From Uche Usim, Abuja
For many Nigerians, it is a scathing reality that the economy is currently on ventilators, as it were, having slumped into recession for the second time in five years.
The development is a sad contrast to the high hopes that greeted the emergence of President Muhammadu Buhari, who took over the reigns of governance on May 29, 2015, riding on the “Change” mantra of the All Progressives Congress, APC, a party formed from the merger of four parties.
His campaign promises stood on a tripod of tackling terrorism, fighting corruption and resuscitating the economy.
Economic watchers and political analysts fear that none of these has been appreciably achieved; rather things are heading South, especially with the COVID-19 disease playing the spoiler.
Corruption, blind politics, reactive economic programmes, weak and unsupervised fiscal environment and other blights have been identified as the challenges plaguing the Nigerian economy.
According to Prof Uche Uwaleke, Nigeria’s first professor of the capital markets, the nation’s economy has remained vulnerable to external shocks due to government’s inability to diversify revenue sources.
He said: “Not surprisingly, the economy went into recession twice since 2015 owing in part to fall in crude oil prices and the forex challenge that came with the two cycles. It is the crash in revenue that always leads the government to borrow.
“Regrettably, there is no evidence to suggest that the bulk of the borrowing has gone into self-liquidating capital projects.
“The way forward is to make conscious efforts to have multiple streams of income, including through embracing the private sector to develop the enabling environment for this to happen.”
Hopes began to wane after his inauguration in 2015 and it took several months for President Buhari to appoint the ministers that will be on his cabinet.
When he eventually cobbled it together, it was the same old politicians that Nigerians had in the past blamed for their woes.
The delay, experts reckoned, took its toll on the economy, as offshore investors were in limbo as to the direction the economy was headed.
In panic, they pulled out their investments and pressurised the Central Bank of Nigeria (CBN) to part with the dollar equivalent.
The foreign reserve was impacted and the exchange rate, as at May 29, 2105, was N199/$1.
While it is safe to note that Buhari’s first tenure was tumultuous, as crude oil crashed horrifyingly, experts insist that lack of proactive steps and sincere efforts to diversify the economy was a bigger tragedy that left Nigeria in the lurch.
Aside depreciating crude oil receipts, insecurity has flourished on Buhari’s watch, impacting terribly on agriculture, mining, transportation, trade, crude oil production and the economy generally.
Having been in office for five years, Nigerians are confronting Buhari with a catalogue of unfulfilled promises.
Many are asking: has the economy changed for good? Has infrastructure improved? Are Nigerians more secured today? Is the average Nigerian worse off, or better off, with regards to affording basic needs like food, shelter and clothing? Is their improvement in security of life and property? Any hope for a better tomorrow since today’s survival is not guaranteed? The queries are endless.
Nonetheless, a lot of Nigerians that opted for Buhari’s re-election insist his first tenure was not all gloom as there are several boxes of achievements to be ticked. For instance, out of 190 countries in terms of ease of doing business, Nigeria’s position improved from 170 in 2014 to a positive 146 in 2019. Life Expectancy, according to the National Bureau of Statistics, increased from 52.55 years in 2014 to 53.43 years in 2019.
The monetary value of goods exported versus goods imported in 2014 was negative $6.4 billion, but as at 2019, Nigeria’s trade balance turned positive to $23.5 billion. At the last lap of the administration’s life, Buhari increased the minimum wage for government workers from N18,000 to N30,000 in 2019, although many see it as a Greek gift because the gains have been eroded by inflation.
Despite the soothing news highlighted above, a herd of economists, including those at the International Monetary Fund (IMF) score the Buhari administration’s economic performance low.
According to them, instead of harnessing the abundant resources in Nigeria to revive and plant the economy on path of progress, or implementing policies that will lift the majority of the population out of poverty, the Buhari administration foot-dragged with persisting structural and policy challenges until the country slipped into recession.
With regards to unemployment rate, Labour Statistics Report released by the National Bureau of Statistics shows that it grew by 2.589 per cent from 6.063 million as of the second quarter of 2015 to 21.765 million as the end of June this year.
In a nutshell, 15.7 million Nigerians became unemployed between May 2015 and June 2020.
In terms of unemployment by state, analysis of the NBS report showed that Imo State recorded the highest rate of unemployment with 1.209 million unemployed people. This translates into an unemployment rate of 48.7 per cent. This was followed by Akwa Ibom with 45.2 per cent and Rivers State with 43.7 per cent.
The states with the lowest rates were Anambra, Kwara and Sokoto with 13.1 per cent, 13.8 per cent and 13.9 per cent respectively.
In the case of under-employment, the NBS report stated that Bauchi State recorded the highest rate with 43 per cent, followed by Yobe and Adamawa, both with 38.4 per cent.
Combining both unemployment and underemployment, the state that recorded the highest rate was Imo with 75.1 per cent followed by Kaduna with 72.8 per cent.
Kwara and Oyo states, according to the report, recorded the lowest of the combined rates of 34.2 per cent and 34.5 per cent respectively.
The rapidly-growing number of unemployed Nigerians has been described by economic experts as a ticking time bomb and a clear example of deceptive promises, especially when juxtaposed with President Buhari’s campaign manifesto of providing three million jobs annually.
In the area of sovereign debt, the Debt Management Office (DMO) puts Nigeria’s total debt stock (foreign and domestic), as at June 2020, at N31.01 trillion ($85.9 billion), representing a 8.31 per cent increase when compared with N28.63 trillion ($79.3 billion) recorded in March 2020.
Again, the Federal Government spent a total of N7.61 trillion on domestic debt servicing between July 2015 and June 2020, statistics available from DMO equally revealed.
According to the DMO, the domestic debt of the Federal Government rose from N8.4 trillion as of June 2015 to N15.46 trillion as of June 2020.
A recent report of the World Bank projected that debt servicing would gulp about 75 per cent of Federal Government’s revenue by 2024.
The World Bank report entitled; ‘State Debt Management in Nigeria: Challenges and Lessons Learned’ highlighted institutional and capacity challenges in Nigerian fiscal federalism system.
The report said in recent years, Nigeria’s public-debt-to-GDP ratio had increased significantly.
Many experts and international agencies have continually raised the alarm on the sustainability of the nation’s debt portfolio.
Although the country’s debt to Gross Domestic Product is said to be low at about 20 per cent, experts maintain that the debt to revenue ratio is very high.
The Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, had said the underperformance of government’s revenue is causing a significant strain in its ability to service debt.
She said this was why all the policies being implemented at the Ministry of Finance is concentrated on driving revenue to meet the obligations of the government.
She said: “The underperformance of our revenue is causing a significant strain in our ability to service debt and to service government day-to-day recurrent expenditure and that is why all the work we are doing at the ministry of finance is concentrating on driving the increase in revenue.”
Between 2015 and 2019, the Federal Government withdrew N1.5 trillion (about $4.92 billion) from the Excess Crude Account, statistics obtained from the Ministry of Finance have revealed.
Seasoned Economist and Chief Executive Officer of the Financial Derivatives Company (FDC) Limited, Mr Bismarck Rewane, recently said that out of 19 economic indicators, including income per capita, inflation, misery index life expectancy and others, measured by his company, 11 were negative while eight were positive under President Buhari’s first term.
For instance, in 2014 inflation was 9.60 per cent. As at April 2019, Nigeria’s inflation rate stood at 11.37 per cent. Income per capita was $2,726 in 2014, but has gome down to $2,400 in 2019.
Rewane was among those who raised the red flag that Nigeria was likely to go into a second recession, since the recessionary gap is just one per cent.
He advised the government to reduce subsidies gradually, invest in road and rail transport, concession the airports, block leakages and simplify tax administration.
The IMF observed that there was still a huge infrastructure gap and weak government institutions in Nigeria, but Mr Femi Adesina, special adviser on Media and Publicity to President Buhari, believes that the administration has done very well in the past four years.
For him, “those who do not see any good in something not initiated by them toil endlessly to hoodwink Nigerians into believing that nothing good is happening on the economic front. But facts are stubborn things. The more they try to deny the facts, the more they rudely stare at them in the face.”
Dr Andrew Nevin, advisory partner and chief economist at PriceWaterCoopers (PWC) Nigeria, expressed concern that for a number of years past, Nigerians have been getting poorer and poorer per capita, as the growth of Gross Domestic Product (GDP) “is below our population growth of 2.7 per cent per annum.”
Nigeria grew 2.7 per cent in GDP in 2015, meaning no growth in GDP per capita. It shrank in 2016, and grew below population growth in 2017 and 2018.
“Now we begin 2019 with our GDP growth below population growth again, and 1Q 2019 annualized GDP growth of 2.0 per cent is a decline from our growth in Q4 2018,” Nevin analysed.
It is, therefore, no surprise that Nigeria is currently ranked the country with the highest number of extremely poor people. It was estimated in the last quarter of 2018 that 87 million out of the estimated 180 million population of Nigeria, representing 45 per cent, are currently living in extreme poverty.
Recently, the Chief Global Economist of Renaissance Capital (Rencap), Mr Charles Robertson, puts Nigeria’s population figures at over 190 million, warning that the rising population portends danger if economic opportunities are not created to make use of the latent energy and creativity of this population.
This figure has been estimated to hit 90.8 million people in extreme poverty. By this estimate, Nigeria was reported to have overtaken India to become the poverty capital of the world.
Another area Nigerians are feeling the direct impact of poor economic planning is the gradual devaluation of naira.
From N199/$1 in 2015 to N381/$1 in 2020, Nigerian traders and importers are gnashing their teeth.
A trader, Mrs Zainab Akinwande, told Sunday Sun that she could no longer sustain her cosmetic business because of horrifying exchange rate.
Hear her: “In 2015, the naira to dollar exchange rate at the spot inter-bank market was N199 to a dollar. With US$2000 through my bank, (equivalent of N398,000), I bought enough cosmetics and other items with which I stocked my shop and made sufficient gain.
“Today, the same dollar is almost N500/$1. To remain in business, I need to pump in N900,000 to buy the equivalent quantity of goods I bought five years ago with N398,000.”
She is not alone, millions of others in the Small and Medium Enterprises space share the same sad story.
Just as Rewane described the experience of Nigerians as suffering and smiling, Nigerians exchange rate experience could be likened to living in hell.
For instance, a bag of 50 kg of rice in 2014 was N9,500. Now, it hovers around N25,000. Beans was N14,000 per 50kg bag in 1014. Today, it costs N30,000.
Despite the not-so-encouraging indicators, energy experts are afraid that the future of oil on which Nigeria depends for 80 per cent of its total revenue and 90 per cent of its foreign exchange (forex), is bleak.
According to David Yager, a noted analyst of the global oil and gas industry: “The current discussion about the future of oil is how soon will it be before petroleum becomes a sunset industry. If it isn’t already, with flat or falling demand. Carbon taxes, electric cars and renewable energy, oil has no future.”
Disturbed by Nigeria’s deep interest in petrol and diesel, Senator Ben Murray-Bruce said that every sensible country is running to electric, while Nigeria is running to petrol and diesel.
“Why borrow almost $10 billion from China to build railways for obsolete diesel powered trains when some Western nations will even pay us to take their obsolete diesel trains? Do we think? The new government should realize that this sobering and imminent reality has important implications for Nigeria’s political economy. Five countries already have served notice of their target dates intention to end the sale of gasoline and diesel cars: Norway (2025), Germany and India (2030), France and the UK (2040), and the costs of renewable energy sources such as wind and solar are increasingly lower than oil, gas and coal,” he said.
Asogwa Robert Chikwendu is concerned by the continued dominance of the oil and gas sector in banks’ credit allocation to the disadvantage of the agriculture and manufacturing sectors. To him, this will not only frustrate government’s economic diversification trend, but will neutralize the intended effects of any monetary policy rates reduction.
Experts want the education system to be overhauled to de-emphasize university degrees and promote the acquisition of vocational and entrepreneurial skills more conducive to self-employment, entrepreneurship, in SMEs, or increased adaptability to employment in agriculture or manufacturing
At Oxford Africa Conference 2019, as keynote speaker on the topic: “Asserting Africa’s relevance, locally, continentally and globally,” Arunmah Oteh who spoke on the Way forward for Africa, said: “Indeed, Africa needs what I call the 3C leadership – Character, Competence and Courage in both private sector and public sector.” The “next level” government should assemble Nigerians with “Character, competence and courage,” to be able to delliver leadership that Nigerians crave for.
Sola Obadimu views Oteh’s advice in a more practical perspective. To him, “for this administration’s second term, PMB needs to decide whether he still wishes to maintain Power, Works & Housing as a single Ministry. He then needs to put people with problem solving mindset, drive and ability in charge of the Ministry or resulting component Ministries.
“We, therefore, need to resolve our infrastructural issues with more seriousness. We need achievers in problem solving to champion these result-oriented Ministeries. Professional advocates can head back to the courts to practise what they know best.”
In its report on the Nigerian agricultural sector, PWC noted that the Nigerian agricultural sector is replete with diverse opportunities.
It noted that the ‘next level’ government should be able to effectively harness these opportunities to drive agricultural development and expand agricultural export.
For instance, analysis by the Nigerian Export Promotion Council (NEPC) shows that the total amount of estimated untapped potential by 2021 for Nigerian exports of cocoa beans to the ten best markets (Germany, Malaysia, Singapore, Turkey, Netherlands, Italy, Japan, France, Mexico and Indonesia) is around $425 million.
In the same vein, the estimated worth of cocoa butter for the top 10 markets was put at $81.9 million, while the value for untapped potential in the market for cocoa paste by 2021 stood at $6.3 million. The untapped market potential for sesame seeds to the top 10 markets (China, Japan, South Korea, Mexico, Poland, France, Lebanon, the United States, Canada and the UK) is estimated at US$170 million.
According to the NEPC, the largest estimated untapped potentials for Nigeria is in China, which accounts for an estimated 65 per cent of total potential value.
China is currently the third largest agricultural export destination, after Turkey and Japan.
Overall, PWC observed that agriculture experts are of the view that the country has the potential to generate US$40 billion annually from export of agricultural goods.
Government should address, inadequate storage facilities and poor distribution network because lack of adequate modern storage facilities for agricultural produce has led to significant post-harvest losses totalling about $12 billion according to World Bank’s estimates.
While the Buhari administration is building some roads, bridges and other infrastructure, industry watchers insist that tackling insecurity has become the first priority as no other sector can be successful without peace.