Despite exiting recession less than two years ago, following five successive quarters of contraction, the Nigerian economy is still tottering on the brink. The consensus among some experts is that it is just a heartbeat away from a plunge into another round of recession. Needless to say, it would be quite shattering to experience two recessions in quick succession.
This mood of pessimism hovering around the country has been further reinforced by a weak growth rate posted during the first quarter of the year. According to the National Bureau of Statistics, Nigeria’s Gross Domestic Product in the first quarter of 2019 witnessed only a marginal growth rate of 2.01 per cent. Although an improvement on the 1.89 per cent recorded in the corresponding quarter of 2018, it, however, fell short of the 2.38 per cent growth rate for the last quarter of that year.
This is quite depressing for an economy that needs persistent double-digit growth to stimulate job creation for its teeming millions of job seekers and create enough wealth to improve the lives of the nearly 50 per cent of Nigerians that are condemned to living in poverty as a result of years of clueless leadership and rudderless economic policies. With more than 93 million of Nigeria’s estimated 200 million people living in extreme poverty, the country is said to be home to the largest population of extremely poor people in the world, even more than India, whose population is five times more than Nigeria’s.
It is therefore not surprising that the Governor of the Central Bank of Nigeria, Godwin Emefiele, has also lent his voice to the pervading air of uncertainty by warning Nigerians to brace for the next global economic crisis. He queries: “The question could be, how are we, as Nigerians, particularly our leaders, I am talking of monetary and fiscal policy authorities, how are we preparing our country for the next crisis?” Providing an answer to the question will determine the trajectory of the country’s economy in the days ahead.
The reason why the warning should not be ignored is that the government has not really done much to unleash the full potential of the economy to attract Foreign Direct Investment. Nigeria suffers from serious infrastructure deficit, especially the lack of power, meaning that any investor will have to invest in alternative power source, which adds to the cost of doing business. The transport system is also in a shambles, with the government holding on to the rail system, instead of liberalising it as was done with the telecoms sector. This has created a situation where trucks take over as a means of moving goods from one part of the country to the other, thus spawning anarchy on the roads.
Besides, prolonged insecurity has made the country a very unattractive destination for FDI. The possibility of being kidnapped or killed is enough to strike fear in the heart of any would-be investor. Within the first quarter of this year alone, 1,075 persons were killed, while 685 others were kidnapped, the Inspector-General of Police, Mohammed Adamu, said. Within the same period, the Nigerian Stock Exchange said N166 billion foreign investors’ fund left the country. A deadly combination of gun-bearing Fulani herdsmen and bloodthirsty Islamist terrorists has made the country very unsafe for foreign capital.
According to the 2019 Rand Merchant Bank report on the best 10 investment destinations in Africa, Nigeria features at a distant eighth position, while countries such as Egypt, South Africa and Morocco dominate the top positions.
Despite what seems like serious attempts to refocus attention on agriculture, it is still glaring that oil remains the lifeblood of the economy. When Nigeria went into recession in 2015, the first in 25 years, it was as a result of a dip in global oil prices that went below $30 per barrel. Significantly, the recovery was also driven by a rally in oil prices. Still, as it is now, whether the economy sinks or swims will be dependent on what happens in the international oil market.
Agriculture, undoubtedly the biggest job creator, has not been spared by natural and man-made disasters. Massive rice cultivation that saw Nigeria almost swapping her status as a net rice importer to an exporter, took a hit during last year’s flooding that swept away farmland in many states. Since the flooding, accessing farms has proved to be another challenge as bandits demand protection fees to allow farmers into their farms.
As a result of Boko Haram activities in the North-East, farming in that part of the country has come to a virtual standstill. The same thing applies to many parts of the Middle Belt acknowledged as Nigeria’s food basket, where entire communities have been sacked by marauding Fulani herdsmen. The situation is even stretching to the southern parts of the country, compelling a former President, Olusegun Obasanjo, to rail about an impending “Fulanisation” of the entire West African region.
Nigeria has to truly pursue a policy of economic diversification by unhinging the economy from the boom-and-bust cycles of oil prices. The government has to look seriously into the problem of insecurity in the country, while also retooling the economy through the introduction of policies that will encourage manufacturing. Nigeria’s weak legal framework has to be addressed as well as other aspects that make doing business in the country too messy.
Nigeria’s manufacturing sector has to come back to life so that, instead of exporting raw materials, value can be added to them before they are exported. Particularly, the government, through some deliberate policies, has to ensure the rebirth of textile manufacturing because of its potential for job creation.
There should also be a reversal of the current trend where almost all the refined petroleum requirements in the country are imported. In this regard, everyone seems to have gone to sleep, awaiting when the Dangote refinery with capacity to refine 650,000 barrels of oil per day would come on stream. Only a government that does not engage in critical thinking would allow that.
