When, back in February, the International Monetary Fund (IMF) released its annual growth forecast for the Nigerian economy and warned starkly that “under current policies, the outlook is challenging,” few commentators or people in Nigerian policy circles paid the international organisational any heed. In the report, released after the conclusion of the annual Article IV Consultation headed by Amine Mati, Senior Resident Representative and Mission Chief for Nigeria, the IMF had lowered its forecast of the economy’s growth rate from a sluggish 2.5per cent to a still less inspiring 2per cent.
The IMF’s gloomy prediction was informed by its reading of certain worrying trends in the Nigerian economy. For instance, and as noted by the Mati team: “The pace of economic recovery remains slow, as declining real incomes and weak investment continue to weigh on economic activity. Inflation—driven by higher food prices—has risen, marking the end of the disinflationary trend seen in 2019. External vulnerabilities are increasing, reflecting a higher current account deficit and declining reserves that remain highly vulnerable to capital flow reversals.”
Although the report acknowledged the stability in the exchange rate of the Naira, nonetheless, it registered additional vulnerabilities as follows: “High fiscal deficits are complicating monetary policy. Weak non-oil revenue mobilization led to further deterioration of the fiscal deficit, which was mostly financed by Central Bank of Nigeria (CBN) overdrafts. The interest payments to revenue ratio remains high at about 60 percent.”
To be sure, none of these negative trends have come as a shock to any watcher of the Nigerian economy. On the contrary, their persistence is a categorical indictment, not just of the current administration, which must accept its fair share of the blame, but of the entire Nigerian ruling elite (civilian and military) from independence till today. As a matter of fact, part of what makes these vulnerabilities particularly galling is that if you remove the year, the report could pass easily for a snapshot of the Nigerian economy at any period since 1960.
The reason that the latest IMF forecast is attracting more than the usual glancing attention and raising experts’ eyebrows is that, since its release on February 17 2020, the global economy has taken a dramatic tumble on account of the spread of Covid-19. As we speak, many countries around the world have imposed quarantines varying in severity, as a result of which economic activity has almost ground to a halt. What this means for Nigeria is quite simple: because, after all these years, Nigeria remains essentially a petro-state which continues to depend on crude sales for half of government revenues and 90per cent of foreign exchange earnings, any little burp in the global oil market throws its economy out of sync. Thus, if current trends persist, chances are that a lugubrious 2per cent growth forecast may even have to be revised further down. Here’s a simple figure to illustrate how truly dire Nigeria’s economic prospects are: as of April 17, the price of Bonny Light was $12 a barrel, a whopping $45 short of the $57 per barrel on which the 2020 federal budget was premised. Essentially, at the moment, the country is churning out, at a staggering loss, a product that the rest of the world is not eager to buy.
Nor is this first time the country has found itself in this situation. As a matter of fact, it has hardly recovered from the most recent collapse of global oil prices in 2014. Of the myriad ugly characteristics of the Nigerian ruling class, none boggles the mind more than its amnesia and total lack of foresight. Which is why we lean towards pessimism despite the many excellent recommendations in the IMF report, including “further tightening of monetary policy… albeit through more conventional methods,” “removing restrictions on access to foreign exchange” for certain categories of imported goods, “executing the much-delayed power sector recovery plan, implementing the anti-corruption and financial inclusion strategy,” and addressing infrastructure and gender gaps.”
For the avoidance of doubt, reversing the country’s poor economic fortunes is not a task for the Federal Government alone. We expect the governments of the 36 states and the Federal Capital Territory (FCT) to focus on areas of comparative advantage, which is why we welcome, for instance, the Oyo State government’s recent move to revive farm settlements. It is time to bring back the glory days of palm oil production and of the groundnut pyramids, together with the allied industries. It is time to exploit the country’s bitumen deposits. It is time the country became a producer in a very significant sense.
The Nigerian elite has had enough warnings on the perils of being a mono-cultural economy. If it does not embrace the Covid-19 crisis as an opportunity to initiate the much-needed course correction, the country can look forward to more years of economic uncertainty and fiscal agony.
