Why Nigeria Economy Is In A Mess
By By Stephen Ubanna
President Muhammadu Buhari of the ruling All Progressive Congress, APC, appears to have left the Nigeria’s economy worse than he met in May 29, 2015. The situation is made worse with the country’s external debt rising to N33 trillion as the World Bank raises alarm that the nation’s economy had plunged into a severe recession , described as the worst in the recent years.
The world Bank had blamed the collapse in oil prices in the international oil market coupled with the Wuhan Town in Hebei Province of the Asian country of China emerged Coronavirus , popular, COVID 19, to the recession. Crude oil exports alone, accounts for over 90% of the country’s Foreign n Earnings. The oil price shock was said to have tarted even when former President Goodluck Jonathan of the then ruling People’s Democratic Party, PDP, was still in the office.
It was said to have got worse in 2015, forcing the Katsina state born Nigerian President to seek for the approval of the then Bukola Saraki , a former governor of Kwara state and then Senate President , to borrow from Multi-lateral Financial Institutions but was blocked. He did not find it funny.
He had waited for an opportunity to do so. The opportunity came with the take over of the 9th National Assembly by the the APC and the emergence of Ahmad Lawan as the Senate President and Femi Gbajabiamila as the Speaker of the House of Representatives. The APC led National Assembly Leadership appear to have given the blanket approval to borrow from the world Bank and any other Multi-lateral Financial Institution and he did not hesitate doing so, claiming that it is for development and rehabilitation of the country’s ‘s broken down infrastructural facilities: road, railway and electricity and provision of new ones. The government had depended on earnings from crude oil sales to settle the external debts.
.It is on record that the country Crude oil price in the International oil market further , fell to four year Gross Domestic Product, GD P, contracted by 3.6 between July and September 2020, after shrinking by 6.1% in the second quarter of 2020, due to the Coronavirus.
Yemi Kale, the country’s Statstician General had said that’’ the Cumulative GDP, for the first nine months of this Fiscal year was 2.8%. He may have sent a signal to the Godwin Emefiele led, Central Bank of Nigeria, CBN, that the economy is heading towards recession , when he confirmed that the 2020, third quarter Real GDP had contracted by 3.62% like the the previous quarters of the year.
Economic Analysts had spointed out that the first and second quarters, economic Contraction was a clear indication that the country’s economy had officially slumped into recession. The recession is coming at a time the nation is just recovering from the recession that followed the 2015 oil crash.
The International Monetary Fund, IMF, may have painted a gory image of the situation when it revealed at the beginning of the crisis that the economy will contract by 8.9 this year in the worst case scenario without any stimulus. The Multi-lateral Financial Institution had described the contraction as the largest over the last 40 years. Recall that the IMF, prior to the manifestation of the signs of recession for the Nigeria economy had forecasted a 5.4% drop in the country’s GDP.
Hajia Zainab Ahmed, minister of Finance, Budget and National Planning, may have given a signal of the economy heading towards recession last May , after the first virtual Federal Executive Council, FEC, which was said to have been presided over by Yemi Osinbajo, the country’s Vice President.
The minister, who was said to be very blunt that the ravaging COVID 19, is not only affecting the Health sector but other sectors of the economy, had said that the resources to fight the pandemic was grossly inadequate. She did not stop there. She had told those that cares to listen that the drop in the oil price in the international market had affected the revenue and Foreign Exchange earnings from the oil sector .
She may have become convinced that the country is heading towards recession at the start of the second term in of office the Nigerian President as the Net oil and gas revenue paid into the Federation Account in the first quarter of this 2020 was a mere N940.91 billion., showing a shortfall of about N125.52. The situation was not different in the second and third quarter of the year.
She was emphatic: we are going into recession. She had assured that the government is doing everything within its capacity to ensure that the recession is shallow ‘’so that the country could easily come out of it’’. She may have be working on the theory that the recession will be shallow which may have igiven Emefiele, the CBN, governor the confidence that the country’’ will come out of it in the first quarter of 2021’’.
At the 55th Annual Bankers Committee, dinner which was that held in Lagos, the nation’s Commercial nerve center on Friday, November 27, 2020, the CBN governor had said the implementation of its interventionist measures , would save the economy from the recession . He was optimistic that the country would attain 2.0% growth rate in 2021.
He had said that the ‘’downside risks would still remain as restoration of full economic activities , particular, in the service related sectors of the economy are uncertain. He noted that ‘’until the COVID 19 vaccines ,is reduced the situation may not change but says no cause for alarm . The CBN governor was said to have told the Bankers Committee members at Lagos at the AGM, that what is happening in Nigeria is not different from what is happening in other emerging economies that rely in Crude oil earnings as well as the retreat by Foreign portfolio investors.
He stressed that the drop in oil earnings had significantly affected the supply of Foreign Exchange into the Nigeria market. Emefiefele, who could not hide his feelings had said that in order ‘’to adjust for the decrease in the supply of Foreign Exchange into the country to meet the demand of importers and other end users, the naira depreciated from N305.00 to a dollar to N360 to a dollar and subsequently to N380.00 to a dollar. Many expects Emefiele , to have informed Nigerians that the naira has been devalued for the umpteenth time as the price of goods and services had continued to rise on a daily basis.
Although ,the CBN governor, h ad said that there is no case for people to panic over the poor state of the economy, stressing that the Buhari led APC government had put in place measures to improve the non- oil exports and other sources of Foreign Exchange to prevent significant decline in the country’s reserves which currently stands at $36 billion, which he had said is sufficient ’’to cover seven months importation of goods and services into the country.
The Delta state born CBN governor, disclosed that since earnings from Crude oil sales in the international oil market dropped, the country had no option but to fall back on Agriculture which remains the key to the government economic diversification plan.
He cited the Fertilizer Initiative Programme which had continued to deliver significant quantities and high quality fertilizer to farmers. He revealed that the Programme had facilitated the resuscitation of 31 Fertilizer blending plants in different parts of the country and also created a good number of direct and indirect jobs across the value chain
. He may have gladdened the heart of Nigerians when he said that the government will continue ‘’ to support the Agricultural sector through the CBN Anchor Borrowers Programme and other similar schemes’’. He gave an insight into the revenue earnings from Cocoa and Sesame seed alone, last year, which was said to have increased by $79.4 million and $153 million respectively, described as very encouraging.
He listed other measures that had had been put in place by the government to revamp the economy, which includes revamping the cotton, textile and garment sector , through the apex Bank Textile Revival Intervention Fund, which many believe would greatly ‘’reduce the Foreign Exchange spent on cotton and other textile imports’’.
Aware of the adverse effect of the drop in in oil earnings to the economy because of the domination of Multi-national oil Companies in the sector the government has initiated plans to increase the participation of more Nigerians in oil and gas Exploration and Production .
This s evident going by the plan to embark on conducting the bidding process for its 57 Marginal Oil fields, that had been suspended over the last ten years. That much was confirmed by Emefiele, the CBN , governor, at the Bankers Committee AGM. This is good news to Nigerians who had looked forward for such an opportunity to participate in the nation’s oil and gas sector.
It is instructive to not that the Buhari government had continued to support the local content and other areas of the oil and gas sector with the disbursement of Funds from the $200 million Nigerian Content Intervention Fund to Indigenous Manufacturers and service providers but that was how far he could go.
The Nigerian President instead of facing the economic problems he met on ground as a two-time elected President of Nigeria, had repeatedly blamed former Presidents Olusegun Obasanjo, late Musa Yara ‘Adua, who presided over the affairs of the country between 199 and 2015, for the near destruction of the economy.
Given the poor state of the economy and the country’s security challenges under the Buhari Administration in the last six years, Obasanjo, who had ruled the country as a military Head of State and as an elected President had said that the country to a failed and badly divided state, describing the country country as a basket case and poverty capital of the world and an wholesome and insecure nation. V