By Douglas Anele
Given President Muhammadu Buhari’s frank admission that he does not really understand the basic theoretical principles of modern Nigerian economy, it would be unrealistic to presume that he has the intellectual tools for differentiating between good and bad economic advice. Thus, his lack of in-depth understanding of the dynamics of economic management might be the reason he and his economic team headed by the Vice President who is a lawyer regularly ignore good advice from economists critical of his government’s overly idealistic approach to economic issues.
For instance, three years ago President Buhari refused, against expert advice, to allow the Central Bank devalue the naira when falling oil prices were eroding the country’s foreign reserves. Eventually, when the harsh economic reality kicked in the naira depreciated so quickly that its negative reverberations hit small scale businesses and poor Nigerians really hard. Moreover, it led to severe restrictions on meeting our international payment obligations, constraints on liquidity, and repulsion of foreign investors.
Buhari’s promise to boost employment and curtail inflation has not been fulfilled – actually the situation has worsened. The rate of unemployment climbed in the last three and half years from 8.2% in the second quarter of 2015 to 9.9%, 10.4%, 12.1% and 13.3% in the third and fourth quarters of 2015 and the first and second quarters of 2016 respectively. By the third quarter of 2017, unemployment figures had reached an alarming level of 18.2%, more than twice the level it was when Dr. Goodluck Jonathan was in office.
According to the Nigerian Bureau of Statistics (NBS), up to ten million Nigerians have lost their jobs since June 1, 2015, with youth unemployment reaching a staggering 33%, which is a serious ticking time bomb. Most Nigerians do not know that the NBS has broadened its criteria for identifying someone as employed; otherwise the unemployment figures would have been abysmal. Expectedly, underemployment has also risen from 17.9% in 2015 to 21.2% in 2018. Data from the Consumer Price Index (CPI) confirm that inflation rate moved up steadily from 9.3% in the third quarter of 2015 to a 12-year high of 18.45% in the last quarter of 2017.
Although it started decreasing mainly as a result of CBN’s intervention in the foreign exchange market, by the first quarter of 2018 it settled at 14.33%. This implies that prices of goods and services have been increasing since the APC government came into office, and that vulnerable segments of the Nigerian population are sinking deeper and deeper into poverty never mind the half-truths and outright falsehoods hawked by government officials. Little wonder, then, that Nigeria has overtaken India as the poverty capital of the world, with an estimated 87 million Nigerians living in extreme poverty.
On the national debt issue, statistics from the Debt Management Office (DMO) is not cheering at all. As at June 30, 2015, Nigeria’s total debt, foreign and domestic, was N12.118 trillion; it climbed to N21.725 trillion by the end of 2017, a meteoric rise of almost N10 trillion in less than three years and more than what the three different PDP governments borrowed in sixteen years!
This grim situation is aggravated by the fact that a sizeable quantum of borrowing by this administration is for financing the budget, while debt repayment presently stands at about 40% of actual retained revenue at a time when the GDP is shrinking. Conclusion: the Buhari administration is leading Nigeria back into the debt trap after Dr. Ngozi Okonjo-Iweala and her team had successfully got debt relief from the Paris Club during the Obasanjo administration.
It is widely recognised that steep drop in crude oil prices beyond the control of our government has had a damaging effect on Nigeria’s economy. But the prices have steadily moved up to an average of $70 a barrel in the last few months. In addition, the federal government has grown our foreign exchange reserves which was under $30 billion to $47 billion.
Unfortunately, the President’s pledge to diversify the economy has not materialised. For example, the value of non-oil exports was N308,696 million in the third quarter of 2015; it declined steadily to N171,349 million in the last quarter of 2017. Of course, the newly-launched Economic Recovery and Growth Plan (ERGP) and its corollary, the Medium-Term Expenditure Framework (MTEF), are intended to address this problem by boosting the economy through increased trade and capital flows.
Still, there are genuine fears about the ability of the current economic team headed by Prof. Yemi Osinbajo to achieve the laudable objectives of ERGP. For example, according to Dr. Sobowale in his article, “Four Reasons Why Nigerian Economy Will Not Improve Under Buhari,” a toxic combination of ignorance, inability to learn from past mistakes, embrace of falsehood and lack of creative ideas will militate against real economic growth within the lifespan of this administration, which means that average Nigerians should get ready for more difficult times ahead.
Clearly, President Buhari has failed woefully to make Nigeria’s economy one of the fastest growing emerging economies in the world with a real GDP growth averaging at least 10-12% annually as he promised. In the decade before he was elected, the economy grew at an average of not less than 6.5% per annum. The GDP Reports from NBS reveal that the economy grew by 2.64 and 2.11% in the third and fourth quarters of 2015 respectively. Unfortunately, recession reared its ugly head the following year as the economy declined by -0.67%, –1.49% and -2.34% and -1,73% respectively in 2016.
It declined further by -0.91% in the first quarter of 2017, and thereafter began a slow and sluggish growth by 0.72%, 2.17% and 2.11% in the first, second, and third quarters of that very year. Although the economy grew by a paltry 1.95% in the first quarter of 2018, there is no up-to-date information for the remainder of the year because, according to Dr. Yemi Kale, Statistician General of Nigeria and NBS boss, the bureau has no money to carry out the necessary research. Keep in mind that although officially Nigeria has come out of recession, the economic situation is still dicey and fragile: both local and foreign economic experts predict that the economy will grow by less than 3% for the rest of 2018 and 2019. That is not all: even in the period when the GDP expanded, it was less than the growth in population.
To cut a long story short, Nigeria’s economy has been on a sick bed since the APC came into power. Even so, President Buhari has hardly scratched the surface of other promises he made at the microeconomic level and skills acquisition. For instance, very little has been achieved regarding boosting vocational training, entrepreneurial and skills acquisition programmes for graduates in tandem with the creation of Small Business Loan Guarantee Scheme (SBLGS) to create at least 5 million new jobs by 2019 though the proposed Small and Medium Enterprises Development Commission (SMEDC).
In spite of the significant role of the informal economy in the lives of Nigerians, that sector has remained peripheral in the economic machinery of this government and is in danger of being used for political leverage by the ruling party. To buttress this point, Nigerians are increasingly questioning the motives of government for implementing the tradermoni initiative and loan of N50,000 to artisans so close to the upcoming elections. This is based on the suspicion in certain quarters that the programmes are a ploy by the APC to rig because the documentation process requires beneficiaries to fill in details of their Permanent Voters Card (PVCs).
Additionally, there is nothing concrete to show that the federal government is serious about full actualisation of the National Identification Scheme to generate relevant data or about amending the Constitution and the Land Use Act to create freehold/leasehold interests in land, with matching grants for states to put in place a nationwide electronic land Title Register on a state by state basis.
Even at this point, about six months to the end of this government, there is no evidence that if President Buhari gets re-elected, he can fulfil his promise of creating an additional middle-class of at least 4 million new home owners through a national mortgage scheme at single digit interest rate for the purchase of owner-occupier houses, as well as review the collateral qualification to make funding for home ownership less cumbersome or demanding. Home ownership remains a big challenge for most working-class Nigerians as a result of persistent bottlenecks in the mortgage system, tedious land ownership processes (the obnoxious Land Use Act has not been amended), and rising cost of building materials.
To close our discussion on the economy, let us consider the latest World Bank report on Nigeria’s economic outlook for 2018 and beyond. The report corroborates Bill Gates’s criticism of Buhari’s economic policy thrust that it does not adequately address the need to invest more on human capital development. It states that “In the first half of 2018, the current account surplus surpassed four per cent of GDP, driven largely by higher oil exports, while non-oil revenue collections have come in lower than envisaged. Despite sustained efforts to improve the business environment, Foreign Direct Investment inflows remain stagnated.”