Beyond the euphoria of winning elections, and beyond the pomp and pageantry of the ceremonial change of Presidential baton that takes place today May 29, 2023, the real substance of the whole outing is the state of the economy being ‘handed over’ to the new administration.
This is so, because the life, livelihood and well-being (or otherwise) of the entire citizenry depends on the shape or health of the economy taken over by the new administration. It is, therefore, most apposite to not only conjecture but to accurately explore and expose the ‘real economy’ being handed over by the President Muhammadu Buhari administration, after eight years of its (the two-term) tenure.
For sure, the past eight years has seen Nigerians experience the worst and ugliest of times; some sort of mixed bag—that weigh more heavily on the bizarre and ludicrous. Yes, as the exiting administration is packing up, it has busied itself in the past few weeks with the commissioning of many projects across the country (some, yet to be fully completed). Apparently, these give a façade of ‘ending well.’ At the same time, however, it is practically on its knees, asking the National Assembly to approve more loans for it from the World Bank, the IMF and other multilateral institutions. A World Bank publication (‘Nigeria Public Finance Review: Fiscal Adjustment for Better and Sustainable Results) vividly gives a true picture of the nation’s finances/economy as the handover date draws near.
According to the publication, Nigeria is at a critical historical juncture: “a deteriorating macroeconomic framework is at the root of its low growth, heightened economic volatility, and scarce job creation.” At this point, a liberal excerpt from the publication is appropriate: “Nigeria has vast potential, but despite this, four major factors have adversely affected its macroeconomic foundations and, in turn, social and economic development.
First, an over-reliance on oil exports, coupled with oil production challenges, has reduced fiscal revenue, and increased macroeconomic volatility. Second, a deteriorating security situation has discouraged both public and private investment. Third, restrictive trade policies, weakness in exchange rate management, and costly subsidies that mainly benefit the wealthy have hindered the country’s macroeconomic performance. Finally, global shocks, including previously the 2015 oil price crash and more recently the COVID-19 pandemic, have exacerbated pre-existing weaknesses in Nigeria’s fiscal framework and growth model.”
Obviously, the above copious quote from the World Bank publication by the close of 2022 aptly captures practically all the macroeconomic challenges of Nigeria, including those that predate the Buhari era. But must such ‘inherited’ problems be handed over to a new administration, even in worse shapes and forms? Again, the World Bank publication asserts that the four highlighted problems (above) have reversed important development gains made by Nigeria. “Notably, the inflation-adjusted income of the average Nigerian today is roughly the same as it was in the 1980s…meanwhile, rapid population growth that has not been matched by economic growth caused the number of poor Nigerians to rise from about 68 million in 2015 to an estimated 80 million in 2019.” And by end-2022, the multidimensionally poor in the country, according to the National Bureau of Statistics (NBS) , had hit over 163 million!
Now, talking about the worth of the income of the average Nigerian, national minimum wage was about N18,000 in 2015 and inflation rate was about 9.80 per cent; today that minimum wage is N30,000, inflation has assumed a hyper-level, standing at 22.22 per cent as at end-April 2023. This is an 18-month high! And ludicrously, in the same month, the outgoing government “approved” increase in allowances to various categories of Federal civil servants, ostensibly to assuage the biting soaring cost of living. But all these amount to tokenism, and too little, too late. Thus, the issue of public workers and ‘non-living wage’ is one of the ‘booby traps’ to be handed over to the new administration on May 29.
Specifically on the hyperinflation rate, the World Bank ranks Nigeria as one of the countries with the highest consumer price index (CPI), placing it (Nigeria) as the seventh highest in Sub-Saharan Africa in 2022. Available data show that when President Buhari took over the mantle of leadership in 2015, petrol was selling at N87 per litre but today, as he hands over, a litre goes for anything between N196 and N210 (depending on the location), despite the sustenance of subsidy by the administration. Cooking gas prices also shot to N822.5/kg from N250/kg eight years ago, while electricity tariffs had been hiked to N70 per kilowatt per hour from about N27/kwh—despite incessant power outages.
Today, the oil and gas sector that has been the mainstay of the Nigerian economy in the past five decades is immersed in confusion, marked by declining crude production, oil theft phenomenon, and unprecedented spate of vandalism, among several others. Incidentally but absurdly, President Muhammadu Buhari who is also the Commander-in-Chief of the Armed Forces of the Federal Republic of Nigeria, has also been the substantive Honourable Minister of Petroleum Resources in the past eight years. Reports show that rather than remaining the highest oil producer/exporter on the African continent, Nigeria has lost the seat to Angola. Nigeria has consistently failed to produce/export up to its Organisation of Petroleum Exporting Countries (OPEC)-allocated quota.
Due to the confusion in this crucial sector, plus the impact of the global “Energy Conversion” initiative, many International Oil Companies (IOCs) have in recent times surreptitiously pulled out of Nigeria.
Even the so-called Petroleum Industry Act (PIA) that President Buhari enacted is too weak and left too many concerns unaddressed. In fact, PIA, in its nitty-gritty, might end up stifling the growth of the industry and cause more bad blood among stakeholders, especially the oil bearing communities. In recent years, many local and foreign investors in Nigeria have either whittled their investment in the sector or taken it elsewhere.
Worsening insecurity in Nigeria is also not helping matters. It is this state of confusion and life-threatening environment that Mr President will be handing over to the next administration. And this, rather than help pull the economy out of the woods, could worsen the fiscal profile of the country that is already mired in a deleterious debt trap. At the latest count, Nigeria’s outstanding public debt is conservatively put at over N80 trillion, with almost 100 per cent of Government revenue going into debt servicing!
The import of the troubled and beleaguered oil sector as at today is that the country will remain critically challenged in terms of foreign exchange earnings, since Nigeria still depends on crude sales for over 90 per cent of its forex income. In all honesty, the Buhari administration in eight years did not do much to encourage the effective diversification of the Nigerian economy. In other words, apart from crude oil sales, not much forex is earned from any other source. However, although some credit must be given to the Central Bank of Nigeria (CBN) for its recent initiatives to encourage non-oil exports, the much-expected augmentation or displacement of oil as the lone key forex earner is yet to be achieved.
The in-coming administration must therefore go beyond mere mantra and lip service, and fully embark on a non-oil export drive; that is, an export-led development strategy, with a strong ‘value addition’ plank. Nigeria for too long has been a rentier economy—where so many practically produce nothing and yet become ‘wealthy’—while majority live in abject poverty. This has got to change; the economy must become productive, and reward productivity!