More than three years into the Muhammadu Buhari administration, Nigeria’s economic woes have persisted. The 2018 second-quarter report by the National Bureau of Statistics, released on Monday, brings the dire outlook to the front burner. Officially, the economy emerged from recession in 2017, yet growth slowed again in Q2, in comparison to Q1. From 1.95 per cent in Q1, the Gross Domestic Product fell to 1.5 per cent in Q2, the NBS states. With the Buhari government not executing rigorous policies to clear the mess it inherited in May 2015, the flatness in the economy looks set to linger.
Under Buhari, the economy has had only faint links with success. The rise in the prices of crude oil, from which Nigeria derives approximately 90 per cent of its foreign earnings, has lifted it out of recession. The Foreign Reserves, which stood at $23 billion in October 2016 after oil crashed to $27 per barrel early that year, climbed to $47 billion in May on the back of oil prices heading north. It has hovered around $70pb in the past few months.
According to the report, manufacturing, the services and solid minerals have improved. But, at best, the economy is still fragile. The report said, “In the second quarter of 2018, the nominal year on year growth rate of trade stood at –0.01 per cent. This indicates a drop by –4.82 per cent points when compared to the second quarter of 2017, but 2.11 per cent points higher than the previous quarter.”
In essence, the slight improvement is not due to specific planning. It is a factor of the vagaries of the prices of oil. Since Nigeria has little or no control over this, the fate of its economy is highly dependent on external elements. If the price of crude were to crash suddenly, the economy will return to recession. Indeed, the decline in Q2 occurred principally because of the contraction in the oil GDP. Depending chiefly on a single commodity is not sound economics. Conversely, with scientific and integrated management, the economy would make strides.
This is why the stock market, unemployment figures, capital importation and non-oil exports, the major indices that gauge the strength of an economy, are a mixed bag, as they are either stagnant, in decline or have risen insignificantly. The bourse has returned -7.59 per cent year to date. Due to political toxicity, the Statistician-General, Yemi Kale, said, “Foreign investors will get scared; they will be taking their money. I think that is what is happening in the Nigerian Stock Exchange and for the local investors; they will apply the wait-and-see approach.”
Though non-oil revenue received a boost, growing by 2.05 per cent, this is tempered by the decline in non-oil exports. Cumbersome, corrupt and expensive ports operations have contributed to this impasse. A report by this newspaper said the gridlock at the Apapa ports in Lagos has spiked haulage costs by 360 per cent; cargoes could be delayed for up to four weeks. The ports, designed to handle 35 million metric tonnes of goods, are struggling to cope with 85 million MT, says Vice-President Yemi Osinbajo.
From 3.0 per cent in Q1, agriculture fell to 1.19 per cent in Q2. This might be the effect of herdsmen attacks on farmers, particularly in the North-Central. Without addressing insecurity, food insecurity looms. Similarly, capital import has fallen in Q2. “The total value of capital import into Nigeria stood at $5,513.55 million in the second quarter of 2018. This was a decrease of 12.53 per cent compared to Q1 2018,” the NBS report said.
However, the greatest threat to financial inclusion is that the economy is not creating jobs. The schools are churning out graduates, who have no hope of being employed. The NBS states that the unemployment rate is 18.80 per cent and underemployment 21.2 per cent. So, the aggregate is 40 per cent. This is just too high. For the youth, the most critical segment of the 193.3 million population, unemployment rate stands at a dizzying 52.65 per cent. Apart from casual jobs and short-term schemes like N-Power, the job creation outlook is not encouraging.
There is the wasteful dependence on the importation of what can be produced locally, while real income is under serious threat. Inflation might have declined from a high of 18.72 per cent in January 2017 to 11.14 per cent in July 2018, yet this is abnormal. It makes planning haphazard. With the Central Bank of Nigeria benchmark rate at 14 per cent, business concerns do not have the elbow room to make new investments that can create jobs. In comparison, the inflation rate in Burkina Faso is 2.50 per cent; South Africa (5.10) and Algeria (5.92).
For the economy to rebound, Buhari should entrench robust economic ideas. After his third year in office, Nigeria should have stopped the profligate culture of importing petroleum products. The country produces crude but wastes the proceeds on imports. It also produces about 30 per cent of the global cassava output, but imports starch. This defies logic. Nigeria has to refine crude for export to gain foreign exchange. So, the downstream needs to be privatised and the opaque Nigerian National Petroleum Corporation made into a holding company. The resources being wasted on under-recovery should be devoted to social investment.
Without constant electricity, the economy is doomed. Currently, the country is tied down with an average generation of 4,000 megawatts. The high-capacity job segments of railways and textiles are currently down. The executive and the National Assembly should swiftly repeal the Nigerian Railway Act (1955) to allow private investment. All multilateral agreements that liquidated the once-thriving textile industry should be reviewed. The ease of doing business, especially the logjam at the ports, should be rigorously tackled.
The economy is suffering because the government is holding on to the destructive habit of state control. The Olusegun Obasanjo government initiated liberalisation with telecoms in 2001, but the policy has been abandoned. Without deepening the free markets model, the economy will continue to vegetate. Therefore, it should open up the space for private capital to thrive.
