When President Muhammadu Buhari came to power in May 2015 the expectations of an economic miracle were palpable. Members of Nigeria’s political and economic elite drooled over the expectation of mindboggling opportunities, a flourishing real sector buoyed by proactive fiscal policies that would stampede growth and ginger development. The campaign promises were tantalizing; fixing of the hapless power sector within four years, three million new jobs would be created annually, the attainment of single digit inflation, the solving of Nigeria’s intractable road and housing problems amongst a long shopping list of further promises. Two years down the road and halfway through the year 2017 is Buharinomics and its attendant promises plausible?
Different people would naturally give different answers. The responses would typically be split between a patently political view point and a brazenly economic. Of course in between these extremes would be a glacial concoction of alternative perspectives. The economic outlook for the Nigerian economy so far does not score the Buhari economic agenda favourably. Inflation has started to glide down slowly from 18 per cent at the beginning of 2017 to 17. 24 per cent at the end of June, but this rubs nastily against the 9 per cent inflation rate recorded at the beginning of the administration. Unemployment rate that was about 7 per cent at the start of 2015 (admittedly this figure is dodgy and reflects more of administrative tinkering with data base than a low rate of nominal unemployment) had rocketed to 13 per cent in 2017, representing a two year rise of 86 per cent. An embarrassing testimony of the competence of an administration that came into office on the one word agenda of ‘change’, which many had wrongly interpreted to mean lower inflation rates , higher employment and spectacular.
To make matters worse the administration has made a hash of the foreign exchange market. The market currently has at least eight different exchange rates, meaning that arbitrage opportunities are rife and a few privileged Nigerians easily wrap their heads around newspapers as they tie their wrappers around their ample waist with billions of round tripped naira gushing into their accounts. This has become the ultimate economic scam officially (albeit inadvertently) sanctioned by the nation’s chief financial watchdog, the Central Bank (CBN). The Central Bank has been forced into a position where it has served as both a tool of monetary stability and an unconventional agent of fiscal expansion. The push and pull of both policy objectives has left the managers of the apex institution with spiting headaches. Godwin Emefiele, CBN governor has had to engage in a dance of wolves by weaving between the funding of a ravenous foreign exchange market with increasingly scarce dollars from dwindling foreign revenues, to the raising of funds to meet the federal governments widening budget deficit (estimated to top N3trilion in 2017) through the sale of local treasury bills, thereby crowding out private sector borrowing and firmly slamming the doors of local credit in the face of domestic manufacturers.
The Minister of Finance, Kemi Adeosun, at different times in the year had accused the CBN of hurting domestic growth and employment, but with the budget locked in a test of wills between the executive and the federal legislature, half of 2017 has been run without a clear fiscal road map or a legally sanctioned spending framework, leaving the CBN to take on roles it was not designed to handle. The bungling of the economic policy architecture by the present administration would likely lead to a 2017 growth rate of less than 2 per cent (perhaps better than the -0.52 per cent of the first quarter of the year) but a far cry from the 15 per cent needed over a ten year period to make a dent in the nations staggering unemployment rate of about 26 per cent for Nigerians between the ages of 18 and 34 years.
Despite the recently launched economic growth and recovery plan (EGRP) there is a sense in which the government appears to be running on a generally ad hoc basis, fire fighting with contrived measures as the fire sparks fly. This newspaper believes that such an approach to economic management is cavalier and ineffectual. The government must decide its overall economic philosophy is it pro-market or is it pro-fiscal intervention, is it neo-Keynesian (encouraging a heavy government involvement in the production process) or is it monetarist (keeping its nose out of private sector business and using the CBN to keep inflation in iron cuffs). Currently the government’s policy position is sprawled all over the macroeconomic map with no clear direction. Buharinomics needs to gain character and purpose pretty fast. Already the lack of clear policy direction compounded by ethno-religious bickering has left the country in a dark place.
Business Hallmark believes that Buharinomics cannot be redeemed over the next two years; the framework is weak as the vision is blurry. But what can be done is to quickly cobble together a team of seasoned economists who would forge a medium term approach to economic management with realistic timelines and data bars. The fairyland dreams of 2015 have since been brutally shattered by the reality of a government hobbled by its own internal contradictions.