“Anyone is illusioned who doesn’t get ready for the worst.” C.P. Snow.
Every government eventually gathers its crop of “yes men” – people who are too ready to pronounce what the government would love to hear. And, they invariably have no decency to confess when the ultimate facts contradict what they said before. For instance, how many economists or financial experts predicted last year that Nigeria would end up in a recession until it happened. Vanguard did, as early as July of last year for the same reasons that we are now predicting low growth – meaning under one per cent — for 2017. Wait till next year and call us.
Meanwhile, a national newspaper on September 10, 2017 published a small report titled “FG can achieve 2.19% GDP growth this year.” The statement was attributed to Mr. Ganiyu Ogunleye, former Managing Director of the Nigeria Deposit Insurance Corporation as well as others based in Abuja. They were reacting to the recent National Bureau of Statistics, NBS, report of 0.55 per cent GDP growth of the nation’s economy in the second quarter of this year. The gentlemen reacting that way would ordinarily be presumed to be financial experts but obviously their grip on statistics is not what it should be. Whatever their motives might be for misleading Nigerians, their observations reflect what has become a national characteristic – the urge to please those in power by issuing fallacies as predictions.
To begin with, the Federal Government has itself revised its growth expectations downwards to 1.9 per cent for 2017 long before the release of the Second Quarter, Q2, results. Furthermore, the NBS in the Q2 report had altered the Q1 result from -0.52 per cent to -0.91 per cent. Cumulatively, as at the end of Q2, the economy despite 0.55 per cent growth in Q2 is still in negative territory for the half year 2017. So, where is the growth that the FG is being urged to consolidate?
Unfortunately for those hell bent on deceiving President Buhari, that “things are looking up”, their own words reveal the truth as always. On September 13, 2017, the Accountant-General of the Federation, Mr Ahmed Idris, at a workshop had a lot of bad news for Buhari and those feeding the President with deliberate half truths and absolute falsehood. Read what the man holding the nation’s purse had to say – and despair for the 2017 budget and Nigeria.
Going back to last year, Mr Idris reminded his listeners that in 2016, the FG fixed a revenue target of N1.3 trillion for all its agencies, but only 35 per cent or N455 billion was realized. So, if you are still wondering how we landed in a recession start from there. Government revenue generation fell well below budget. One of the consequences of that failure to generate adequate revenue was soon made clear to Nigerians and the global community when the Minister of Finance announced in September 2016 that only N770 billion or 56 per cent of the budget had been released for capital expenditure with less than four months to go in the year. The nation predictably ended with a recession. Yet, as late as September last year there were still “experts” announcing that the nation would end with positive GDP growth!
For the current year, Mr. Idris had very bad news for the FG and for us. According to him “We realized only 35 per cent of the N1.3tn revenue estimated for 2016. For 2o17, it has been lowered to about N807bn and we are now in the third quarter of the year. But, we have been able to realize to date about N120bn.
We are now in September, which means we have not even gone half way; we are just hovering around 25 per cent of the estimated revenue for this year…”
That fact, unlike the collective fiction which the FG’s Economic Management Team and the spokesman for government would like to sell to us, already has produced the same sort of consequences which last year’s failure to generate induced. In fact, the situation is now much worse in many respects. Again, early this month, almost a year to the day as 2016, the Minister of Finance made another announcement whose meaning most people, not being economists, did not fully understand. She told all of us that the FG has released only N350 billion or 15 per cent of the N2.36 trillion budgeted for this year for capital votes. Nobody needs a Nobel Prize in Economics to understand that when Internally-Generated Revenue, IGR, stands at 25 per cent with eight months gone in the year and only 15 per cent of capital votes disbursed, the year had ended on a bleak note once again.
But, dreamers don’t give up easily. The over 2 per cent growth envisaged for this year presumed that government revenue and spending will be adequate to support the expected growth. Obviously, that will not now happen. And, that failure has already savaged the 2017 budget beyond repair.
It is not every economist who undertakes the risky venture of forecasting the likely trends of economic indices. For those who do, it is an exciting exercise. Invariably, building a model is indispensable; and that can be done by developing your own or borrowing from somebody else. Almost always the two options are adopted. It is vital for the forecaster to achieve credible results that he should be dispassionate about the venture and not allow the calculations to be influenced by official pronouncements which are frequently misleading. Vanguard observations are model-based and that is why they have proved more accurate than official pronouncements.
The current problem with low revenue which now threatens the 2017 budget is an example of what can happen when the nation’s Economic Management Team is wedded to illusions instead of reality. But, before addressing that there is a need to take a step back into recent history.
When in 2014, Dr Okonjo-Iweala, former Minister of Finance proposed the 2015 Budget based on two variables – average crude oil price for 2015 at $78 per barrel and 2.2 million barrels per day exported, Vanguard was the first paper to disagree on both counts. We said the price will hover around $50-55 per barrel and exports will be less than 2 million per day. The nation’s current economic predicament started from that monumental error of judgment by Okonjo-Iweala who was the Coordinating Minister for the Economy.
When in late 2015, the current administration again predicated its 2016 budget on 2.2 million barrels a day exported, we again warned against it. But, the warning fell on the usual deaf ears at Abuja. We ended with a recession – mainly because the crude oil export revenue was short by about 36 per cent. If Nigeria had achieved 2.2 million per day export of crude in 2016, there would have been no recession; instead GDP growth of about 3.5 per cent would have been the result.
One would have thought that the EMT headed by Vice President Osinbajo would have learnt their lessons and move away from budgets based on 2.2 million barrels per day crude exports. But, there it is in the 2017 and 2018 budgets. Somebody must be addicted to that figure which is messing up our lives. The fact is, only a major war or unforeseen catastrophe will make it possible for Nigeria to produce and export 2.2 million barrels of crude a day ever again. The world is turning away from oil. A great deal of the revenue shortfall Nigeria is experiencing now can be attributed to lower than expected crude oil revenues. That is why universities, doctors and others are on strike and we can maintain infrastructure. The EMT is operating on a flawed model for budgeting and the economy is headed for disaster. One programme will serve as an example in this respect.
The Social Intervention Programme, SIP, is perhaps what would have been Buhari’s legacy programme. In the 2016 budget, the President announced what he called the most ambitious social programme in the nation’s history. Among the illusions contained in the 2016 budget was the “aim to achieve macroeconomic stability by achieving a real GDP growth rate of 4.37%.” We know what happened last year. Buhari also promised “to recruit, train and deploy 500,000 unemployed graduates” and to feed 5 million school children nationwide. All these as well as other quixotic projects were to be funded from revenue that had not been earned and which was not earned in 2016. The largest sum of N500 billion was allocated to this programme in 2016; less than N100 billion was made available for reasons already stated and nobody knows how many graduates had been recruited trained and deployed.
The SIP is domiciled in the Vice President’s Office, whose spokesman Mr. Laolu Akande, recently told the entire world that N6.2 billion had been spent to feed 2.8 million kids in fourteen states. Obviously, nobody in that office realized the implication of that announcement for Buhari’s legacy. Spending N6.2 billion on 2.8 million kids means only N2.210 per kid was spent and in twenty days N110 was spent on each child and there was nothing left for another month. So, all the noise about SIP in 2016 came down to feeding the kids at N110 per kid for only one month! Is that any sort of legacy for Buhari to leave behind?
Again, the EMT was warned not to rush into this programme in 2016; to wait, plan properly and be sure that SIP would be sustainable. Today SIP is a disgrace with Buhari’s name attached to it. In 2017, SIP will be treated worse than in 2016. The lies of 2016 are blowing up in their faces in 2017.
Last week the Nigerian Employers Consultative Association, NECA, which also includes all the members of the Manufacturers Association of Nigeria, MAN, not only called on Nigerians to disregard the report which showed that the country was out of recession but added a prediction about the year-end result. They said, “We note that against our population growth rate of 3.2 per cent, any GDP growth lower than two per cent makes no dent in Nigerian poverty, unemployment and inequality and is insufficient to ensure business growth and profitability…Already we fear that the 2.19 per cent growth target in the ERGP for 2017 appears unattainable.” The NECA must have been using economic models similar to our own to arrive at that conclusion.
Given all the evidence available and presented by independent economists and finance experts, who can possibly believe what Buhari’s EMT presents for 2017 and even 2018? By 2019 per capita income, which is a measure of poverty would have declined by at least 15 per cent from 2014 figures. Can that be a platform for second term? Can a President whose government makes us progressively poorer, in all fairness to us, expect to be re-elected?