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Nigeria and her unending economic woes

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“Nigeria suffers the worst economic recession in 36 years – W’Bank data.”

By Dele Sobowale

All the leading Nigerian newspapers conspired to ruin Sunday, November 22, 2020, for us and to start the week off by publishing what was in actual fact an economic disaster foretold. Economists working with reliable models knew at the end of the second quarter, Q2, that the third, Q3, was also going to be horrible. Only Federal Government officials, as well as those commentators wanting to please them could have expected a different result.

At  UniJankara, we remain firmly committed to publishing the truth as best as we can get it. Let Know-Nothings in government write rejoinders to earn their pay. The results, when published, will usually vindicate us.

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“The more you look, the less you see.” –    Prof, Moshood Abiola aka Peller.

Peller, the magician was a delight to watch perform. But, as he plays each trick on his gullible audience, he would repeat “The more you look the less you see.”

Peller knew that a Nigerian fool is born every minute. Unfortunately, it is not only in the world of entertainment that you can fool some of the people all the time. The government does it all the time. They actually play financial tricks on Nigerians and make us pay dearly for the deliberate deception or half-truths.

The National Bureau of Statistics, NBS, disclosed that the Gross Domestic Product, GDP, “fell by 3.62 per cent in the three months till September.” That was true enough. Nigerians were even told that “the Nigerian economy shrank in Q2 as the GDP fell by 6.10 per cent, compared with a growth of 1.87per cent in Q1.”

Again, that was factual enough; but not good enough. Here is why.

Cumulative quarterly growths: 2019-2020; Q3.

First, after three quarters in 2020, cumulatively, the Nigerian economy had declined -7.85 per cent. Thus, it is a safe bet that the result for the full year will be negative compared to 2019. That is the first thing we must get into our heads. Some time in the first quarter of 2021 we should expect to be told that Nigeria experienced cumulative negative growth in 2020.

Second, the performance in the first three quarters of 2020, have wiped out all the gains in Q2-Q4 of 2019. Painful as it might be for all of us to admit, the Nigerian economy, by the end of 2020 might be back to where it was in Q4’2018.

A person condemned to fetching water and pouring it into a basket until it is full has a better chance of making progress than this country right now.

Reasons for the poor 2020 performance

Several reasons account for the 2020 results apart from the obvious – COVID 19. Nobody knows if a recession would have occurred without COVID-19. But, if the 1.87 per cent Q1-2020 growth had been followed by slower growth in Q2, a technical recession would have been recorded all the same.

COVID-19 and the lockdown imposed nationwide made the severe downturn inevitable. We can take some comfort from knowing that our experience was not one of the worst in the world. That is all – negative comfort.

However, agriculture, being a major contributor to our GDP, has been assailed by many calamities which will not soon go away. Unprecedented flood ravaged farms nationwide in what some experts believe represent manifestations of permanent global climate change. If so, the losses in 2020 might be repeated in 2021.

Desertification in the North and Ocean surge in the South are reducing land available for cultivation. We have provided no adequate responses to all these challenges.

To natural disasters we must now add man-made calamities – herdsmen invasion of farms, kidnapping, murder and banditry now render farming in large parts of the country a worthless or suicidal undertaking.

There is no sign all these will stop in 2021. But, even if they do, hundreds of thousands of farmers will need to be convinced that it will be safe to be alone in their farms again. So, what various crimes have destroyed will not be restored soon.

If COVID-19 and lockdown slowed down farming considerably, it devastated the night travel, manufacturing, aviation, transport and entertainment sectors. I can state authoritatively that the Q4’20 results are already trickling in. It is bad news all around. The contributions for annual harvests are the worst anybody has ever known. A bleak Yuletide is expected – even if there is no second lockdown. It is a certainty that Christmas will be ruined if the country is locked down again.

Repercussions of the current recession

“Income tax revenue lags behind FG projections.”  –  Vanguard, Nov. 23, 2020, p 19.

The report went on to say that “an indication has emerged that the government has recorded a 25.3 per cent shortfall in Company Income Tax, CIT, in the first six months of the year. Also, economy analysts say the sustained macroeconomic headwinds would likely worsen the CIT in the remaining balance of the year.”

Any half brilliant Economics level-100 student in a university could have predicted that sharply reduced productivity was going to be the logical repercussion of prolonged lockdown both in the private and public sectors.

What any student might not know was the fact that even before lockdown the Federal government had invariably failed to collect up to 65 per cent of the budgeted revenue since 2016. COVID-19 merely added to the problem.

Right now, the forecast for the year is for revenue collection not to reach 55 per cent of budget. More bad news.

When that happens, government spending will fall far below expectations. Few people have even noticed that less than 30 per cent of the 2020 capital budget has been released to Ministries as we approach the end of 2020. That has been the pattern since Buhari became President and it is not about to change.

Furthermore, as the government fails to achieve all the positive targets set out in the budget, it will surpass the negative estimates goals set for the year. Debt-service ratio will increase and exceed what we were led to expect.

At the moment, the country is generating just about enough revenue to pay its debts. There is little left for development or even maintenance. That explains why Ministers of this government all promise to deliver projects in the future. Completion dates of the Lagos-Ibadan expressway and rail road have been shifted so many times nobody believes the Ministers anymore; and they are obviously no longer embarrassed by the repeated shift of timelines.

But, don’t blame the Ministers. They serve a government which obviously believes that “Promises like pie-crusts are made to be broken.” No major project will be delivered next year.

Finally, with GDP growth in negative territory, the government and Nigerians can write off 2020 among the years when 10 million people will be lifted out of poverty. Instead when this year ends on December 31, at least six million more Nigerians would have joined those living in abject poverty at the beginning of the year.

STOP PRESS: “Nigeria’s per capita income could fall to 40-year low – W’Bank.” Nov. 24, 2020.

Sixty per cent of Nigerians were not alive in 1980 – forty years ago. We actually lived better then.

 

Vanguard News Nigeria

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