Not for the first time, a dark cloud hovers over the economic horizon. This time, the Economic Advisory Council has dampened the hope of a quick recovery. At its inaugural briefing, the EAC cited lapses in the management of the economy, an anti-investment environment and poor record-keeping, among others, as the basis for its disturbing report. On the flip side, the body enunciated persuasive arguments on the way forward. Without a rigorous implementation of these recommendations, the Nigerian economy is set for prolonged stagflation.
Straight off, the EAC, which the President, Maj.-Gen. Muhammadu Buhari (retd.), inaugurated last October to replace the regime’s Economic Management Team, made mincemeat of the subsisting template. Its report states that there is no synergy among the Ministries, Departments and Agencies of government. This is difficult to fault as the MDAs have long been observed to work at cross-purposes. For instance, the Ministry of Finance is unable to enforce its writ against the slew of MDAs encumbering smooth operations at the seaports.
Pertinently, the Doyin Salami-led EAC pointed out that the economy was growing sluggishly, but, at 2.6 per cent, population is growing faster than the economy. Nigeria recorded 1.9 per cent growth in Gross Domestic Product in 2018 and the African Development Bank estimated a 2.3 per cent rate for 2019. International Monetary Fund reviewed its forecast downwards from 2.5 per cent to 2.0. In 2018, Nigeria became the poverty capital of the world, primarily due to dwindling revenue, mismanagement of resources and corruption that culminated in recession in 2016. Like previous administrations, there is no hard-nosed blueprint to rein in the exploding population growth.
Unerringly, the council stressed “the need to strengthen national statistical agencies, reform procurement processes, improve education and the need for job planning in training offered by academic institutions,” and noted the non-conducive environment plaguing domestic business operations. In the same breath, this prevents foreign investors from ploughing their funds and expertise into the economy. Nothing could be more nerve-wracking.
Every economy – Nigeria’s inclusive – needs a heavy dose of it but, at the moment, Nigeria lags far behind in attracting Foreign Direct Investment, which can serve as a good measure of economic competitiveness. According to UNCTAD data, the United States received FDI of $251 billion in 2019 (the highest); China $140 billion and Singapore $110 billion. In comparison, Nigeria attracted $3.5 billion in 2017 and only $1.9 billion in 2018, although this increased slightly by $909.54 million in the second quarter of 2019.
It is not surprising that the EAC harps on the country’s diminished ease of doing business. “We need an environment that will attract investment,” the report concluded. “People will come only when they feel confident and when they come, their exit will not be challenging.” Among other disincentives, infrastructure is decrepit, at less than 5,000 megawatts, electricity is virtually epileptic and security has deteriorated rapidly.
To gauge the hostile economic climate, the World Bank’s periodic Ease of Doing Business reports consistently put Nigeria at the bottom of the pile. Out of the 190 economies assessed in 2019, Nigeria’s economy performed poorly at number 146. That position is not much different from the 145 recorded in 2018, or the much poorer 169 in 2017.
Besides, Nigeria is nowhere among the top reformers. The World Bank considers the first 20 positions as attractive economies with successful EoDB climates, a select group that Mauritius joined after undertaking five reforms in 2019. It is the highest ranked in this category in Africa, but at 29, Rwanda, which undertook seven reforms, is not far off. The World Bank notes, “In registering property, Rwanda ranked second. Rwanda has an efficient land registry where it takes seven days to transfer property and costs only 0.1 per cent of the property value, the same as in New Zealand.” Nigeria’s aim ought to be as lofty as this.
Nevertheless, the EAC is a noble idea that, if properly harnessed, could push the Nigerian economy in the right direction. The economy needs a steady flow of ideas from the best work in the academic community and the private sector. The world’s top economy – the US – launched its own economic advisory council when the Congress included it as part of the Employment Act 1946, the White House states. With five main goals, the difference with Nigeria’s EAC is that it is a statutory body in the US. That means its members have to be confirmed by the US Senate. This way, their existence is not solely at the mercy of the president, but they are also answerable in a way to the lawmakers. This way, everybody is on his toes.
To instil similar thoroughness in the Nigerian economy, Buhari should go beyond having the EAC. He should set up an effective economic management team, which he should meet with more frequently. The EAC should also put its reports in the public domain as the United States’ Council of Economic Advisers does. Initially, Vice-President Yemi Osinbajo headed Buhari’s economic team, but the EAC has changed all that. The EAC, as the name implies, is just an advisory body. Despite this, it too has a wealth of experience to utilise. Surprisingly, the President treated this casually by appointing the Secretary to the Government of the Federation, Boss Mustapha, to implement the EAC recommendations on lack of synergy. This is wide of the mark, another demonstration of naiveté.
In retrospect, all the administrations from 1999 established economic management teams. The Olusegun Obasanjo Economic Management Team had a host of ministers including Ngozi Okonjo-Iweala and Nasir el-Rufai, the then Central Bank of Nigeria Governor, Chukwuma Soludo, and Nuhu Ribadu of the Economic and Financial Crimes Commission. His successor Umaru Yar’Adua retained the template with a little adjustment in the composition. Goodluck Jonathan made Okonjo-Iweala, his finance minister, the coordinating minister for the economy.
A cabinet committee, which will implement the EAC recommendations and take on operational responsibilities, is still imperative.