The first half of President Buhari’s second term ended last week 29 May 2021. Government officials and economic analysts have been using various platforms to evaluate the country’s economic performance while proffering solutions on ways the economy can make better progress. It is remarkable to note that despite the threatening impact of COVID-19 and other challenges, there were areas that registered remarkable progress that kept Nigeria as the largest economy in Africa.
Nigeria is the largest economy in Africa with the country ranking highest on the list of African countries by Nominal Gross Domestic Product (GDP) with $466bn, followed by Egypt with $374bn, and South Africa with $317bn. Algeria and Morocco make up the top five with $147bn and $112bn respectively.
A quick look at the list of African countries based on GDP at Purchasing Power Parity (PPP) shows that Nigeria comes second to Egypt, closely followed by South Africa at third place, and Algeria with Ethiopia making up the top five places. Purchasing Power Parity (PPP) is a measurement of prices in different countries that uses the prices of specific goods to compare the absolute purchasing power of the countries’ currencies.
In many cases, PPP produces an inflation rate that is equal to the price of the basket of goods at one location divided by the price of the basket of goods at a different location. The PPP inflation and exchange rate may differ from the market exchange rate because of poverty, tariffs, and other transaction costs.
Checking another critical economic metric, the Human Development Index, provides a more balanced periscope on this issue. The Human Development Index is a summary measure of average achievement in key dimensions of human development: a long and healthy life, knowledge, and a decent standard of living. It is a standard means of measuring well-being. It is used to distinguish whether the country is a developed, developing, or an underdeveloped country, and also to measure the impact of economic policies on quality of life.
Out of 53 African countries captured in the measurement provided in the Human Development Index (HDI) report for countries in Africa as included in the United Nations Development Programme’s Human Development Report, released on 15 December 2020 and based on data collected in 2019, Nigeria ranked 28th on the continent (low human development) and 161st globally. This clearly shows that the country is seriously lagging behind in the development of its most critical asset: its citizens.
Despite having the biggest GDP in Africa, it is irrefutable that Nigeria is deeply enmeshed in serious economic travails as many key economic indicators allude to this fact.
The unemployment rate in Nigeria rose to an unprecedented 33.3% in the three months from December 2020 to March 2021, according to a report published by the National Bureau of Statistics in its March 2021 report. That is up from 27.1% in the second quarter of 2020, the last period for which the agency released labour-force statistics.
More than 60% of Nigeria’s working-age population is younger than 34. Unemployment for people aged 15 to 24 stood at 53.4% in the fourth quarter, and at 37.2% for people aged 25 to 34. The jobless rate for women was 35.2% compared with 31.8% for men.
Nigeria’s unemployment rate has more than quadrupled over the last five years as the economy went through two recessions, casting a shadow over the efforts to implement policies to drive growth and create jobs by President Muhammadu Buhari’s administration. The economic crisis has led to many of the nation’s vast jobless populace seeking alternative avenues to make ends meet, with most deviating into criminal ventures and unscrupulous activities.
Nigeria’s inflation rate for the month of March 2021, rose to 18.17% from 17.33% recorded in February 2021. This represents 0.82% points higher than the February figures.
This is according to the Consumer Price Index report, recently released by the National Bureau of Statistics in its March 2021 report. The galloping nature of Nigeria’s inflation is an indication of the dwindling purchasing power of Nigerians. This implies that Nigerians spent more on purchasing goods and services in the month of March, compared to February. The last time Nigeria recorded an inflation rate higher than 18.17%, was in January 2017 when headline inflation stood at 18.72%.
High unemployment rate coupled with rising inflation leads to an economic situation known as Stagflation; which best describes Nigeria’s economic reality. Stagflation is typically characterised by an increase in prices which occur when there is an increase in the inflation rate, rising unemployment, high misery index, and lower economic output.
The Nigerian economic environment in the last two years witnessed a number of shocks, the consequences of which the country is suffering from due to inappropriate structural policies. Some of these setbacks include: The instability in the price of crude oil in the international market and the attendant pressure on the Nigerian Naira due to a drop in foreign reserves. The World and Nigeria, in particular, is still grappling to recover from the huge economic losses suffered from the lockdowns and general decline in business activities enforced by the COVID-19 pandemic.
The government’s swift macroeconomic interventions and scaling up of efforts to deal with the economic crisis have been remarkably very timely; even though the country remains hugely exposed.
Needlessly, oil and non-oil revenues are the major sources of government finances. Oil revenue, despite being the top earner of government revenue has always accounted for an average sum less than 10% of the country’s GDP. A look at the contribution of the oil sector for the four quarters of 2020 reveals its contribution to the GDP as follows (Q1: 9.5%, Q2: 8.93%, Q3: 8.73%, Q4:5.87%). The Nigerian revenue has centered around oil earnings and any significant decline in oil revenue; more times than often always translate into fiscal difficulties for the government.
The severe economic recessions suffered in 2016 were triggered by the resurgence of militancy in the oil-rich Niger Delta region; which was characterised by massive sabotage of the country’s crude exports leading to a shortage in supply and the ensuing drop in earnings. The existential causes of militancy in the Niger-Delta region which include environmental degradation, human neglect, burgeoning poverty, and improper use of monies apportioned to develop the region by relevant authorities still subsists; and the risk of different waves of armed militancy in the region is still very high.
The Niger Delta Development Commission (NDDC) and the Ministry of Niger Delta Affairs created to effectively manage these issues must put more efforts into the maintenance of calm in the region and must pursue a judicious use of the enormous funds provided to develop the region and douse agitation.
The NDDC was recently engulfed with glaring allegations of financial impropriety; leading to the government embarking on a forensic audit of the Commission’s finances from inception till date. While the public waits for the release of the audit report, proper actions must be taken to raise public trust and confidence in authorities charged in managing the region that lays the golden egg.
Government can do more to empower the real sector and raise its contribution to national earnings. Gains recorded in the agricultural sector are being eroded due to the heightened insecurity all over the country. The security of farmers, especially from Benue, Adamawa, Zamfara, Ondo, Delta, Ebonyi must be guaranteed. With the rising food inflation, their contribution to the overall food security in the country cannot be over-emphasised.
Meanwhile, during the current administration’s first term in office, the economic management team of the administration was led by the Vice President, who also doubles as the Chairman of the National Economic Council (NEC) a constitutional body composed of all the state governors and key members of the government’s economic management team. During the second term, however; seeing the downward spiral of the economy and the pressing need to engage specialists for recovery and growth; the President in September 2019 assembled an Economic Advisory Council (EAC) a team of eight economic experts led by Prof. Doyin Salami, a renowned economist. The team is to advise the President on economic policy matters, including fiscal analysis, economic growth and a range of internal and global economic issues working with the relevant cabinet members and heads of monetary and fiscal agencies.
The first report the Council provided to the President perfectly encapsulates the sorry state of our economy. The council raised concerns that the rate of the growth of the economy is slower than the rate the country’s population is growing; harped on the need to strengthen national statistical agencies; reform procurement processes; improve education; and the need for job planning in training offered by academic institutions, while also creating an environment that will attract and stabilise investment.
Close to two years since the inauguration of the council; Nigerians are still anxiously anticipating tangible results and an improved economic base; which will be a clear departure from the usual rhetoric and platitudes of government.
The economy is in dire need of massive infrastructural investments all over the country. Remarkable progress is being recorded in railway infrastructure but more is needed in areas of basic social amenities, road networks, power supply and other essential public infrastructure.
As part of efforts to stimulate infrastructural development across the country, the Central Bank of Nigeria (CBN) in July 2020 revealed that the federal government has approved the take-off of the establishment of a N15 trillion infrastructure development company (Infraco).
Infraco would leverage local and international funds for the rebuilding of critical infrastructure as part of efforts to reposition the Nigerian economy and insulate it from external shocks after the COVID-19 pandemic. Set up in partnership with the private sector, Infraco is expected to grow its capital and assets to 15 trillion naira over time to fund public projects like roads, rails and power. Nigerians are still waiting for the infrastructure fund to rapidly translate to reality.
Nigeria’s import-based model has caused various damages and setbacks to our economy, with our currency’s weak purchasing power getting worse by the day; coupled with declining production; it is not a coincidence that the economy is in tatters and on life-support. Nigeria is a country blessed with numerous mineral resources in every state of the federation. Coordinated efforts must be made by the Federal & State governments to resuscitate industrialisation in the country on a massive level which will, in turn, create job opportunities. Funds must be injected in erstwhile manufacturing outlets in the country using our raw materials such as cocoa, coffee, wood, textile, steel, groundnut, palm oil, cotton, fabrics, rubber and food crop industries for consumption and exports; while robust public-private partnerships must also be consolidated upon to achieve this objective.
Mechanised production must be made attractive to positively exploit the immense human capital resource at Nigeria’s disposal; with a population growing at an astronomic proportion and forecasted to be World’s third-largest by 2050; it is expedient for them not to be left idle; as idleness leads to a heightened tendency of a huge number of people available for crime, terrorism and other societal ills.
Economy thrives only in safe and secure environment. The deteriorating condition of our security has contributed a lot to the exacerbation of our economic problems. Every region in the country is grappling with existing and new security challenges on a daily basis; with its attendant effects on investor confidence and ease of doing business.
The disparity between the upper class and the lower class keeps increasing; almost to the level of complete disconnection. This explains why wealth is concentrated in the hands of a selected few and the majority are living from hand to mouth; unsure of where their next meal will come from. This type of economic model should be reversed if the government is serious about removing Nigeria from its ignoble position as leader on the list of countries in the world with highest number of people living in extreme poverty. Top economies in the world have a formidable middle class; a very lean upper class and an empowered lower class. Nigeria must pursue this economic stratification.
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Many countries are leveraging technological advancements to chart the path for future economic development. Nigeria must not be left in the lurch; all attention must not be fixated on oil revenue alone; a factor accounting for lots of under-development in many other potential revenue streams. A huge proportion of Nigerian youths are making giant strides in entrepreneurial ventures in different areas (ICT, Fashion, Fast Foods, Entertainment, Sports, Trading, etc.) Government must take action to assist its youths in staying empowered and stop the constant verbal promises of youth empowerment economic diversification.
Reckless wastage of public funds on excessive frivolities is a recurring theme in government over the years; with little or nothing concrete being done to effectively cut down government expenditure especially on political office holders and phoney projects. This has even affected savings as they are being frittered away by the day; to the point that the excess crude account (created as a last resort in public spending) is being shared and plundered with careless abandon. There was a recent furore in the polity on the impending face-off between organised labour and the Federal Government over plans by the Ministry of Finance to cut governance costs by reducing pay of civil servants.
The Minister of Finance said that in addition to the proposed pay-cuts, government will also review the number of government agencies in terms of their mandates, adding that the government will consider merging two agencies with the same mandate.
The Director-General of the Budget Office disclosed that the cost of governance under President Muhammadu Buhari regime has risen sharply from N3.61 trillion in 2015 to N5.26trn in 2018, and then N7.91trn in 2020. That is an increment in excess of 100% since the administration came into power. These sort of upsizes are unacceptable and unhealthy to a haemorrhaging economy.
As fiscal and monetary policies remain fully in their control, there is an urgent need for all levels of government to walk the talk now, leaving aside political leanings and work hand-in-hand to halt this descent of our economy into the deep abyss, before it becomes completely unsalvageable.
