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.
