By UCHE CHRIS
Why the economy continues to underperform in spite of our obsession with GDP growth and economic outlook
There is something fundamentally wrong with our general attitude to the issues that make for good conduct, decent life and social development. What comes naturally in other climes and societies is usually abused, controversial and politicized; and in the process loses its basic objective and essence. In the end, it turns out to be one of those failures of our national life as its contribution is lost and objective defeated.
Even with the rampaging menace of armed men and gory details of insecurity in the country, Nigerians found something positive and different to talk about last week and it has to do the latest Gross Domestic Product, GDP, figure from the National Bureau of Statistics, NBS, which showed a surprisingly marginal growth of 2.27 percent for 2019, about 0.3 percent above projections.
Before then, economic experts and financial institutions have being issuing all sorts of predictions on the economic outlook for the year, which are based on probabilities and suppositions that are more often than not informed guess works that leave one wondering about their usefulness and relevance.
Well, it is not that such predictions and forecasts are wrong in themselves; at least they provide us with some form of pastime and an outlet to dissipate pent up emotions of frustrations and unfulfilled national aspiration. However, the real surprise about these forecasts is that we actually take them seriously and pretend that we know what is going on and what the outcome will be. The fact is that every economic forecast and outlook since 2015 has turned out wrong, making the forecasters, including the IMF and World Bank, liars.
Economic forecasting should ordinarily be an objective task predicated on stable macro- economic policies, predictable and consistent policy implementation and actions. Even in economies where these conditions are fairly well established and economic data accurate, available and verifiable, forecasting is still a perilous undertaking as the slightest indiscretion or natural event can upturn the apple-cart.
If this is so in developed economies, it is therefore actually suicidal to attempt such in an economy like ours in the past five years where only one man or a faceless clique with a publicly undefined agenda determines what happens; and the economy operated without fixed plan and clear direction. Such preoccupations as we have had with GDP and outlook become mere mimicry of what happens elsewhere, and a foolery to provide little hope and comfort to anybody – just an elixir of sort.
Some years back, the Economist Magazine did a study on forecasting and came out with an astounding conclusion: Only forecasters believe in their forecast simply because it is just another job for them to do to fulfill all righteousness; and only few people can sincerely fault their own work as inaccurate. Again, in the end, they turn out blank; at which time nobody remembers who said what, and the deception continues.
What is sad about the current obsession with the frivolity of GDP and outlook speculations is that it does not address the real question nor see the big picture. For instance, what does 2.27 percent GDP growth mean for the country, given its myriad of problems such as poverty, population, unemployment, insecurity and infrastructure deficit? With the U.S. economy which boasts of the best infrastructure and development indices in the world growing at 4 percent, then our people must have their heads examined to celebrate 2.2 percent.
This economy is sick and by the end of this regime in 2023, it will be terminally so. All the predictions and outlook cannot save it; those optimists who think that bandying figures provides enough consolation and solace will be disappointed. The damage is becoming irreparable and what is needed is strategic focus and realignment of political and economic forces to redeem and salvage the chestnut from the coming inferno.
When this government came to power Nigeria was the largest economy in Africa with $500 billion GDP; five years later the GDP is about half of that figure at $370 billion, over 74 percent drop. This drop is not nominal, but a real and objective decline in the living standards of Nigerians, which explains the its’ drastic plunge in the poverty ladder by becoming the poverty capital of the world with over 92 million people in extreme poverty at the end of 2019.
It is a crying shame that we are even talking about the 2 percent GDP in a world that is fast leaving us behind. In the past 30 years Nigeria’s population has been galloping at annual average of three percent positioning it to be the third largest population in the world by 2040 after India and China – and with what economic resources.
So our GDP has to grow at double of that rate for that period of time to catch up with the population. Even that minimalist projection has been dismissed as practically unattainable because of the other existential issues that have emerged, such as insecurity and infrastructure deficit.
Dr. Jim O’Neal, the former Goldman Sachs guru who coined the acronym, BRITS, (Brazil, Russia, Indonesia, Turkey, and South Africa) in a lecture in Lagos in 2018, warned that Nigeria cannot join this group of emerging economic power houses as earlier anticipated in the Vision 2020 Agenda unless its economy grows at about 18 percent for 30 years. Earlier in 2016, Mr. Mustapha Chike-Obi, then MD of AMCON, and also a former Goldman Sachs executive in a Hallmark Policy lecture said Nigeria needs to grow at 15 percent for 10 years to make the vision 2020 target. Both projections are beyond the nation as presently constituted and governed.
In other words, Nigeria is indeed, retrogressing with 2 percent GDP growth, because in actual fact, it is not growing; rather, it is only trying to recover lost position in the past. Before this government, the lowest growth rate was 4.6 percent in 2014; in five years 2.5 percent has been the highest growth rate in addition to an 18 months recession. So where does this leave us? Compared with 15 or 18 percent projections, are we making tangible progress with 2 percent?
Normally, nations make economic sacrifices for the future progress of the economy; such sacrifices are supposed to be short term and temporary to allow for policy and structural adjustments in pursuit of clear long term objectives. This however, does not appear to the case with this government because its policies are knee-jerk, reactionary, and obsolete, like the closure of borders, which is basically unsustainable. No modern economy can operate on that basis.
As John Maynard Keynes once quipped, no economic policy adjustment can be pursued on a long term open-ended indefinite appeal for sacrifice, because people have immediate and short term needs and must survive first; and hope for the long term may actually be risky, as in the long term, we all may be dead. This is the dilemma facing the nation today.
UCHE CHRIS, [email protected]