Monday, 2 December 2013

State of the Nigerian Economy 2013

State of the Nigerian Economy 2013
By Bayo Ogunmupe
IN order to measure the performance of an economy, you have to visit the economic policy of the government. To be able to act on economic information therefore, you have to look into the statistics, data, and other clusters of available information. Reading the statistics poorly may end up in wrong decisions taken. Timely readings will stimulate meaningful policy actions. According to Ayo Teriba, Chief Economist of the Econs Associates. Com, data updates in the Nigerian yearbook, Fact books aren’t reliable for they won’t be available for use till very late in the year.
 For example, the Annual Report of the Central Bank of Nigeria (CBN) which ought to be published by the second quarter of the year, in June, had not been published by October 31, 2013. Also, only the 2010 Annual Abstract of the National Bureau of Statistics was available by the end of October this year.
Therefore, we can only rely on statistics obtained from the Internet. So much for the hindrances to measuring the state of the Nigerian economy. However, in this exercise, we shall measure the state of the economy on such parameters as our dilapidated infrastructure, absence of regular electrical power, and the rut and neglect of our tertiary education!
Nigeria’s current economic travail is linked to things we should do which we did not do, either due to the dearth of leadership, traceable to intellectual weakness or our penchant for financial profligacy. Another contributory factor is impunity – situations where culprits should be punished but the authorities refused to act.
Let us start finding the panacea for our economic woes through examination of impunity from prosecution now rampart in the polity. The level of impunity that goes on in government is amazing.
Since 1999, successive administrations have been wasteful and also failed to demonstrate purposive leadership. From the Presidency to the states, from the National Assembly to the state houses of assembly, the federal ministries to the state ministries and parastatals, it is impunity all the way.
The recent report of a committee chaired by Ahmadu Lemu, president of the Supreme Council of Sharia, accused the executive arm of government of bleeding the economy. The report had more knocks for federal lawmakers who it accused of flamboyant lifestyle in the midst of nationwide poverty.
The Lemu panel accused the National Assembly of taking a large chunk of the nation’s earnings, raising the alarm that what is being spent on the lawmakers would soon send the nation into bankruptcy. However, some federal lawmakers have argued that the three percent allocation given them in the annual budget is too insignificant to affect the economy.
It isn’t the legislators alone that are bleeding the Nigerian economy. The same impunity goes on in the executive branch, where public office holders steal with reckless abandon. This is why government agencies shroud their activities in secrecy. Public funds are used to fund private ambitious. Which is why a state governor can own 35 houses in choice places in the country and a fleet of automobiles within four years of entering public office.
This impunity culture was recently taken a notch higher with the reported purchase of two armoured cars for N255 million for the use of a minister. As usual, Aso Rock has maintained sealed lips over the matter while calls for the sack of the minister have reached fever pitch. We are particularly irked by a government that claimed the economy would be grounded if it met the requests of the Academic Staff Union of Universities (ASUU) but was buoyant enough to fund N255 million vehicles. Sadly, this onset of impunity may slide into anarchy if governance continues to be business as usual.
Actually, criminality thrives because of impunity. Although President Goodluck Jonathan promised to check impunity during his last media chat, critics aver that the president’s hands are tied because oil thieves are people he cannot fight, they are his cronies. However, going by recent reports, economists say that Nigeria’s revenue dropped by 42 per cent because of the disruption to oil production caused by oil thieves who hacked into pipelines.
Worse still, reports from the labour market leave much to be desired. Indeed, Nigeria’s unemployment rate rose from 21.1 per cent in 2010 to 23.9 per cent in 2011, so said the National Population Commission (NPC) in a release on October 10, 2013. The NPC said figures from the National Bureau of Statistics (NBS) showed Nigeria’s economic growth had not translated into job creation.
The NPC report said that NBS estimates Nigeria’s population grew by 3.2 per cent in 2011 from 159.3 million people in 2010 to 164.4 million people in 2011, reflecting rapid population growth.
In 2011, our unemployment rose to 23.9 per cent compared to 21.1 per cent in 2010. It said the labour force swelled by 2.1 million to 67.2 million people with just 51.2 million persons employed, leaving 16 million people jobless. The report added that unemployment was higher in the rural areas at 25.6 per cent than urban centres where it is 17 per cent.
Thus, unless government takes decisive steps by clamping down on oil thieves, confidence in the government will be eroded. Government needs to openly dissociate itself from allegations that those in oil theft have its backing, otherwise people will continue to see as hypocritical, government preaching against the crime. Jonathan’s estimation in the eyes of Nigerians would be poor as he would be seen as an ethnic jingoist who is more interested in the affairs of his kinsmen than the good of all Nigerians.
Meanwhile, Jonathan’s persistent search for the saving grace may be found in steering Nigeria towards modernity. This can be achieved by strengthening the institutions meant to protect Nigeria from internal and external economic disasters. For example, the Excess Crude Account and the Sovereign Wealth Fund shielding the economy from the declining oil prices are now in place. Jonathan should be shopping for a competent replacement for the meticulous and indefatigable Lamido Sanusi, the outgoing Central Bank governor. For an active Central Bank of Nigeria (CBN), a transparent Bond Market and a Stock Exchange that is on the rebound are areas where we have recorded significant gains.
Our current financial boon has gone beyond oil and gas. The growth of our non oil sector has been impressive. Agriculture, wholesale and retail trade and services have come to the fore to compete with petroleum. But the pace has been slow compared with the joust between the president and the state governors over federal allocations. These fights are often dressed in the costume of true fiscal federalism.
Though both the states and the federation have tax raising powers, both never exercised such powers. However, what we sorely needed now are institutions which ensure security of lives and property. Such institutions are hospitals, a larger and more disciplined police, the National Guard and Financial Independence for the Judiciary. Indeed, the National Guard should be doing the duties of our present Joint Task forces. The Army should be divested of police duties.
On hospitals, the best hospital in Egypt is owned by Egyptair, Egypt’s biggest airline. Nigeria can imitate that by partnering with a private company to foster medical tourism through creating big and efficient hospitals. Jonathan should call on Globacom, Shell or Mobil to establish hospitals for the good health of Nigerians instead of mindless promotions by our communication companies. Two, private companies can partner with government on a joint stock basis with a company becoming the core investor.
On security, government should increase the strength of our police force from 377,000 cops to one million men, because as 170 million people, Nigeria needs 1.7 million policemen.
In spite of our economic boom, the Nigerian nation state remains vulnerable to factional disputes such as that of Boko Haram. Repeated outbreaks of violence show limited access to security, making the people vulnerable to instability because of shifts in the dominant ruling coalition. Thus, it is essential for our democracy to build a strong, united and enlightened civil society to check the excesses of a predatory government elite. The contributory factor to the general malaise of corruption and impunity is illiteracy. Only recently, the UNESCO dubbed Nigeria with highest number of illiterate people in the world!
Next on our agenda is the profligacy of the past as a factor in our present underdevelopment. In 2004, during the Olusegun Obasanjo administration, and the first coming of Finance Minister, Dr. Ngozi Okonjo-Iweala. Then the Paris Club of Creditors wrote – off $30 billion debt. We then paid arrears of six billion dollars which was 40 per cent of our debt. But now in the light of the present indebtedness of such nations as the United States, Britain and France, it is arguable whether that lump sum debt payment was wise. We believe it was most unwise that Obasanjo heeded the behest of Okonjo-Iweala in the payment of that debt in a once for all basis.
Presently, the national debt of the US, before the October 2013 two week shutdown was $17 trillion. Yet the US isn’t thinking of payment part of it in a once for all basis. That stand was informed by the opinion of economists since debt levels do not affect economic growth.
In 2010, economists Kenneth Rogoff and Carmen Reinhart reported that among 20 developed countries, the yearly growth of GDP was 3 per cent, when debt was low (i.e: under 60 per cent of GDP).
But it dips to 1.6 per cent when debt was high, i.e. above 90 per cent of GDP. However, other economists including Nobel laureate Paul Krugman have argued that it is low growth which causes national debt to increase rather than the other way round – meaning debt propels the economy forward.
Indeed, out-going U.S. Central Bank chairman, Ben Bernanke stated in April 2010 that “Neither experience nor economic theory indicates the threshold at which government debt begins to endanger prosperity and economic stability. However, a high debt level may result in inflation if currency devaluation is viewed as a solution to debt reduction. If wages are rising due to inflation, fixed amount of debt can be paid off more easily using cheaper dollars. This helps the debtor but hurts the debt holder, who receives less value in return for their loan. Those pieces of information rendered the 2004 debt payment ill-advised and profligate.
But despite government’s no cause for alarm’ assurance, Nigeria’s debt is mounting. After the debt relief initiative of 2004, our stock of foreign debt declined with US$3.8 billion domestic debts by August 2006.
The revered Scottish economist Adam Smith (1723-1790), author of The Wealth of Nations said that when national debts are accumulated to a certain level, there is scarcity since such debts have never been completely paid. That aphorism is coming home to roost as Nigeria treads the old path of foreign indebtedness. According to an article by Okonjo-Iweala on Nigeria in the Internet, Nigeria’s current external debt stands at $34 billion. She gave our domestic debt as N6,537 trillion as at December, 2012. However, the total domestic debt of the 36 states and Abuja has been put at N1.5 trillion in 2012.
But as at 30 September 2013, Nigeria’s debt has risen to N8.32 trillion, the Debt Management Office (DMO) has said. This excludes the domestic debts of the 36 states and the FCT. These data were released on the DMO website on 11 November, 2013.
This was contained in the 2013 Report of the Annual National Debt sustainability Analysis of the Debt Management Office.
However, economists have raised the alarm that Nigeria is treading the old path of indebtedness. For instance, Nigeria signed a $1 billion loan with China for infrastructure development as part of a US$3 billion facility approved by China at low interest rate. Thus, we have returned to the era of the debt ridden society of the new millennium. In order to stem the tide of the debt deluge, Dr. Teriba averred that Nigeria should engage the President to institute an annual state of the economy address where the president shall provide the people with where the economy is coming from, where it is going and wherewithal to attain full employment for the people.
According to Teriba, Nigeria’s economy has grown very fast since the year 2000.  This was in response to surges in global trade. In particular, our GDP has doubled from N20 trillion in 2007 to N40 trillion in 2012. Our oil and gas output rose from N7.5 trillion in 2007 to N15 trillion in 2012. In the non-oil sector, our GDP rose from N12 trillion in 2007 to N25 trillion in 2012. Crops rose from N6 trillion in 2007 to N12 trillion in 2012. On trade and commerce our economy’s GDP rose from N6 trillion in 2007 to N11 trillion in 2012. Comparatively, with a nominal GDP of $250 billion in 2012, Nigeria is 30th, among the list of world’s biggest economies. We were 40th in 2005, 52nd in 2000. Nigeria is the second largest economy in Africa, coming behind South Africa. Nigeria is set to become one of the 20 biggest economies by 2020.
Unfortunately, Nigeria’s growth is cyclical because of our dependence on global commodity price swings. Our gains may be wiped out by any oil price crises. Which is why we need new creative thinkers as policymakers. The profligacy of paying $6 billion as debt arrears in 2004 is responsible for our present lack of electricity, poor state of tertiary education because of our inability to refurbish university laboratories. Also the current state of our economy confirms the persistence of mediocrity among our leaders. Moreover, lack of patriotism has been identified as the missing link between our oil wealth and the present widespread poverty among the populace.

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