MAN, LCCI others blame recession on COVID-19, #EndSARS; foresee job losses, reduced purchasing powerBy Dele Sobowale

“To know that which before us lies in daily life is the prime wisdom…” -John Milton, VANGUARD BOOK OF QUOTATIONS, VBQ, p 275.

Nigerians now know the truth. Nigeria is in a recession. The dreadful result was summarized for us this way in PUNCH, November 22, 2020.

“The NBS, in its Gross Domestic Product report for Q3, said the GDP, the broad measure of economic prosperity, fell by 3.62 per cent in the three months till September…For the first time in more than three years, the Nigerian economy shrank  in Q2 by 6.10 per cent..”

The World Bank (WB) added two bits of information to make the situation more depressing. First, the bank pointed out that this is the worst recession in 36 years. Second, WB followed that up by telling us that per capita income in 2020 and 2021 could fall to 40-year low. For Nigeria, acknowledged world poverty capital, things cannot possibly be worse. It means that we will not soon relinquish the title of poverty capital; we only have our own dismal record to beat.

A RECESSION FORETOLD IN MARCH 2020

“For every folly of their [rulers], Nigerians feel the lash” – Horace, 65-8 BC, VBQ p 61.

Grim as all these revelations might appear to Nigerians, they represent a tragedy already foretold, as usual by VANGUARD.

While the rest of Nigeria was still wondering what would be the repercussions of COVID-19 on our economy, we presciently made the forecast of a recession. Read:

“COVID-19 HAS CLOBBERED BUDGET 2020 INTO A COMA

‘Coronavirus: FG Considers Reviewing 2020 Budget’ – DAILY INDEPENDENT, March 5, 2020, p 1.

‘55 Nigerian oil cargo unsold as demand tumbles’ – PUNCH, March 6, 2020, p 23.

Shakespeare, 1564-1616, must have had a situation like the one in which Nigeria now finds itself before pronouncing: ‘All things do help the unhappy man to fall.’ President Buhari, during one of his many trips abroad, once described himself as the most unhappy leader. He has a right to claim that title. Nigeria under him became the poverty capital of the world and that is a title that will not be relinquished soon. On four indices included in the Misery Index, MI — children out of school, maternal death, infant mortality and per capita income – Nigeria is ranked first in all of them. Nigeria is also home to two of the world’s five worst terrorist groups: Boko Haram and herdsmen.

Although it is the poorest country among the Organization of Petroleum Exporting Countries, OPEC, and it is only the eighth largest producer, more crude oil is stolen in Nigeria than any other country. Thus, the Federal Government of a nation, which needs every dollar it can get from oil, stands and looks on while a few selfish but powerful crooks consign the rest of Nigeria to prolonged poverty and endless destitution. None of the big oil thieves has been apprehended and prosecuted. Instead of protecting our own most important source of funds, we are contented to make requests for $22 billion loan package.

These observations are meant to provide background to what will follow in this article because Nigerians need to understand the disaster that awaits us on account of COVID – 19 and our near total dependence on oil. Perhaps the place to start is what was predicted last year when the 2020 Budget was presented to the National Assembly, NASS. Unfortunately for us, the demand for crude was less than expected from January 1, 2020. It remained low throughout February and, as we move into March, we discover that COVID-19 has rendered Budget 2020 totally untenable.

BUDGET

OF SELF-DELUSION

“The most obstinate illusions are ultimately broken by facts” – Trevor Roper, VANGUARD BOOK OF QUOTATIONS, VBQ, p 100.

“Budget of Continuity was based on a benchmark oil price of $60 per barrel, oil production of 2.3mbpd…government projected a deficit of N1.91tn. The revenue performance is only 58 per cent of the 2019 budget’s target due to the underperformance of both oil and non-oil revenue sources. Specifically oil revenues were below target by 49 per cent as at June 2019″ – President Buhari, Budget 2020 presentation to the NASS, October 8, 2019.”

That was the 2020 Budget summarized. Below was my own reaction to it.

STARTING ON THE WRONG FOOT; STAYING ON THE WRONG TRACK

‘Morning shows the day’ according to an old adage.

The disaster of the 2020 Budget actually had its origins in 2015. The first three appointments every modern Head of Government makes in today’s global village are: the Ministers of Defense, Finance and External Affairs. Those are the people other countries appraise most critically. And the appointments are made very quickly after elections are over. Bearing in mind that “a week is a long time in politics” (Harold Wilson, British Prime Minister 1970s), Buhari waiting for five months to make those key appointments had already sent a signal to the global community; and not a good one.  To then turn around and hand the economy to people totally unknown in global financial institutions for the five months sent another signal. Mrs. Adeosun might be a good accountant; but, she is not and cannot be an excellent Finance Minister. The results showed very quickly. A recession followed in 2016.”

The rest of the analysis of the 2020 Budget went on to predict that it will never be implemented as it is. That was before COVID-19 gate-crashed into our lives and is now going to cause a lot of havoc to the budget of every country on the planet. The first signal of the problems ahead is the turmoil in global oil trade.  OPEC is now in disarray. Saudi Arabia, the largest exporter, after failing to get Russia, a non-member to agree to a cut in production and supplies, had unilaterally reduced crude price and is now set to increase output. Those steps spell economic doom for countries like Nigeria which are more heavily dependent on oil. From the evidence available at the moment, the average price of crude oil on the global market is unlikely to exceed $50 per barrel for the next three months unless an emergency meeting of OPEC is held to establish a new quota and production level acceptable to all members.

Even then, any agreement by OPEC members will not be binding on non-members – who now control a larger percentage of global oil output than OPEC. The cartel has lost the clout which in the past made it possible to dictate global oil prices. While there are several uncertainties, there is one certainty, which cannot be ignored. COVID-19 has devastated Nigeria’s 2020 budget. It was not realistic before COVID-19; it is totally in shreds now. It requires no high intelligence to realize that a budget review is urgently needed.

BUHARI APPOINTS  BUDGET REVIEW ADVISERS

For once President Buhari did not waste time in approving a budget review committee of advisers. That is a step in the right direction. Other steps must necessarily follow – and quickly too because time is one of the variables they must bring into consideration. In that connection the most important matters to be decided include the following:

  • Bench mark crude price to adopt in the recommendations for the budget review
  • Time to start operating the new budget.
  • The impact on the Federal and State Governments
  • How to handle the inevitable recession

In the second part of this series, I will elaborate on the four issues listed above. But permit me to be the bearer of bad news: ANOTHER RECESSION IS LOOMING ON THE NIGERIAN ECONOMIC ENVIRONMENT.”

That was published in the second week of March – long before the FG started to address its mind to the possibility of a recession.

If the Federal Government had reached out for information, it would have been able to reduce the decline in GDP growth considerably. Second quarter might not have slumped to -6.10 per cent and Q3 not as bad as -3.62.

WHERE WE STAND NOW

“Hell hath no limits; nor is it circumscribed in one self place, for where we are is hell…” – Christopher Marlowe, 1564-1594, VBQ p 89.

Food insecurity and famine in 2021 now certain.

For Nigerians living today, the closest thing to hell is here. For millions of our people, especially rural subsistence farmers, hell is definitely here. Hell is here, not only because COVID-19 might trigger another lockdown, but because criminals – herdsmen, kidnappers, cattle rustlers and bandits – have now shut down a significant percentage of Nigeria’s  farmlands.

Zamfara, Kaduna, Niger, Katsina, Sokoto and Borno states together accounted for about 30 to 35 per cent of our annual food production. Today, even two battalions of soldiers cannot guarantee the safety of farmers and their harvests in Borno State where the governor had escaped two assassination attempts. In Zamfara and Katsina states, the governors openly announce their negotiations with bandits in order for farmers to be allowed to work in peace. Invariably, the armed hoodlums break their promises and still attack farmers. Recent kidnap of senior police officers, on their way to Gusau, at the border of Katsina and Zamfara states, revealed what ordinary people suffer on those routes.

The atrocities committed daily on the Abuja-Suleija-Kaduna highway only tell some of the story of food high-jacking by bandits in Kaduna and Niger States. Going to farm in many parts of the North has become a suicide mission; none but the bravest and most desperate now attempts it anymore.

Chief Olu Falae, former Secretary to the Federal Government, former Minister of Finance, serves proxy for all farmers in the South besieged by suspected herdsmen. Herdsmen had been visiting Falae’s part of the South from time immemorial without creating havoc. Change came in 2015 when suspected herdsmen openly dropped their shepherd’s staffs and picked up AK-47s. Falae was kidnapped and ransom was paid and nobody was apprehended for it. A few days before I started to write this special report, suspected herdsmen devastated parts of Falae’s farm once again. If Falae had depended exclusively on farming for his livelihood, herdsmen would have forced him to stop farming as hundreds of thousands had done in the South.

When criminal herdsmen went on the rampage, it never occurred to the powers-that-be that widespread famine would result. Large scale famine is now a reality with which government must now deal with. It will remain with us for a while because it is easier to destroy than to build. Millions of Nigerians have been forced to leave farms they have taken years to cultivate and turn into food machines for all of us.

The devastation of farms and the impoverishment of millions of farmers have contributed in large measure to the current recession. As aggregate personal income has plummeted with the recession, demand for meat has also dropped sharply. Shortly after receiving call from the Sunday Editor to write this article, Head Butchers in seven Lagos markets were contacted to ask about demand for beef, goat and ram meats. The result was startling. On the average, there has been about 25 per cent drop in cows, goats and rams slaughtered and sold. A stop at the cattle market – Kara – revealed that there is a strong correlation between what the butchers reported and the reduction in cattle sold. Lagos cattle dealers are now sending back cattle. The tragedy has come full circle.

Unfortunately, reduced demand is not the only problem facing herdsmen. Some of the cattle rustlers carrying off their animals were once farmers whose farms were devastated by suspected herdsmen. Information reaching us indicates that some displaced farmers are now imposing a sort of rural jungle justice – suspected herdsmen destroy farms; farmers seize their cattle in retaliation. Paradoxically, the cattle rustlers have discovered that it is more profitable to rustle cattle than to farm. Few of them will return to farming until government finds a way to restore security to rural areas.

Agriculture, which was always the first sector to lead economic recovery after a recession, might not play that role now. The sector is in bad shape. Consequently, food prices will continue to rise.

Manufacturing mauled

“Consumption is the sole purpose of production.”

This is an axiom in economics which pertains more to manufacturing than any other sector. Despite its importance, manufacturing will be touched only briefly in this write up. The situation here is not different from that in agriculture. Warehouses are full of finished products – unsold; and selling slowly. The demand for manufactured goods naturally lags behind request for food. With many Nigerians struggling to feed; manufactured goods are not top priority now.

Hospitality and Entertainment

This sector was simply wiped out during the lockdown. Many of the investors might never recover. And just as some people were looking towards the Yuletide to, at least, re-open shop, another lockdown is threatened. Millions of Nigerians have lost their jobs from the first lockdown. Another one will dash all hopes of getting re-engaged any time soon. Ali Baba and comedians will have to wait.

Remittances reduced

Close to twelve per cent of foreign exchange coming into Nigeria is from legal and illegal remittances. The foreign exchange coming through that source has helped to moderate domestic exchange rates. Global COVID-19 and universal lockdown had dealt a mortal blow to remittances. Nigerians abroad who were just barely surviving had little left to send home.  Round two of global lockdown means that Nigerian recipients of money from abroad are in for a tough time in the early months of 2021 at least.

IMMEDIATE

FUTURE IS BLEAK

“There are no desperate situations; only desperate men” – Joseph Goebbels, 1897-1945, VBQ p 38.

Worldwide government officials are desperate as this year’s global recession appears likely to continue till at least the first half of next year. Aggregate demand for crude will remain low; so will the average price. Nigeria lacks any other exportable commodity which will provide the revenue we need to achieve the targets set out in the 2021 budget – which is already demolished even before the year starts.

Try as the Central Bank might, it is going to be difficult to keep exchange rates from deteriorating in 2021. Galloping inflation will follow and a greater percentage of the national revenue will go into debt-servicing.

SEVEN IMPERATIVES TO GET NIGERIA’S ECONOMY GROWING

“Well my friend, get me out of danger. You can make your fine speech afterwards” – Jean De La Fontaine, 1621-1695, VBQ p 68.

As a friend of Nigeria, I feel duty bound to obey the French writer by offering some (only some) of the ideas that will help us out of crisis.

Most economic “miracles” in history have hinged on the countries involved selecting and removing certain obstacles to progress. Each was unique and cannot be totally duplicated elsewhere. To me, Nigeria will progress rapidly if:

  • Government checks the activities of herdsmen, bandits and kidnappers of farmers. Without this the exodus from farms will continue.
  • Central Bank of Nigeria, CBN, has made credit facilities available for expansion of agriculture. But, farmers are not able to access the funds because there is a bottle neck which must be removed.
  • Government should concession everything that can possibly be.
  • Federal and state governments should consider and introduce toll gates. Toll is a user’s surcharge. If you don’t use, you don’t pay. Non-users should not be subsidising users.
  • Downsize governments; there are too many ministries and agencies.
  • Federal and state governments should aim at cost recovery for services provided; while making special allowance for the aged – 70+
  • EVERY LOAN TAKEN MUST BE FOR A SPECIFIC PROJECT WHICH WILL REPAY THE LOAN WITH INTEREST. NO MORE LOANS SHOULD BE TAKEN TO FUND CONSUMPTION.

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