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Market Digest Nigeria

Economy

Will Nigeria’s economy ever favour the poor?

The clear and present danger of the deleterious effects of Nigeria’s tottering, oil-dependent economy on the  quality of life, or call it the Human Development Index(HDI) of the average Nigerian gives cause for serious concern.HDI covers the three dimensions of knowledge, a long and healthy life and a decent standard of living. Stimulating economic growth therefore, requires more proactive actions on the part of government too.

TOPSHOT – A man walks on plastic waste, used to reclaim a swamp so that the land can be developed for housing, in the Mosafejo area of Lagos on February 12, 2019. – Nigeria, which elects a new president on February 16, is Africa’s most populous nation and leading oil producer but is dogged by poverty and insecurity. (Photo by Yasuyoshi CHIBA / AFP) (Photo credit should read YASUYOSHI CHIBA/AFP/Getty Images)

Nigerians having to pay for increase in Value Added Tax (VAT) from 5 per cent, increase in electric power consumption tariff and being asked to gear up to pay fees at toll gates, along decrepit and pothole-riddled federal highways, one fervently prays that we are not on a bumpy ride, on the next level journey to mass misery. Juxtapose this with the saddening scenario of governments prevaricating over the payment the paltry N30,000 minimum wage, especially at a time members of the political class are satiating their epicurean tastes in some lifestyles of obscene luxury and the worry deepens. According to the National Bureau of Statistics (NBS) the country’s Gross Domestic Product (GDP) for the second quarter, April to June, 2019 slowed to 1.94 percent from 2.1 per cent recorded during the first quarter. In a similar vein, according to the latest report on the misery index, released from the John Hopkins University in Baltimore, United States of America, Nigeria was ranked as the sixth most miserable country to live in anywhere in the world. The parameters considered include the state of inflation, the unemployment rate and bank lending rate.

Add these frightening figures to the claim by the World Poverty Clock(WPC)which revealed that 91.885 million people in Nigeria live in extreme poverty as at June, 2019 and it is patently obvious why the economy can no longer be run the way it is. This means that more than half of Nigeria’s population live on less than a dollar (N360) a day. According to the World Bank, a person can be said to be truly living in extreme poverty if they live below the poverty line of $1.90 which translates to N693.5 per day. The new numbers make up 46.5 percent of Nigeria’s population which is approximated at 197,686,877, sometimes rounded up to 200, 000,000. It would be recalled that in June 2018, the same World Poverty Clock had named Nigeria the poverty capital of the world, overtaking India with statistics showing 87 million people live in poverty. Yet, in reminiscences, Nigeria’s GDP grew by about 2.8%  back in the 1990s and rose to about 6.0% from the return of democracy until 2015 when the Buhari-led administration took over. Ever since, the growth rate has drastically dipped into a recession. This lasted for about five quarters up to mid-2017.

Perhaps, all these and more frightening figures may have informed the recent decision by the President Muhammadu Buhari-led administration to come up with the Economic Advisory Council(EAC).The main aim of the EAC should be to guide the Nigerian economy in the right direction out of the wood, to the path of sustainable economic growth. One believes and strongly too, that the EAC is needed at this critical period of the socio-economic challenges of high rate of unemployment, mass misery, poverty and the attendant escalating wave of crimes. It should therefore, not be seen as displacing the constitutionally recognized Economic Management Team (EMT) of some government ministers and bureaucrats, including the CBN Governor under the chairmanship of the Vice President, Prof.Yemi Osinbajo, who also happens to be the chairman of National Economic Council (NEC).

As one, who had muted a similar idea of an economic think tank back in 2015 and made it public through opinion essays, the roles of both the EMT and EAC could be complementary. While the former is seen as part and parcel of government and not likely to ruffle political feathers, the latter is made of a different stuff. With EAC made up of top technocrats and seasoned professionals such as Prof. Chukwuma Soludo, Prof. Doyin Salami, Bismark Rewane, Muhammed Sagagi, Shehu Yahaya, all  drawn from outside the government cycle, they are expected to provide sincere, objective and indeed credible pieces of advice based on their truly rich and robust researches and experiences.

With a globally-respected body such as the International Monetary Fund (IMF) admonishing Nigeria to walk the talk on economic diversification from crude oil sales we cannot but do the needful. Though there was an expansion of 5.15 per cent in the oil sector and 1.64 per cent growth in the non-oil sector over the second quarter of 2019 the drop in oil production from 1.99 mbp to 1.98 mbp calls for a more proactive action. So, what is the way forward?                                                                                                                                            The answers are as varying as the economists we have on ground. According to a respected analyst, Egie Akpata “you don’t get growth by doing nothing.” The economy cannot grow as long as Nigerians are not engaged in viable industrialization. That should be food for thought. He has gone further to advocate for the removal of the querulous fuel subsidy regime. With a stroke of the pen the executive could say a good bye to it and Nigeria will be smiling to the bank with N2 trillion every blessed year!

On his part, the Lagos Chamber of Commerce Director-General, Muda Yusuf, government should show more commitment towards  solid infrastructural development, ensure improvement on monetary and fiscal policies to boost investor confidence. Significant as well is the position of the Manufacturers Association of Nigeria (MAN) on the imperative of stable electric power supply, good access roads, strong rail network, access to the ports that are efficient and waterways that are really functional. According to him the high costs of manufacturing and distribution render the finished products uncompetitive. He is right.

According to Mr. Ajibade Fashina, Managing Partner of Pedabo and member of Morison KS increase in VAT would have negative spin-off effects on the running of Small and Medium Scale Enterprises and the cost of living of the average Nigerian. He believes that unleashing the potentials inherent in agriculture across the value chain as well as provision of the enabling environment of stable infrastructure would do us all a world of good. One cannot agree any less.

All said, experts on the economy insist that the onus lies with the EAC to call for a review of the 2020-2022 Medium Term Expenditure Framework and Fiscal Strategy Paper (MTEF/FSP) which reduced the capital expenditure. Such measure cannot stimulate economic growth. As Rewane had reiterated back in 2015economic development can be measured by looking at the state of human development, institutional structure/evolution, physical development and the state of institutions in a country.

Ayo Oyoze Baje

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