By Dele Sobowale
The party is over — Allan Greenspan, former Chairman US Federal Reserve Bank.
NIGERIA in the context of global economic slow down. In a global village, no country is immune from the universal economic downturn which is already underway. Allan Greenspan, who for more than ten years controlled the e world’s economy as the Chairman of the US Federal Reserve Bank was on CNN in December to warn us that the global economy will shrink in 2019. In fact, the deceleration is already in progress in the USA – the world’s largest economy and China, the second. Europe and other Asian countries are already bracing up for what is expected to be a tough period. The US Federal Reserve in December raised interest rates and the stock markets everywhere went into a tailspin. The Dow Jones Industrial Averages – the bell-weather exchange is likely to close lower year-on-year than at any time since the great recession of the 1930. The Nigerian Stock Exchange would have shed close to 20 per cent of value by December 31. It will certainly lose more in 2019.
The predictable drop in growth rates worldwide have been made more certain by the trade wars between the USA and China as well as other countries. And there is no sign that a n amicable resolution will be reached soon. When two elephants fight, the little animals better take cover or get trampled. “Take cover” was Greenspan’s advice to economic policy managers everywhere on earth. Nigerian economic policy makers will be well-advised to take note because the country will pay more for the loans it seeks next year as a result of the US Fed action.
Trade war and crude oil prices
Long before Greenspan spoke, the World Bank and the International Monetary Fund, IMF, had predicted a slow down in global economy in the coming year. Forecasts for global expansion had been dropped three times on account of uncertainties surrounding trade war and crude oil prices. After a brief surge in the second and third quarters of 2018, which saw crude prices reaching $80 dollars per barrel, the price had tumbled to less than $60 and volumes have dropped. What appeared like a mini-boom a few months ago had turned into a more prolonged burst which will last well into 2019.
No nation on earth is more dependent on robust crude oil prices than Nigeria; none suffers more grievously when severe price drops occur. Perhaps that is the place to start to look down the road into 2019 and determine the consequences of these two most important developments for Nigerians.
The imperatives of the 2019 economy
Fortunately or otherwise, 2019 is an election year. Even though the elections come early in February, and the outcome is unpredictable, some facts must be stated at the outset. First, irrespective of who emerges President in 2019, and all the political promises being made notwithstanding, only another crude oil bonanza can save the Nigerian economy from being savaged by forces within government’s control and those it is powerless to influence. Gross Domestic Product, GDP, will likely grow at less than three per cent again. There is even a chance of return to recession. The seeds of economic trouble were sown before the 2019 was placed before the National Assembly, NASS in late December.
Second, the 2019 budget will suffer the same fate as the 2015 Budget presented by former President Jonathan in many ways. It was passed late by a NASS which had been depleted by defeats at the polls. Several committees delayed their reports for repeated lack of quorum. Then, they butchered the budget so badly that even one hundred per cent implementation could not have produced a good result.
The 2019 Budget might again have another similarity with the 2015 Budget which doomed it and the Nigerian economy and laid the foundation for the recession of 2016. Defeat for Buhari and his concession will mean that the 2019 Budget will have to be executed by a different set of officials other than those who prepared it. Chaos is predictable in that scenario. So, the 2019 Budget has already become a hostage to several hostile forces; implementation will yield very little positive result – irrespective of who emerges President.
Third, and we are still on the 2019 Budget, even by the Federal Government’s admission, the budget is N300billion less than the 2018 appropriation. Government spending is the cardinal variable in GDP growth expectations. Less government spending invariably results in slower growth – not more. With this year’s GDP tending towards under-two per cent growth, 2019 cannot possibly exceed that. Furthermore, the 2018 budget had been so poorly implemented, the Director General in the Budget Office, Mr. Ben Akabueze, told Nigerians that less than 40 per cent of revenue expected from Ministries, Departments and Agencies, MDAs, had been received by November of 2018.
The story was the same for 2017. Obviously, the Federal Government under current leadership cannot manage budgets. It has instead resorted to a “borrow-and-spend” strategy. That approach to managing budget is so flawed that an entire article might be required to explain its faults. But, the major one is clear. There is a limit to how much any country can borrow before the lenders doors are slammed in its face. Then, the debt servicing ratio climbs dangerously and capital expenditure suffers, infrastructure decays and life becomes totally unbearable for Nigerians. Nothing in the 2019 Budget suggests that Nigerians will escape these ordeals in the coming year.
It is seldom that one observes poor economic situation resulting in good social and political environment. So, without exhausting the economic issues, it is vital to look into some of the social and political problems which our worsening economy will make worse in 2019.
Back log of social calamities will remain uncleared
The year 2018 must go down in our history as the year some of the social calamities, time bombs really, were revealed to us by the world. Three different studies announced that Nigeria is now the poverty capital of the world with 87 million of us living below poverty. We were also informed that six Nigerians dive under every minute. That means we would have added five million more from January to December 2018. Will the Nigerian hatchery stop producing more in 2019? Nothing in the 2019 Budget suggests our leaders have a plan to stop the country from increasing the number of extremely poor people by another five million. That is more than the population of most of our states. There was no single sentence acknowledging that the country has a problem; let alone a solution for it in the Budget. That is time bomb number one ticking…
In the past twenty years, the least number of states I visit was twenty one. In the year 2018, the number was twenty-eight in all the six zones of Nigeria. It was, therefore, no fiction for me when 13 million school aged Nigerian kids are currently declared out of school – again the highest number in the world. Bearing in mind that about 60 per cent of Nigerians are under sixteen, it stands to reason to understand that 52 million of the 87 million poor are kids. But, reason is not enough. Easily observed in every part of Nigeria are millions of poor emaciated kids roaming the streets and market places of Nigeria, homeless, in search of food and veritable workshops for the devil.
Number of out-of- school kids
Years ago, when the number of out-of-school kids was 10 million, Dr. Oby Ezekwesili, then Minister of Education under Obasanjo wondered where the kids were. She was offered a fact finding tour of the six zones of Nigeria – which was not taken up. It is simply difficult for the elite who rule Nigeria and whose children are in good schools to imagine that their kids will eventually live in a Nigeria with those now living without hope of any future. The number of out-of-school kids will again increase in 2019 to about 14 million….
The affluent and the middle class parents in Nigeria have a major problem on their hands. At a popular hotel in Aba, in September 2018, which serves proxy for several hundred others in cities and even small towns nationwide, there was dense smoke all over. The hotel was not on fire. The smoke was generated by Nigerian youths smoking and inhaling different types of drugs.
The girls were just as eager as the “guys” to inhale despite the predictable loss of self-control. While the poor are getting ruined by the worst disease on earth – poverty – the “lucky” ones are going to the devil on self-indulgence. Nigerians will have to decide whether to tackle the menace of educated youth drug addiction NOW or in the future build more psychiatric hospitals. There is an epidemic in progress. We need to save our brightest and best before the devil claims them…
Finally, most Presidents use the opportunity to address the parliament on the budget to address other burning issues which need attention and which will also require extra funding. Buhari’s 2019 Budget was deficient in this regard. Some of the social problems mentioned above indirectly impact the economy and endanger our collective welfare.
For instance kidnapping and rapes are made easier when the victims had been lured into taking drugs. The rapid increase in the number of kidnap and rape cases we are now experiencing in Nigeria indicate that no family with a daughter is secure any more. Funds must be allocated to check these problems just as we allocate money for airports and roads. Otherwise, the roads we eventually construct will lead us nowhere in 2019.