As if the current unclear economic policy context was not disconcerting enough, the sudden emergence of a raging debate on the sale of public assets has escalated one’s fears that easier things seem to appear more attractive to the government. Yet, in public policy, it is wise to be wary of the easiest options. As a pro-market economy advocate, I inherently support any programme of government that will help roll back the public sector from the economy because economic evidence shows this to be almost always correct. However, lacking the sound economic management and policy context as yet, I am presently opposed to what sounds like a proposal for “distress option” sale of public stakes, especially in NNPC and NLNG. But the government can proceed urgently through the Bureau of Public Enterprises (BPE) to sell off those cesspools of corruption in our petroleum sector otherwise known as refineries. Their sale would, in fact, amount to fiscal savings beyond the proceeds and should, therefore, be supported by all.
I am opposed to the sale of any productive assets, like the NLNG because there seems to be no clear economic vision and rigorous analytics to serve as the anchor for such a major policy thrust. We need well-deliberated policies from our government, including the plans for revitalisation of the programme of privatisation being run by BPE to properly situate public debate of economic structural change agenda. After all, even in our country, there is now proof that the economy can relatively respond to deliberate, well thought and rigorous analysis of context and sound policy options in resolving growth and development problems.
The evidence that backs this is that it was a modest range of such sound economic policies that helped deliver an average of five-six per cent growth of our economy on a sustained basis over a long period of nearly a decade and half. It was only recently at the end of 2015 that growth dropped to below three per cent. True, the relatively impressive economic growth rate did not resolve the major challenges of poverty, unemployment and inequality. That 61 per cent of our population is poor, according to the Nigerian Bureau of Statistics (2011 Household Survey) is indicative of how growth and poverty reduction can often times disconnect. Also, according to NBS, unemployment rate stood at 10.5 per cent at end of 2015 and grew to 13.3 per cent by the second quarter of 2016, revealing that the economy is severely failing to absorb new entrants into the labour market – especially the 2-2.5 million youths that seek to do so annually.
With a high income inequality rate of .4 Gini-coefficient instead of a score closer to a perfect zero, the gap between our top income earners and the majority bottom poor earners is one of the highest in the world and is the reason Nigeria stands at number 26 out of 190 countries. So, yes again, there are very deep challenges that growth did not yet resolve for Nigerians since the early 2000s when it became normal in the economy. However, we can objectively admit that if we had not grown steadily at those higher rates from 2003-2014, the economy would not have expanded as significantly as it did in the 16 years of our 1999 cycle of democracy. The expansion of our GDP offered more diverse opportunities in sectors like telecommunication, agriculture and agri-business, entertainment and services. In real human terms, a growing economy provided more and newer opportunities for citizens than was the case during the lost decades of the 80s and 90s known mostly for no, low or negative growth. The concept of economic growth must, therefore, not be derided nor dismissed as some usually do.
The fundamental anchor for Nigeria’s long period of economic growth was, when starting since 2003, policy makers managed to achieve macroeconomic stability through an effective mix of monetary, fiscal and some measure of structural policies. Whereas not many citizens would normally concern themselves with the rather arcane concepts that engage the minds of economic and finance technocrats; yet, growth policies are fundamental to economic progress of individuals, households, governments and businesses. This is becoming obvious to Nigerians in the last twelve months as more citizens now better see the relationship between growth and the fact that some who once had a job no longer have one.
What then was the genesis of the loss of economic growth? It came from the fact that we learned nothing from previous mistakes in the manner of poor governance of resources, especially oil earnings. Nigeria was once again extravagant during the most recent five years of oil boom. That this happened even after the country turned the corner in 2003 when it set up oil-based fiscal rules on how best to save in plenty in order to prepare for the lean period, is all the more disappointing. Regrettably, in the period between 2010 and 2014 when oil prices were exceptionally high and several other oil-rich countries were accumulating reserves, Nigeria was acting out an alternate reality. We were incongruously borrowing during plenty to expand the consumption habits of all the levels and arms of government.
The parlous state of the Nigerian economy on May 29, 2015 should, therefore, have instructed an incisive and urgent macroeconomic stabilisation programme to realign price levels in the economy. If a menu of sound monetary and fiscal policies that the economy needed on May 29, 2015 had been provided, it would have sent the right signal to players that there was no cause for alarm. Had the government made quick and necessary adjustments that corresponded close enough to the level of impact that a 40 per cent sharp drop in government oil revenue necessitated, the story would most likely be less negative today.
There is a new level that our post 2014 oil-shocked economy must find for stability in order to stop tottering reason and so we do need a string of policy responses that can enable this happen quickly. Such responses would have helped the economy absorb the shock, reassured investors and consumers, and thereby helped reasonably retain investor confidence. But that did not happen. The attendant fiscal pressure and the delayed right policy response were severe enough that by the end of 2015, economic growth sharply declined to 2.7 per cent. It was a major mistake that the economy did not get the timely and right type of policies that could have helped us avoid the calamitous collapse into negative growth in the last two quarters of 2015 that finally led us into a recession.
The signals of statist economic policy preferences did, in fact, worsen matters and set off the wave of uncertainty that dented investor confidence in the economy. So, it is accurate to conclude that both the preceding and the successor governments conspired by their actions and inactions to throw the Nigerian economy into the deep rut from which it must be rescued to avoid social implosion.