“Nigeria will be out of recession soon, technically. When you achieve 0.01 growth, you are out of recession” according to Professor Charles Soludo, ex-Chief Economic Adviser, ex-Governor of the Central Bank of Nigeria, CBN. At the same venue, Professor Pat Utomi, who might be a candidate for Governor of Delta State added that “Our recession is self-inflicted. I am one of the persons who have always insisted that our recession is self-inflicted.” When one of those individuals talks millions of people listen. When the two talk, the world listens because – like it or not – they are among the brightest and best we have ever produced in Nigeria. How Utomi missed getting appointment as a Minister or Senior Special Adviser is still a mystery which only God can unravel.
When Soludo announced that, “Nigeria will be out of recession soon”, he might not realize that he had delivered a verdict. First, he has announced that the nation is still in recession in August 2017. Second, he raised queries regarding the statement made by the CBN Governor in April. Emefiele had announced that the “economy will be out of recession in June.” That statement was echoed by the Federal Minister for Information and Culture – a man who grabs at floating straws the way drowning people do. As we head for the end of August, recession is still very much with us. And, instead of 2.6 per cent growth of the Gross Domestic Product, GDP, 0.01 per cent is being touted as a possible achievement this year. Those at the top levels of government who handed “Baba” Buhari the 2017 budget – an afang plate of illusions – will now have explanations to make to Nigerians. As usual they will tell Buhari that there is a magic wand that will produce 2.6 per cent growth for 2017. Most financial and economic experts know it is impossible.
After all the noise about exporting surplus yam to parts unknown, it is still a fact that Nigeria remains an import-dependent nation. In fact, our propensity for imports grew in 2017 despite the import prohibition placed on over three dozen items. The millions of dollars made available by the CBN to bring exchange rates down from N500/$1 to N360-365/$1 have produced the unintended effect of increasing our import bill by 95 per cent to $588 billion per month. What we gained on one hand we lost on the other.
Meanwhile, crude oil exports have stubbornly refused to cross the 2 million barrels per day mark. On the average, they have remained at 1.7 million barrels per day. At the same time, two of our biggest global customers, India and South Korea have announced plans to diversify their sources of supply. Specifically, they have turned to the United States which was once our largest customer but which is now a great competitor. The Organisation of Petroleum Exporting Countries, OPEC, recently placed a quota on Nigeria export of crude – well below our budget of 2.2 million barrels per day. Attacks on crude production platforms resumed recently and might increase as we race towards October 1, 2017. Obviously, only an incurable optimist will expect anything near 2.2m from the export of crude oil this year.
Foreign Direct investment went up to $1.9 billion – mostly in Portfolio investment. The bulk of it had gone into the capital market driving up the prices of shares and creating a “Bubble” effect. Portfolio investors are traditionally unreliable. They induce a temporary optimism, based on herd mentality; expand the market; then withdraw when they have made enough profits and the bubble bursts on unwary investors. We experienced this in 2005-2008 until the crash came gradually and left local investors holding “tissue papers” until recently. Nothing suggests that this rally will last beyond December of this year. Then another crash might follow in 2018.
Debt is rising because we are not repaying loans. Instead, Nigeria’s Economic Management Team and the Debt Management Office, DMO, keep on thinking of ingenious ways to borrow and bring down the interest repaid on previous loans. The favourite argument that our debt to GDP ratio is low overlooks the fact that no country repays its loans from GDP; debts are serviced from available revenue. Nigeria’s revenue to debt ratio is very high and that is what induces us to borrow more and use a corresponding increase of revenue to service the debt and to have to borrow more. Nigeria has entered into a vicious debt cycle which can only be broken by greatly improving on our tax collection and plugging leakages from all revenue sources.
A recent report in a national newspaper regarding the activities of the Federal Internal Revenue Service, FIRS, in Lagos Island and one exercise personally witnessed at Utako, Abuja, FCT, points to a more active service. But, it also revealed to what extent individuals and companies in Nigeria had been allowed to become serial tax delinquents in the past. A lot is being done; a lot more needs to be done to increase the internally generated revenue of the Federal Government.
Diversification of the economy remains all talk and little action.
Agriculture remains the focus for now. But, three major factors impede rapid growth in that sector. Credit is still difficult to secure and farm hands are almost impossible to get. The myth of Nigeria’s abundant population capable of feeding Nigeria and producing excess for export explodes at the farm gate. Labour is hard to get and keep. Nothing is more insecure than farm produce at harvest time. Many farmers have experienced, to their sorrow, vandalism and unbearable theft of their crops at harvest time. Herdsmen and farmers are not two groups involved in a dispute. Farmers have no interest in stealing cattle or killing them; herdsmen on the other hand have no qualms about allowing their flock to ravage a farm at harvest time. That is why agricultural development is slow.
Meanwhile, the population continues to grow at 3 per cent. We have added 10 million mouths since Buhari became President. Have we produced additional food to feed them? The answer is No. So, we import more food. And we will continue to do so until we face facts…