Nigerian economy: Light at the tunnel’s end?

Undoubtedly, discussions and commentaries on the Nigerian economy have in recent times become dissonant and cacophonous; indeed, some sort of ‘babel’, leaving the public in more bewilderment and obfuscation. As has been observed in several fora, the economy and economics are among those subject matters on which ‘laymen’ usually vociferously pontificate and argue tenaciously ad nauseam. Almost everybody with a smattering of economics goes around and about either ‘hailing’ or deprecating the state and shape of the Nigerian economy. And the confusion goes on and on!

But really, from economic development perspective, an economy can achieve some “growth without development”, since economic growth is merely an increase in the capacity of an economy to produce goods and services, compared from one period of time to another (usually year-on-year). And this is why it can be safe to say that Nigeria has been experiencing “some economic growth”, having pulled itself out of a recession in a ‘record time’. Thus, while the economy as measured by the Gross Domestic Product (GDP) grew (or sank) by minus one point five eight (-1.58) per cent in 2016, recent National Bureau of Statistics (NBS) figures show that last year (2017), the economy achieved a positive growth rate of zero point eight two (0.82) per cent. This shows a modest increase in GDP within a space of one year.

A breakdown of the GDP figures shows that the economy in the five quarters ended March 2017, achieved sub-zero growth all through, but turned the corner and remained positive in the three quarters ended December 2017. In the same vein, some key economic indicators also moved in the desired dir ections: inflation rate consistently trended downward: from a worrisome peak of 18.72 per cent in January 2017, to 15.13 per cent in January 2018, according to the National Bureau of Statistics; a drop of 3.59 per cent points in one year. Similarly, Nigeria’s stock of external reserves ‘ballooned’ from US $25.84 billion as at end-December 2015 to US $27.23 billion as at January 2017, hitting a five-year peak of US $41.20 billion by February, 2018. It has crossed US$45 billion by early March 2018.

These phenomenal developments are attributable to such factors as sustained substantial rise in the price of crude oil in the international market (from a low of US$45 per barrel in 2016 to about US$70 per barrel early this year); Nigeria’s improved oil production and supply, favoured by OPEC’s deal for managing glut in the global oil market. Innovation in the management of Nigeria’s foreign exchange market, that ensured improved forex inflow, among others, were also at play. The multiplier effects of all these have also been evident in the Nigerian capital market, where market capitalization of all the quoted companies had almost doubled, from about Eight Trillion Naira in March 2016 to over Sixteen Trillion Naira in early 2018. Following the same pattern, while capital importation (via portfolio, FDIs and others) into Nigeria in 2016 fell from US$9.64 billion in 2015 to US$5.12 billion, it more than doubled to hit US$12.23 billion as at end-December 2017.

Yet, even with these apparently heartening figures, the question as to whether there is light at the end of the tunnel for the Nigerian economy remains valid. Is the foundation for sustainable economic recovery in place? Would the country have couched its economic plan on “growth trajectory” or on “development trajectory?” In other words, is growth plan, sensu stricto, appropriate and adequate for Nigeria at this point in time? In economics science, growth is a sub-set of development; and the pursuit of the former denotes ‘short-termist’ tendencies. No doubt, economic growth is a vital and necessary condition for development, but it is not a sufficient condition as it cannot guarantee development. And the term “inclusive growth” is a misnomer, since any growth that really becomes inclusive tends to approximate development.

According to Wikipedia, economic development is the process by which a nation improves the economic, political, and social well-being of its people. And whereas economic development is a policy intervention endeavour with the aim of improving the economic and social well-being of people, economic growth is a phenomenon of market productivity and rise in GDP. Consequently, as an eminent economist Amartya Sen points out, “economic growth is one aspect of the process of economic development”. In point of fact, whereas economic growth focuses on the GDP as its measure, a number of indicators come into play when the focus is on economic development. These include unemployment level, inequality of wealth (gap in income between a country’s richest and the poorest), demographics (population growth, birth and death rates, life expectancy, etc.), access to healthcare, poverty rate and access to education. Others are literacy rate, access to technology, risk of diseases, infant mortality rate, government spending priorities (which compares health and education expenditure with military expenditure and paying off debts), among others. Indeed, these indicators are normally aggregated into a Human Development Index (HDI), which approximates a true measure of economic development.

These vivid discrepancies between economic growth and economic development really calls to question, Nigeria’s choice of a ‘growth plan’ as its economic blueprint at this point in time. The Economic Recovery and Growth Plan (ERGP) of the Federal Government is a very short term economic plan (2017-2020) that is bereft of most ingredients for addressing the people’s wellbeing. One of the key aims of the ERGP is to invest in the Nigerian people by continuing to provide support for the economically-disadvantaged, create jobs, improve accessibility, affordability and quality of healthcare across the country and guarantee improved human capital (through access to basic quality education for all). And the question will be: is this lofty objective attainable within the plan horizon, and given the nation’s economic reality?

Today, the ERGP, having been launched in April last year, has almost run mid-way, with the two ‘sub-plans’—2017 and 2018 annual budgets still mired. The 2017 budget was signed into law in May 2017; barely seven months to the close of the year. The N8.602 Trillion 2018 budget proposal which was presented to the National Assembly in November, 2017 is yet to be approved. This seeming budgetary stalemate may have informed the apprehension of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) when at its sitting in November 2018, it warned that “while the economic recovery appears to remain fragile, a tenacious implementation of the 2017 budget and quick passage of the 2018 budget would boost aggregate demand and confidence in the economy”. Alas, whither the quick passage and tenacious implementation of the budgets?

In its latest Article IV Consultation report on Nigeria, the International Monetary Fund (IMF) also warned that “higher oil prices would support a recovery in 2018 but a ‘muddle-through’ outlook is projected for the medium term under current policies, with fiscal dominance and structural constraints leading to continuing falls in real GDP per capita”. The global lender also identified other risks to Nigeria’s growth to include further delays in implementing policies and reforms ahead of 2019 elections, security tensions, and oil prices, a fall in which could see capital flows reversed.

With these concerns and warnings of the MPC and the IMF and the “loud silence” on 2018 budget and other economic issues, and the unfolding “pervasive attention” to politics and political matters on the build-up to 2019 general elections, the economy could be heading for a miasma. We can only hope that the much expected ‘huge’ electioneering spending will trickle down to generate effective demand and boost aggregate consumption in the economy. Alas, it’s all dicey!
• Okeke, an economic and sustainability expert wrote from Lagos