation of the capital component of the 2017 federal budget followed the trends in 2014, 2015 and 2016 financial years. Only N450 billion has been released in a capital vote of N2.174 trillion,” Lead Director of the Centre for Social Justice (CSJ), Eze Onyekpere, said.The late passage of the budget has remained the same in the last three years. The Budget Office of the Federation, led by Ben Akabueze, recently said the 2017 budget was also adversely impacted by its late passage. Unfortunately, the same fate has befallen that of 2018.Onyekpere noted that resetting of the budget calendar is the only way to correct the anomaly where government would be looking for loan in 2018 to implement 2017 appropriation.

Indeed, recurrent non-debt expenditure got N2.59 trillion in 2015 and moved up to N2.65 trillion in 2016; N2.99 trillion in 2017 and now a proposal for N3.494 trillion. These increments cannot be the sign of a system that is taking steps to remove waste and inefficiencies.“The contradiction between government’s mantra of cutting down waste, improving efficiencies, removing ghost workers from the payroll and the rising recurrent non-debt expenditure is worrisome,” Onyekpere added.The Chief Executive Officer, BudgIT, Seun Onigbinde, has described Nigeria’s yearly budget as a ‘contract vending machine,’ as well as fulfillment of a hollow ritual, rather than development plan and a bundle of disappointment and at best, a course that one already knows where it would always end right from the start.
“Here, every arm wants to stuff things into the budget, so that it becomes a legal opportunity to procure and that is the problem,” he said, adding that it is the same reason why yearly budgets have not made any impact.A Professor of Economics and Executive Chairman of Society of Analytical Economics, Prof. Godwin Owoh, has earlier in the year, expressed doubt on the preparedness of the Executive to see that traditional January to December budget cycle happens. For sure, that is what is happening right now.

Debt profile/service
As at June 30, 2015, the national debt stock was made up of federal and states external obligations, as well as domestic borrowings was ₦12.1 trillion ($63.8 billion). However, the country’s debt stock rose to N21.7 trillion ($70.92 billion) at the end of December 2017. This is about $7b increase in debts in less than three years.
The current debt profile, when benchmarked against the 2015 exchange rate at N199 per dollar, would amount to N14.1 trillion, approximately N2trillion increase.The development has resulted in increased debt service bill, although Adeosun said it has recorded a new decline from about 66 per cent to 45 per cent, courtesy of the improving revenue mobilisation from both domestic and foreign sources.In 2016, the “Change” administration provided about N1.47 trillion for debt service; N1.8 trillion in 2017; and N2trillion in 2018. The figures show that in three successive budgets, about N5.2 trillion has been provided to service debt, which is more than half of the 2018 total budget.

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