In the field of Political Economy, particularly the Marxian school of thought, the economy is oftentimes regarded as the substructure upon which other superstructures of any society is built. Consequently, the economy determines the behavioral pattern of politics, culture, and other social relations that form the superstructure.
All over the world, countries’ economic strengths are measured by the Gross Domestic Product (GDP), thus the GDP is the key indicator of a country’s economic strength(s), the major components of GDP are calculated by adding up these economic variables: Government spending, consumption, private investment, and Net exports. To ensure the GDP is strong, the amount of government spending has to be huge. When government spending is huge and it is complemented by private investment, the consumption of citizens automatically becomes high.
There is no gainsaying that Nigeria, like any other country of the world, is currently going through a turbulent economic patch necessitated by COVID-19. Of course, the COVID-19 pandemic has severely impacted on the world economy generally. Just before the pandemic, Nigeria’s economy was anchored on the Economic Recovery and Growth Plan (ERGP), a medium-term plan for 2017-2020, developed by the administration of President Muhammadu Buhari to restore the economy that just came out from the woods of recession.
The ERGP was targeted at inclusive growth to consolidate national cohesion; a structural economic transformation; improving efficiency in both public and private sectors; increasing national productivity and achieving sustainable diversification of production. Beyond the targets of the ERGP, it also envisaged a GDP growth of 4.6% average annual growth between the estimated years of the economic plan (2017-2020). Then from the estimated negative growth of -1.54% recorded in 2016, real GDP was projected to grow to 2.19% in 2017 and 4.8% in 2018 before peaking at 7.0% in 2020.
Buhari’s government, indeed, acknowledged that it could not recover Nigeria’s economy alone, hence it leveraged on the potentials of the private sector to effectively achieve the desired economic recovery and transformative growth. It was also very imperative to harness the dynamism of Nigerians, beginning from the Micro, Small and Medium Enterprises (MSMEs) to the large domestic and multinational corporations to achieve the set objectives.
Unfortunately, the ERGP has been scuttled by the COVID-19 pandemic.
However, in a proactive response to the economic challenges posed by the pandemic, President Buhari constituted the Economic Sustainability Committee (ESC) headed by the Vice President, Prof. Yemi Osibanjo to inter alia: develop a stimulus package and come up with measures to keep the economy afloat. Similarly, in late March, the House of Representatives had earlier passed the Emergency Economic Stimulus Bill 2020 to provide businesses and citizens of the country. The bill, as proposed, aims at 50% tax rebates to businesses registered under the Company and Allied Matters Act (CAMA) so they can use the savings to continue paying their workers.
A total of N2.5 trillion was earmarked for the implementation of the Economic and Sustainability Plan (ESP). This was disclosed by the President in September. Speaking at the end of a two-day “First-Year Ministerial Retreat” in Abuja, the President said he had directed the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed; Governor of the Central Bank of Nigeria(CBN), Mr. Godwin Emefiele to ensure a timely release of N2.5 trillion for the implementation of ESP as well as funds for a capital project.
Surprisingly, with the humongous amount of money that the government has injected into the economy, there is little or no corresponding effect on the economy yet. Indeed, indices of economic growth can never make sense to a common man on the street until those indices can put food on his table. The consumption level of the citizens, undoubtedly, should be high, given the level of government’s liquidity that has been injected into the economy. But this is barely the case. To this end, the questions that easily come to mind are: could it be possible that people have access to these funds? Or is it possible that people do not know how to tap into these funds?
The above questions are very pertinent to be asked in that most times, our deficient system makes it impossible for interventionist funds like this to get to the hands of the supposed beneficiaries. Again, focusing mainly on the formal sector could as well be one of the reasons why the ESP has not yielded many economic results so far. The informal sector, which the ESP somewhat neglected accounts for about 65% of the country’s total GDP and, at the same time, employs more than 90% of our workforce.
Some of the conditionality attached to the “survival funds” could not have been afforded by the self-employed persons in the informal sector. For instance, while announcing for the commencement of the N2.3 trillion stimulus economic package namely; survival fund (N75 billion) for MSMEs and the Guarantee take-off Scheme (N15 billion), the Minister of State for Industry, Trade and Investment, Ambassador Maryam Katagum on the 21st of September, 2020, gave out the following conditions as the prerequisites to accessing the funds: the benefiting companies must be registered in Nigeria under the Corporate Affairs Commission (CAC); must have a BVN by company CEO.
Above all, as I have always argued on different occasions and in so many fora, Nigeria’s economic problems are more of “monetary policy” than “fiscal policy”. Unfortunately, at all times, the government mostly adopts the fiscal policy approach to solving our economic problems. The stimulus package(s) was rather a fiscal policy approach adopted by the government to alleviate the economic implications of the Covid-19 pandemic on Nigerians. However, right from the beginning, I did not expect it to have great impact on the economy.
The government cannot expect its fiscal policies to solve our economic woes when the exchange rate (monetary policy) remains extremely poor. The effect of the exchange rate has persistently plagued Nigeria’s economy. Today, the Naira’s exchange rate to a dollar is about N384.95. Worst still, the exchange rate has not been unified, as different importers access their foreign exchange from different sources.
With Nigeria’s exchange rate in shambles, the economic implications of it on the economy can never be overstated. As a consumer and an import-dependent country we are, it means that every goods/service imported into the country would attract extra costs in which the final consumers will bear the burden. This, indeed, has significantly added to the exorbitant prices of goods/services in the market.
From the foregoing, this article is of the view that the Nigerian government must come up with economic policies that would cause a paradigm shift in the economy – a shift from a more consuming, less producing, and importing economy to a less consuming, more producing, and exporting one. Until this is done, the consumption variable of the country’s GDP vis-à-vis standard of living in Nigeria would remain very poor and low.
To continue next week.