By OKEY ONYENWEAKU
The Nigerian economy has been hanging on a cliff in recent times. And indications are that it might collapse again sooner or later if urgent adjustments and course corrections are not made.
This is on account of the fact that the economy has remained in limbo longer than necessary. It had closed the first quarter with a GDP growth of 0.5 per cent after crawling out of recession and grown by 0.11% at the close of year 2020 as reported by the National Bureau of Statistics.
Going forward however, for the Nigerian economic growth to make any meaning, experts predict that it must grow by between 10 to 15 per cent sustainably for 7 or 10 years to make any outstanding dent on the currently very parlous conditions in which many citizens of Africa’s most populous nation live.
The Chairman of Fidelity Bank and former and pioneer chairman of the Assets Management Corporation of Nigeria, AMCON, Mr. Mustafa Chikeobi strongly shared the above view with Business Hallmark a few years back, explaining that managing the economy was not a child’s play, but needed not only dedication but also keen attention to details and careful nurturing to attain set and beneficial goals.
Similarly, the Chief Executive Officer of Financial Derivatives Company Limited, Mr. Bismarck Rewane told an audience recently that the country needs to grow the economy and its investments by at 7 – 8% a year for 5 -10 years based on an investment-led strategy.
“Nigeria is still a laggard in many respects. Therefore, we have our work cut out for us and if we are going to achieve accelerated, sustainable and inclusive growth, we need to attract domestic and international capital with its attendant investment multiplier to achieve a GDP level of $1.5trn by 2030when our population could be 250million or more.
“We need to grow the economy to at least investment at 7 – 8% a year for 5 -10 years based on an investment-led strategy. If we fail to do this very soon, the problems of multidimensional poverty, debt and insecurity may consume us in the next decade,” he said.
On the contrary however, there is a seeming consensus that such interest and focus seems to be lacking in economic plans in the immediate as it has to do with the broad dimensions of governance and national economic policy implementation.
However, the World Bank has just projected the Nigeria economy whose growth stood at 0.5per cent in first quarter 2021, would likely grow by 1.8 per cent at the end of year, extending its projection from the 1.1 percent it had projected earlier in the year. Whereas this growth projection is still unsatisfactory to many given the economic potentials of the country, some analysts say the reverse (that relapsing into recession) might indeed even be likelier. Experts believe the economy has barely got off the floor in the last five or six years and that the macro-economic dynamics do not favour articulated economic growth. ‘I see a more than 50 per cent chances that the economy may slide into recession again rather than growing,’ said an economist who would not want his name mentioned in print.
WHAT ARE THE REASONS?
Since 2015, the economy has barely got off the floor. It had plunged into recession for about 12 months from 2016 to 2017. The economy had just barely recovered when it plunged into a second recession in 2020, though Covid-19 and the low price of crude were fingered to have been responsible for the wobbly economy.
Covid-19 had in fact, ravaged most economies, Nigeria inclusive. There were shut downs almost all over the world which affected business activities and also disrupted supplies among other halted events. The pandemic caused the death of many estimated to have hit over 3million and still counting. Nigeria also recorded its fair share of the devastating effect of the pandemic. This notwithstanding many analysts believe that even if such negative impacts are discounted, there are still and remain fundamental problems with the Nigerian economy and how it is being managed, including knee-jerk or non-pragmatic political reactions and policies that then tend to have a deleterious impact on economic growth.
The most resent is the Federal Government’s suspension of the operations of the microblogging platform, Twitter. Twitter is a ‘microblogging’ system that allows you to send and receive short posts called tweets. The firm whose net worth stands at over $4bn has provided direct and indirect jobs for many people all over the world and Nigeria is not left out. Experts estimate that the Nigerian economy loses over N2bn daily as a result of the ban on the use of Twitter. The implication of this is that huge funds have already been lost and many jobs connected to it are also lost.
Going to deeper grounds, recent statistics reveal that the rate of unemployment, the second highest in the world is 33%. At the same time, the underemployment rate stood at 22%; even as inflation, which is hitting the roof top at 18.12 per cent is at its highest point in the last seven years. At the same time, Diaspora remittances inflow fell 27 per cent year on year (YoY) to $17.2billion in 2020 from $23.55billion.
Many have also not forgotten that the operating environment last year was choking for almost all the businesses including banks. Though the banks largely posted impressive results, within the same operating environment, the 2021 budget chalked a deficit of N5.2trillion representing 3.6 per cent, while the country owes N33trillion ($82bn) debt. The fear here hinges on the fact that federal government spends about 60 per cent of its revenue to service debt.
The major revenue earner for the country, crude oil price, which has retreated from $70 pbd to $62.46 pbd as at March 25, 2020 still fluctuates.
Insecurity has not only hobbled agriculture, many parts of Northern Nigeria have been taken over by bandits such that not much business activities can subsist.
With the fearful scenario above, economic trajectory of the country is still uncertain. This is because even the apex bank has warned that care must be taken to galvanize and push the economy out of slumber.
What has heightened fears of Nigerians is the rising debt of Nigeria which stood at $33trn in 2021 while it is expected to hit $38trn in December 2021. But worries Nigerians most is that about 60 per cent the revenue is used to service debt. Despite these worries the Minister of Finance, budget and National planning, believes that the 23 per cent debt to Nigeria GDP was sustainable.
And though Nigeria recorded its highest Foreign Direct Investment (FDI) in eight quarters in the third quarter of 2020, as the nation attracted investment worth $414.79 million, that situation, many believe would be short lived given that Nigeria has become a killing field for terrorists and bandits. FDI is expected to shrink to reflect the worsening operating environment and investment climate, analysts reckon.
Earlier in the second quarter of 2020, FDI slumped to $148 million from $213 million in the preceding quarter.
Further explanations consider some of these risk components to include; the political risk components, government stability, socioeconomic conditions, investment profile, internal conflict, external conflict, corruption, religious tensions, democratic accountability, and ethnic tensions have a close association with FDI flows.
The above scenario, in fact, captures dramatically what Nigeria is experiencing today.
Just recently, some companies had to take their investment that was meant for Nigeria to Ghana because of insecurity among other regulatory challenges.
For instance, the US-based social media company, Twitter had announced plans to site its West African headquarters in Accra, and not Nigeria where it comparably has a majority of its clients and patrons.
Of course, the company chose Ghana citing democracy, respect for free speech and respect for rule of law as some of the reasons for the choice of Ghana over Nigeria and other African countries.
There is a consensus that most of structures required to live and feel free as a citizen of a country are lacking in Nigeria today.
There are many other firms like that which consider not only Ghana but other African Countries as having better and more friendly operating environment and ease of doing business than Nigeria.
It also important to note that diaspora remittances inflow into the country fell 27 per cent, year-on-year, (YoY) to $17.2 billion in 2020 from $23.55 billion.
Analysts have expressed their reservations and do not want to be carried away by what could be described as a flash in the pan. Many are seemingly certain that the economy which has just crawled out of recession to see a GDP growth of 0.11% at end of year and now o.5 in first quarter was still very feeble.
Fitch recently warned Nigeria to watch the rate at which it uses ways and means to inflate its economy.
For the Founder/Chief Executive Officer of Mutual Alliance (member of the Nigerian Stock Exchange, and Heritage Capital Markets Ltd, the economy has been flat and could relapse into recession if the government fails to pay adequate attention and enforce policies that can jump start the economy.
Ajaegbu who was also former President, Institute of Chartered Accountants of Nigeria (ICAN), told BH that as a natural phenomenon since the economy is already at the base the only natural thing is for it to grow even when no special macro-economic effort has been exercised.
Managing Director, Highcap Securities, Mr.DavidAdonri who shares in the fears of many told Business Hallmark that the economy has very little to offer the common man. ‘’You can see the reflection in the macro-economic indicators. Look at the unemployment rate at 33 per cent officially, but unofficially it might be up to about 60 per cent because those official figures are just to dress the window but in reality we know what is happening. Look at inflation which is officially 17.33 per cent, but in reality it may be up to 50 per cent.”
Adonri who noted that the micro-indicators have affected the GDP and weak growth of the economy which is captured at 0.11 per cent increase constitutes ‘motion without movement. ‘’It is an inflationary growth’’, he explained.
Supporting the views of others on the weak economy,Group, Chief Executive Officer, Cawry Asset Management, Chief Johnson Chukwu told Business Hallmark that only drastic changes in the economic policies can make positive impact on the Nigerian economy which has remained weak due to the wrong ideas. ‘’Baring any global dislocation, the economy will continue to recover. We will continue to witness slow but positive growth. But the standard of living may continue to deteriorate because the growth will still remain below population growth.’’ Said Chukwu who also explained any major global distortion can cause harm to even the slow growth.
According to him, another challenge that could hurt the economy is that next year is close to the election time so the government may no longer be interested in making any major and drastic policy to benefit the economy.
How do you explain, in such proportion that could hardly be found elsewhere, the massive deposition of such natural resources as crude oil, zinc, gold, steel, rubber, palm, granite, rich and arable soil for the cultivation of different kinds of crops, abundant water bodies and above all, human resources, by way of talent, academic brilliance, and willingness to work?
Suffice it to say that Nigeria has it all. But the irony here is that Nigeria is also a poor country. The World Poverty Clock reports that as at yesterday, Nigeria has 43% of its population or about 90million people living below the poverty line of less than $1.90 per day. Against the background of Nigeria’s much touted wealth, one is then compelled to ask: What could be the problem?
Why are we the poor children of rich parents? Why are we the unfortunate dwellers in the hellhole of excruciating poverty while our parents live lavish in the paradise of excess wealth and affluence? The banker and investment expert, Dr. Alex Otti had earlier posited.
On his part, Bemigho Reno Omokri, a Nigerian human right activist and lawyer, has reminded Nigerians that they should not think that foreigners are not watching the unfolding political crisis in Nigeria.
‘’And to those who think it was only the Igbo peoples of the Southeast that were affected by MuhammaduBuhari’s Civil War 2.0 threat, I hate to burst your bubble.
Foreign Direct Investors heard that threat. International aid organisations heard that threat. International finance corporations heard the threat. At this very moment, they are all being advised by their government to leave Nigeria.
Finance and investments that were on their way to Nigeria are now making a U-turn. Because money is a coward. It runs from where there are threats of war to where there are promises of stability.
As a result of these factors listed above, the economy will shrink. Again. The Naira will be devalued. Unemployment will rise, and the resultant joblessness will lead to a steep rise in the insecurity and crime epidemic facing the nation,” he said.
Unfortunately, While Nigeria is still struggling to convert its economic potentials to growth,China’s GDP expanded by a dizzying 18.3% in the first three months of 2021 from a year earlier, sealing its status as COVID-19’s “first in, first out” economy.
Details show that China’s first-quarter GDP expanded by 4.28 trillion yuan ($655 billion) from January-March last year. That’s roughly the size of Poland’s economic output in 2020, or two times the value of all the shares of French luxury goods giant LVMH in the stock market.
The Nigerian economy had plunged in 2016 contracted for about 12 months, (that is four consecutive quarters) before the recession of 2020. This clearly shows that the country’s economic growth is still very fragile and has been for most of the time dependent on crude oil to survive.
‘’The GDP growth could slip back’’, said Chief Executive of Financial Derivatives Company limited, Bismarck Rewane.
It would be recalled that the Nigerian economy had maintained a healthier growth trajectory before the election of President MuhammaduBuhari in the office as President of Nigeria in 2015.