By Udeme Clement
As 2011 economic year comes to an end, analysts and economists are already looking at the growth rate in the country. A holistic view of various sectors revealed that Nigeria ’s economy is growing at eight per cent.
The data released recently from the National Bureau of Statistics (NBS) shows that the rate of unemployment stands at over 21.9 per cent as the economy is growing at eight per cent without creating jobs. Unemployment among youths according to experts is estimated at about 60 per cent, meaning that youths between the ages of 15 and 35 willing to work are not gainfully employed.
Poverty level is on the high side. In 2008, poverty rate at the national level was 54 per cent and increased to 62 per cent between 2010/2011. A comparative analysis of the poverty rate in the economy shows that about 60 per cent Nigerians live below poverty line. Currently, the growth rate in agriculture is between eight and nine per cent. Only the telecom sector is growing at the rate of 35 per cent.
Moreso, in the last quarter of 2011, the National Population Commission (NPC) disclosed that the population in Nigeria has increased from140million five years ago when the last national headcount was conducted to 168million with annual population growth rate of 5.6 million people.
NPC explained that 82,098,001 of the country’s population are females while males account for 85,814,560. The agency’s new projection of the country’s population growth with an assessment of 3.2 per cent rate, shows that Nigeria ‘s population would hit 221million by 2020.
Thus, par capita wise, the economy in 2011 is worse off due to rapid decline in essential services such as the number of hospitals, medical personnel, number of schools, quality of education and social services needed to improve the standard of living in the society.
The issue now is what will be the prospect for 2012 fiscal year with a large population without both qualitative and quantitative increase in services that are essential, and if Nigeria can still achieve its Vision 20:2020 as the population increases with high level of poverty.
Also, President Goodluck Jonathan has presented the budget for 2012 to the Senate without allocation for fuel subsidy. Nigeria ’s economy in 2012 without fuel subsidy and the poor state of infrastructure for some analysts means severe poverty for the citizens.
Some economists said that the quantum jump in the price of fuel from N65 per litre to N120 as suggested by government will cause structural inflation in the economy with multiplier effect in every sector. Major developments in the economy in 2011 include: Banking reforms/Nationalisation of weak banks: The banking reforms, which further shrinked the number of banks ended successfully in 2011 with the nationalisation of three banks.
Thus, the MainStreet Bank Limited was licensed to take over Afribank, Keystone Bank Limited assumed the assets and liabilities of Bank PHB and Enterprise Bank Limited fully took over Spring Bank. Interestingly, all Nigerian banks had been fully recapitalised and relative stability restored to the financial system, as no bank
was allowed to fail. The apex bank adopted various measures to put the financial system on the path of long term stability and efficiency.
Increase in electricity tariff in 2011: The decision by Nigerian Electricity Regulatory Commission (NERC), to increase electricity tariff by over 50 per cent from January 2012 was also taken in 2011. The increment according to NERC was in line with the on-going reforms in the power sector.
The Commission said that consumers with single phase meters would pay between N10.85 and N14.60 per kwh as against the current rate of N7.30 per kwh, while customers currently paying N11 per kwh would pay between N16.50 and N22 with the new tariff.
The residential category of the lowest paying customers at the current rate of N2.20 per kwh would pay between N3.30 and 4.40. While the highest paying consumers at the rate of N15.60 per kwh would be made to pay between N23.40 and N31.20 with the new tariff.
Thus, NERC, which is charged with the statutory function of effecting major reviews of electricity tariff every five years in line with the Multi-Year Tariff Order MYTO, effected 10 per cent increase in electricity tariff in 2009.
In 2009 the cost of electricity per unit was N7.00/kw, N8.50/kw in 2010 and moved to N10/kw by July 2011. MYTO was introduced in 2008, to ensure a paradigm shift from the traditional price fixing to a cost reflective tariff driven by private investment in the power sector. The initiative was to move the sector from the previous monopoly structure to the current competitive market environment.
Safer airspace/Restructuring in aviation sector: 2011witnessed positive changes in the aviation sector, which could be attributed to the autonomy that government granted Nigeria Civil Aviation Authority (NCAA). In 2011 and in the last two years Nigeria has not recorded a major plane crash.
We now have safer airspace and new aircrafts flying in the country with no cases of air return, crash landing and other problems associated with aviation industry before the autonomy. Also in the last quarter of 2011, government removed some top directors and brought in fresh ones to fast track development in the sector.
National Economic Management Team with 24 members: 2011 economic year also witnessed the setting up of the National Economic Management Team with 24 members, under the supervision of the former World Bank managing director, Mrs Ngozi Okonjo-Iweala, who is now the Finance Minister.
Iweala, held the finance portfolio in Nigeria from 2003 to 2006 and successfully secured debt relief for the country. Now investors and financial analysts are watching to see how the minister with her economic team alongside the governor of Central Bank of Nigeria (CBN) Lamido Sanusi and other reformers would make fundamental changes and diversify the economy into non-oil export sector, in order to reduce over-reliance on crude oil as the major source of revenue generation for government.
Presentation of the Medium Team Expenditure Framework (MTEF) to the Senate: The presentation of MTEF to the Senate by the Minister of Finance, Mrs Ngozi Okonjo-Iweala, in the last quarter of 2011 was widely commended by the investors and stakeholders in the country.
Presentation of 2012 budget to the National Assembly: President Goodluck Jonathan presented the appropriation bill to the House to ensure early passage aimed at preventing structural lag in the economy. The budget’s break down shows total expenditure N4.749 trillion, which shows an increase of about six per cent on N4.484 trillion appropriation bill of 2011 economic year.
The budget forecast is based on the crude oil benchmark of $70 per barrel with an exchange rate of N155 per dollar. The capital expenditure is N1.32 trillion, which represents 28 per cent of the entire budget. When compared to 26 per cent in 2011 budget allocated for capital expenditure it shows increase of two per cent, which is an improvement over the 2011 budget.
N2.472 trillion is allocated for recurrent (non debt) expenditure, which represents 72 per cent of the aggregate expenditure, while N398billion has been provided for statutory transfers and N560billion for debt servicing without allocation for fuel subsidy.
Removal of the controversial fuel subsidy from the budget: The Federal Government took a bold step by removing the allocation for fuel subsidy from the 2012 budget, stressing that government has no money to continue paying subsidy, which is already estimated at over N3.4 trillion in the last few years, against stiff opposition by Labour that it will cause inflation in the economy thereby bringing more hardship to the people.
Stakeholders/Investors perspective: Presentation of MTEF was a good idea —The Chief Executive Officer, Lambeth Trust and Investment limited, Mr. David Adonri-MTEF would be useful if the money is to be spent on infrastructure development and capital projects.
This is because it would boost economic growth and development now and in the long-run. If adequately implemented, it would create jobs to tackle the persisting unemployment problem in the economy. But if the money is for recurrent expenditure, it would not help the economy in any way. Rather, it would compel the monetary authority to increase the interest rate.
There is prospect for the economy in 2012—the managing director, APM Terminals Apapa, Mr. Dallas Hampton, the Concessionaire in charge of a 25-year lease agreement of the terminal—Nigeria has the second largest economy in sub-Saharan Africa (after South Africa) with a GDP of $207 billion in 2010.
APM Terminals also holds a minority stake in the West Africa Container Terminal (WACT) at Onne, the largest oil support port in Nigeria, and the entire Southern hemisphere. The International Monetary Fund has projected Sub-Saharan economic annual growth rates to rise from 5.2 per cent in 2011 to 5.8 per cent in 2012, with Nigeria’s GDP growth rate forecast at 6.9 per cent this year and 6.6 per cent in 2012.
In 2011, Nigeria’s economy did well in the areas of financial management—The executive secretary, African Capacity Building Foundation (ACBF) Dr. Frannie Leautier. The economy achieved major stability in the financial sector to brace up for the global financial crisis and emerging issues in global economy. The banking reforms carried out the apex bank without depositors losing their money was a major achievement and other African countries should take a lesson from that.
The constitution of the Economic Team was a good initiative— managing director DHL in Nigeria , Mr. Randy Buday— There is greater prospect for Nigeria ’s economy in 2012 fiscal year, looking at the commitment of the economic team in designing a framework for industrial growth. Also, early release of 2012 annual budget is very important and would boost the rate of growth by removing structural lag from the economy.