For Africa’s largest economy, the latest downward review of its economic growth projections for 2020 by the International Monetary Fund did not come without warning. In its 2020 Article IV Consultation on Nigeria, the Washington, DC – based institution slashed Nigeria’s Gross Domestic Product forecast from 2.5 per cent to 2.0 per cent. This is a sizeable cut, but with the lethargic pace of growth in the face of a myriad of challenges, it is an opportunity for the Maj. Gen. Muhammadu Buhari (retd.) regime to review its economic policies holistically.
For years, the Nigerian economy has been defined by sluggishness. Its near-sole dependence on oil revenue hurts it gravely such that when oil prices crashed in mid-2014, the ripple effects culminated in a recession in 2016. Although the downturn ended in 2017, growth has not attained the heights of the early years of the last decade. The GDP ended negatively at -1.6 per cent in 2016 but rose to 1.9 per cent in 2018.
In 2019, the GDP recorded a 2.27 per cent growth. This was higher than the IMF projection of 1.91 per cent. Seeing a leeway, the Buhari regime is celebrating the 2019 GDP report by the National Bureau of Statistics. The NBS stated that, in the fourth quarter of 2019, the economy grew at 2.55 per cent, the highest growth in any quarter since the recession of 2016. Apparently, this was not because the regime had a magic wand; it is just that the Nigerian economy, by hindsight, ebbs and flows with the dictates of international oil prices.
Thus, economic experts argue that this mini-resurgence is connected to the rebound in oil prices. At the height of the meltdown in 2016, oil sold for $40 per barrel on the average. In 2019, it averaged $64.05pb. This boosted the GDP as the country fell short of its non-oil revenue projections. Comparatively, Nigeria attained an 11.3 per cent GDP growth in 2010, the highest in the past 10 years as oil sold for an average of $77.38pb then.
In spite of the NBS’s cheery report, the Buhari regime ought to take the IMF cut in the GDP projection seriously. The IMF team that issued the reduced growth rate was meticulous. It interviewed economic managers, government officials and the top private sector players. Such a report deserves to be rigorously analysed before jumping into precipitate conclusions of better days ahead.
A thorough consideration of the NBS report for 2019 shows some salient sectors that ought to be addressed before the economy can attain sustainable growth. Although manufacturing grew by 26.29 per cent year-on-year in 2019, it suffered a decline of 7.2 per cent because it stood at 33.57 per cent in 2018. This is expected. Nigeria fared badly in the World Bank’s Ease of Doing business ratings, berthing at 131 out of 190 countries in 2019.
The electricity to power production is in short supply in Africa’s largest economy, oscillating between 3,000 and 5,000 megawatts. Because of tortuous port operations and reduced access to foreign exchange, it is difficult for manufacturers to produce. To avoid a shut-down, some manufacturing concerns have relocated to neighbouring West African countries. With the economy short on production, the country depends mainly on imports, especially in refined petroleum products, food items, electronics, vehicles and heavy equipment.
Likewise, construction suffered a decline. Year-on-year, it dropped from 58.51 per cent in 2018 to 43.72 per cent in 2019, a slump of 14.79 per cent. The report noted that agriculture grew by 13.80 per cent year-on-year in nominal terms in Q4 2019, showing a decline of 4.78 percentage points from the same quarter of 2018. With the Boko Haram insurgency in the North-East, the Fulani herdsmen rampage in the North-Central and banditry in the North-West disrupting farming, this is not far-fetched.
To achieve a high growth rate that can absorb the impact of the burgeoning population growth rate of 2.6 per cent, it is not out of place for the regime to re-examine these sectors. A competent economic management team should be constituted. Its efforts should focus on how to remove the bottlenecks hindering smooth port operations.
Without infrastructure, the economy will remain in the doldrums. Therefore, the regime should build roads swiftly to aid the movement of goods and services. Privatisation is critical, but the attitude of the incumbent regime in this area is disappointing. This should change in the larger interest of the economy. In a transparent manner, the loss-making refineries should be privatised.
The United Nations Conference on Trade and Development says the foreign direct investment to all countries amounted to $1.31 trillion in 2019, out of which the United States, China and Singapore were the top three recipients in that order. To raise its meagre share of $1.9 billion FDI inflow and boost its economy, the Nigerian government has to implement deep reforms to improve the business environment.
Rail transport, which guarantees cost-effective movement of goods and services, is sorely inadequate in Nigeria. Although the Buhari regime is in the process of constructing the standard gauge rail transport between Lagos and Ibadan, this is a drop in the ocean compared to Nigeria’s needs. It should get the Railway Act 1955 repealed to attract the private sector to midwife a revival.
Agriculture is most critical for job creation and poverty alleviation. Government should promote modern agricultural practices. It has to secure the country from the murderous Fulani herdsmen and bandits, who are wasting lives and sending the smallholder-farmers out of circulation. Also, it should address the Boko Haram terrorism, which is in its 11th year, and review the electricity logjam, without which the real sector cannot take its pride of place.
