Buhari One Year After: Economy In Bad Shape | Independent Newspapers Limited
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Buhari One Year After: Economy In Bad Shape

Posted: May 29, 2016 at 6:30 am   /   by   /   comments (0)

 Isuma Mark ABUJA


Former President Goodluck Jonathan left behind $30 billion for the new administration of President Muhammadu Buhari on May 29, 2015, according to sources. At the time of Jonathan’s leaving office, Nigeria still maintained Africa’s leading economy status, top investors’ destination and a gross domestic product growth rate of 6.5% on average behind China and India, respectively.

But these enviable positions have quickly vanished and given way to startling realities: Nigeria is no more Africa’s leading economy. And except for its size, Tanzania, Ghana, Kenya, Algeria, Rwanda and others are investors’ top destination relegating Nigeria to 16th position in Africa, analysts said.


Worst Performing GDP Since 25 Years:

Also, the country’s GDP growth rate is in the negative, with a GDP growth rate of -0.36 for the first time in 25 years. Investigations show that there were hopes that the country would fare better when President Muhammadu Buhari took over on May 29, last year. That confidence quickly gave way as the 2015 fourth quarter growth figures of 2.11 percent signposted an economy on decline.

Evidently, statistics released by the National Bureau of Statistics (NBS) for the first quarter of 2015 showed an aggregate GDP of “N22, 262,575.97 (in nominal terms) at basic prices. Compared to the first quarter of 2015 value of N21,041,701.10, nominal GDP was 5.80% higher,” the NBS stated.

Also, “nominal GDP growth was, however, lower relative to levels recorded in the last quarter of 2015 by 14.15 percentage points.”

This, the bureau said was due to falling crude oil exports since oil accounts for overall national earning.

The sector has been beset by increasing shortfall in oil revenues as more facilities are shut due to attacks on facilities, ultimately affecting power supply, which at a time dropped to zero.

Even in the heydays of the late Sani Abacha’s government, when Nigeria was declared a pariah state, the GDP stood at 3.25%.

And looking at the overall performance of the Abacha administration, there were serious doubts over this current administration’s capacity to deliver.

For instance, amid the troubling banking sector and poor industrial output, Abacha succeeded in reducing the rate of inflation from 72.8% in 1995 to 28% in 1996 and to under 10% in 1997.

Essentially, the eye-catching performance during that time was the increase in capacity utilisation of the manufacturing sector from 29.3% in 1995 to 32.5% from a budget deficit of N81 billion in 1994 and modest surplus of N1 billion in 1995.

The administration also achieved a budget surplus of N37 billion or 1.45% GDP in 1996. GDP growth that year stood at 3.25% growth compared to 1.3% in 1995. External balance of payment increased to 1.3% from $1.44 billion in 1995 to $4.08 billion in 1996.

Experts say articulating policies and deliberate political will coupled with some of the best hands at that time made Abacha pull the country out of the woods. According to them, that is lacking in this government.


Naira Melts As Inflation Gallops:

Worst performing indicator was the national currency, the naira. The Central Bank of Nigeria (CBN) has in the last one year left many economic experts bewildered.

While it fixed foreign exchange at N1997-1998/$, the activities at the (black) parallel market has continued to rein in whatever benefits it tries to achieve.

Thus, the parallel market saw a steady rise of dollars against the naira to as high as N385.

As the forex crisis continued to exert huge pressure in prices of goods, the CBN raised the benchmark Monetary Policy Rate (MPR) to 12% from 11%.

Other key decisions were the increase in bank’s Cash Reserve Ratio (CRR) to 22.5 percent from 20 percent.

The move, according to the CBN, was aimed at tightening liquidity, which it blamed for exerting pressure in the foreign exchange market thus negatively affecting consumer prices.

Oil marketers were urged to access forex through the ‘black’ market. Even petroleum importers were told to access the black market for dollars at the rate of N295/$.

The result has been the unfortunate increases in prices of goods, according to the NBS. The bureau in its reports said inflation rose in the country to cap at 13.72%. Analysts are worried that since the return to democracy, this has not happened in the country.


Investors Lose Hope, Withdraw N4 trillion In One Year:

Investors’ confidence has never been worse since 1999. In fact, the past six months have seen investors’ activities rattling the country with over N4 trillion withdrawn from the economy.

In fact, the noticeable movement of investment out of Nigeria was in December 31, 2015, when market cap was down from N11.62 trillion to N9.85 trillion. A whopping N2.2 trillion was withdrawn which set the alarm bell ringing on what was ahead.

In January 2016, foreign investors on the floor of the Nigerian stock market transacted 51.57% of total market activities down to 36.48% at the end of February trading.

Reports by the Nigerian Stock Exchange (NSE) polls trading figures from major custodians and market operators on their Foreign Portfolio Investment (FPI) flows for the month of February showed foreign investors withdrew N31.84 billion during the month against N10.94 billion invested in Nigeria market.

In February, percentage of transactions of foreign investors was 36.48% compared to 74.49% of domestic investors.

Total transaction on the bourse during the month stood at N117.27 billion as against N184.49 billion total transaction carried out in January.

This was a clear rejection of the shambolic response investors wanted from the Buhari’s administration.

According to Moody’s, Nigeria is vulnerable to external realities due to lack of economic direction.

The long-term issuer ratings, therefore, downgraded Nigeria rating from Ba3 to B1. The agency said the downgrade is based on Nigeria’s increased external vulnerability “brought about by the prospect of lower-for-longer oil prices”.


Power Shortage, Unemployment Worsen:

For the first time, Nigeria experienced zero power generation and distribution. While available power generation was above 5,000 megawatts before Buhari took over, it continued to drop until it reached zero.

The Minister of Works, Power and Housing, Mr. Babatunde Fashola, while in the opposition, criticising the last administration said, “A serious government would fix power within six months.” Unfortunately being saddled with three sectors, have failed to deliver.

Fashola has N433.4 billion allocated to his ministry. Yet, no activity has been witnessed to bring back the three sectors suffering under his care.

It has been one excuse after another. While the Buhari government has blamed attacks in Niger Delta on gas pipelines, in some cases, recurrent break down of facilities has been blamed.

Fashola at a time attributed the power outages to inadequate turbines. Nigeria had four turbines with two built by the last administration.

“There is not enough power in the country, so how do you share what is not enough such that everybody gets enough? It’s difficult, if not impossible,” Fashola said, justifying the current government’s actions.

At the moment, the power situation has risen to 1,500 megawatts.

While darkness pervades the land, the Buhari’s government increased electricity by over 50% heaping more pains on the people.

Factories have shut down while small and medium scale enterprises have gone under. Artisans who rely on generating power from generating sets cannot cope with difficulties in buying fuel while the country gradually sank into the worst fuel scarcity in history.

Manufacturing which is key to every economy suffered most in the last one year, available statistics has shown. Relying on the NBS statistics, it said thus, ‘nominal GDP growth of manufacturing in Q1 2016 slowed by 2.98% (year-on-year), 4.23% points lower from growth recorded in Q1 2015 and 9.91% points lower from growth in Q4 2015 as a result of slower growth in 10 of 13 subsections of the manufacturing sector.

“On a quarter-on-quarter basis, the sector slowed by 11.92%. The contribution of manufacturing to nominal GDP was 9.93% in Q1 2016, lower than the 10.17% recorded in the corresponding period of 2015, and marginally lower from 9.09% in Q4 2015.”

For Q1 2016, real GDP growth of the manufacturing sector slowed by 8.39%, 14.17% points higher from growth recorded in Q1 2016 with oil refining, cement, food, beverage and tobacco and electricity activities weighing on growth.

It says growth was, however, 7.27% points lower from rates recorded in Q4 2015. On a quarter-on-quarter basis, the sector slowed on the margin by 11.91%.

This worsened unemployment in which NBS puts at a dreadful 12.4% in the first quarter of 2016.

It said the number of the unemployed increased by 1,449,18 persons as against increase of 518,000 recorded in 2015.

The report pointed out that active Nigerians willing and seeking jobs are 24.5 million compared to 22.45 million in the fourth quarter of 2015, and 20.73 million in the third quarter 2015.

Also, 528,148 persons or 0.97 percent, were laid off from work as investors flee and the manufacturing sector shrinks.

Even the number of underemployed in the labour force during the review quarter increased by 607,613 persons, capping at 15.02 million. This resulted in an increase in the underemployment rate to 19.1% in the first quarter of 2016 from 18.7% in the previous quarter.


We Must Diversity – Saraki, Dogora

To curb the sorry state of the economy, the President of the Senate, Dr. Bukola Saraki, said Nigeria must diversify.

“The economic strength of any country is commonly weighed by its alternative means of survival in the unfortunate failing series of failing primary sector,” the Senate president said.

According to him, “The key therefore to achieving true economic success, sovereignty and development are through strategic diversification of the economy.”

Acknowledging that the country which is “rich and blessed with both the natural resources and human manpower of close to 200 million people must start to sustainably harness these potentials.

“Over-dependence on oil and gas has invariably deluded our trajectory from sectors like agriculture, tourism and indeed mineral resources over the years,” Saraki identified.

He added: “We must understand that the hidden potential in these sectors can and will ultimately accommodate our infrastructure development plans, employment and human development agenda, as well as ensure economic sustenance for millions of Nigerians.”

His counterpart in the House of Representatives, Yakubu Dogora, could not agree less. According to him, the frontiers must be expanded to back whatever diversification would be undertaken by law.

“Consistent with our legislative agenda, and the need to find a lasting legislative solution to the economic challenges facing us, that the House introduced sectoral debates on the Nigerian economy. The first phase of this initiative is the issue of diversification of the Nigerian economy. This initiative involves invitation of honourable ministers of the relevant ministries to House plenary sessions to brief the House on the initiatives and activities of their ministries.

“The House then probes, interrogates and debates their proposals with a view to proposing new laws and amendment of existing laws to help achieve the goal of diversification of the economy,” he said.


Unify Nigeria, Agbakoba Urges

Of major concern is the alleged divisive tendency the president is currently courting. There has never been a divisive president since 1999 in the country.

While the president who won power on the mantra of change heralded the birth of popular belief that things would change for good, he had court intense criticism for being a promoter of sectionalism, ethnic alliance and nepotism.

Critics would easily point to his cabinet as destroying the Federal Character Commission. The president had justified the lopsided appointments he has made saying, people should not expect him to develop regions that did not vote for him. According to him, it is justifiable to only develop regions which won him votes. And he has since developed that unwritten policy through his appointment and use of security forces.

This prompted a Senior Advocate of Nigeria (SAN), Olisa Agbakoba, to say the president needs to unify the country rather than divide it by using restructuring of the country as the starting point.

“The president can build a new national order by recognising our diversity and managing it in an inclusive process that would lead to an agreed constitution by all Nigerians,” he said.

Advising that “the president must refrain from calling yet another wasteful conference. All that is needed is a comprehensive review of the reports of the national conferences. It will be a very difficult but not impossible task.”

According to him, true federalism would unify the country which would ultimately move the country forward.