FG and GDP estimates

Nigeria’s Gross Domestic Product estimates (in real terms or at 2010 constant prices) for the full year 2018 limped by 1.93 per cent over 2017. The NBS estimates fell within a hair’s breadth of the projected 1.9 per cent growth rate contained in the 30/3/17 IMF press release following its 2017 Article IV Consultation with Nigeria just as the forecast growth rate of 0.8 per cent for 2017 in the same press release predicted the subsequent NBS estimate of 0.82 per cent (for the year). By the same token, falling wide of the NBS figures were the initial Economic Recovery and Growth Plan projected GDP growth rates of 2.19 per cent for 2017 and 4.80 per cent for 2018 including their serial downward revisions at different stages as well as the much reduced GDP growth rate of 1.75 per cent for 2018 (the average quarterly growth rate in the first three quarters) which the CBN presented last October.

Since the country exited economic recession in Q2 2017, the International Monetary Fund (IMF) along with the Central Bank of Nigeria (CBN) has painted an economy which was fraught with vulnerabilities and fragilities and verging on relapse into recession. Such conditioning of the public to expect dismal economic outcomes prompted the flak that greeted the unexpectedly strong growth of 2.38 per cent in Q4 relative to Q3 2018. However, in Table 4 of GDP Report 2018, the distribution of varying quarterly changes among the 46 GDP activity sectors (at constant 2010 prices) does not betray any pattern to even support possible allegation that the NBS contrived and cooked 2017 and 2018 Q4 growth rates in order to produce results which were close to GDP growth rates forecast by the IMF and much less to project government economic performance in undeserved good light. Nonetheless, in case there is a secret NBS/IMF accord on the matter, the Statistian-General would be well advised to note the awakening public concern.

Surely, the core message of the 2018 GDP estimates should be laid bare. In tune with CBN Annual Reports, the 2018 GDP at current prices per capita (in U.S. dollars at Appropriation Act exchange rate of N305.79/$1) stood at $2,156, down by 31.4 per cent from the peak of $3,144 per capita in 2014. However, the CBN hoodwinks Nigerians by using that exchange rate. Over 70 per cent of forex was transacted through the nonstandard and artificial Investors’ and Exporters’ (I&E) forex segment at the devalued exchange rate of about N360/$1, which more closely reflected the market exchange rate than the official rate. At the I&E exchange rate, the 2018 GDP per capita drops to $1,831. Note that GDP per capita based on the “feel good” official rate crossed the $2,000 mark in 2010 when it posted $2,316. Therefore, based on the naira exchange rate, Nigerians on average were reduced in 2018 to well below their economic standing in 2010. Have you begun to hear a refrain that Nigeria in 2018 became the poverty capital of the world?

Rather mockingly in a formal statement, the Special Adviser to the President on Economic Matters (SAPEM) resorted to the egregious mischief of propaganda by describing the Q4 2018 GDP growth of 2.38 per cent which culminated in the sluggish full year 2018 GDP growth rate of 1.93 per cent as “consistent with the policies and principles of the Economic Recovery and Growth Plan relating to macroeconomic stability and economic diversification.” For the truth’s sake, government should be quickly reminded of the virtual promise in the 2017-19 MTEF&FSP that “the implementation of the plan (that is, ERGP) may significantly enhance the growth trajectory of the economy over the medium term closer to the double digit growth which the economy actually requires.”

As contained in previous editorials of the newspaper, it bears reiterating that blocking the way to attaining double digit annual GDP growth are long entrenched nonstandard fiscal and monetary practices rather than low oil prices and shortfalls in crude oil output. To wit, given GDP growth rates of at least 10 per cent, GDP per capita would double in seven years or well within any two-term tenure by a single elected administration or even two adjacent administrations by different parties. But mournfully, Buhari’s first term with the aid of SAPEM has inflicted national economic setback as shown earlier. Propaganda does not grow the GDP: only sound polices do.

Now, how have wrong policies aborted double digit GDP growth rate? For example, according to Q4 2018 CBN Economic Report, inflation in 2018 rose by 2.2 per cent in China, 4.7 per cent in India, 4.8 per cent in South Africa and 12.4 per cent in Nigeria. Given Nigeria’s 2018 GDP figure and the provisional overall fiscal deficit of N3.4 trillion, the attendant inflation expectation of 2.6 per cent (ignore marginal possible frictional and structural contribution) compares fairly favourably with the Chinese inflation figure. This scenario would be predicated on a single forex market with a floating naira centred on the Appropriation Act exchange rate.

But wrong-headedly, the N5.2 trillion fiat printed amount substituted for withheld Federation Account dollar allocations in 2018 represented an avoidable 4.0 per cent additional fiscal deficit that (compounded by the various ultra vires CBN devaluation rates of the naira in several forex market segments including the I&E window) accounted for the country’s high 12.4 per cent inflation rate. In 2018, GDP growth in China and India was estimated at 6.6 per cent and 7.3 per cent respectively. The Nigerian economy, subject to proper implementation of the federal budget as legislated, would ordinarily best the Chinese and Indian numbers.

With an eye to attaining excelling GDP growth rate, it is imperative to caution that the SAPEM’s charge is not to celebrate lasklustre GDP growth rates being painfully squeezed out of “CBN’s non-expansionary (that is, growth is not permitted) monetary policy stance (it rests on 14 per cent monetary policy rate) aimed at further curbing inflationary pressure (which was being induced by CBN in the first place).” So it is a terrible thing that the President’s economic adviser sees in the above volatile mix macroeconomic stability and road to economic diversification. Instead, the SAPEM’S responsibility is to recommend and superintend implementation of best practice fiscal and monetary policies (and these are duly identified) which would guarantee macroeconomic stability and conducive production environment in which the economy encapsulated in the GDP could sprint at double digit growth rate or thereabouts to national economic prosperity and progressively enhanced individual welfare. These goals are easily attainable and Nigerians deserve nothing less.