The Nigerian economy took a deep plunge this year but make no mistake, it’s not a sudden twist, it’s been long coming and every discernible mind should have seen it coming. However, the un-foretold hardship the current situation of the economy has put on Nigerians have really taken a toll on their memory. The struggle to survive is naturally frustrating millions of Nigeria into believing there should be a quick fix.
Compatriots, there is no quick fix to an economy that took decades to achieve its present dilapidated form.
Nigeria is a middle income, mixed economy and emerging market, with expanding financial, service, communications, technology and entertainment sectors. It is ranked as the 21st largest economy in the world in terms of nominal GDP, and the 20th largest in terms of Purchasing Power Parity. It is the largest economy in Africa; its re-emergent, though currently under-performing, manufacturing sector is the third-largest on the continent, and produces a large proportion of goods and services for the West African sub region. Nigeria recently changed its economic analysis to account for rapidly growing contributors to its GDP, such as telecommunications, banking, and its film industry.
Previously hindered by years of mismanagement, waste, corruption and dependence on just one derivative (Oil) has been one of our major setback.
Apart from the fact that Nigeria, over the years became overly dependent on the Dollar which is as a result of the failure to rejuvenate its manufacturing/production sector, corruption played a huge role in the decay of an economy that was pitched to take over the globe.
Corruption is a form of dishonest or unethical conduct by a person entrusted with a position of authority, often to acquire personal benefit. Corruption may include many activities including bribery and embezzlement, though it may also involve practices that are legal in many countries. Government, or ‘political’, corruption occurs when an office-holder or other governmental employee acts in an official capacity for personal gain.
The mirage and ripple effect “Free Government Money” created in the past few years gave an impression that everything was ok with the economy. Alas, underneath, Nigeria was seated on a keg of gunpowder which had already been set on fire, waiting to create a catastrophic blast.
Our economy was touted to be a very buoyant one basically because there was a huge chunk of free money floating around. Padded budgets, inflated contracts, embezzled contract funds, nepotism amongst many other corruption vices flourished and created that mirage that gave people the impression that the economy was just fine. That right there is a result of the fact that majority of Nigerians only think in Naira.
Nigeria’s economy is struggling to leverage the country’s vast wealth in fossil fuels in order to displace the poverty that affects about 33% of its population. Economists refer to the coexistence of vast wealth in natural resources and extreme personal poverty in developing countries like Nigeria as the “resource curse”, although “resource curse” is more widely understood to mean an abundance of natural resources which fuels official corruption resulting in a violent competition for the resource by the citizens of the nation.
Nigeria’s exports of oil and natural gas—at a time of peak prices—have enabled the country to post merchandise trade and current account surpluses in recent years. Reportedly, 80% of Nigeria’s energy revenues flow to the government, 16% cover operational costs, and the remaining 4% go to investors. However, the World Bank has estimated that as a result of corruption 80% of energy revenues benefit only 1% of the population.
Now, take some out to think about it. In October 2005, Nigeria and the Paris Club announced a final agreement for debt relief worth $18 billion and an overall reduction of Nigeria’s debt stock by $30 billion. The deal was completed on April 21, 2006, when Nigeria made its final payment and its books were cleared of any Paris Club debt but as at 2015, Nigeria was borrowing again to pay worker’s salaries. Can you imagine? What a travesty!
Lessons learnt? No! That ridiculous feat does not align with the expected results of a buoyant economy. Projects that were included in the budget were not being executed due to lack of funds. Isn’t that a red flag? We export crude to import Petrol, Diesel and other by-products. Is that a good economic policy?
We were dependent so much on Crude Oil when we have Natural Gas, Rubber, Cocoa, Tin, Columbite, Taolin, Talc, Tin, Quartz, Iron Ore, Gypsum, Zircon, Calcite, Tantalite, Chalcoprite, Mica, Copper Ore, Limestone, Tourmaline, Beryl, Garnet, Muscovite, Aquamarine, Topaz, Marble, Bismuth, Wolfromite and others. We had all the opportunities to diversify the economy and look at other alternatives to revenue generation which in turn will simultaneously rejuvenate the manufacturing sector, yet we failed to take those chances but we kept on rejoicing over a pseudo-buoyant economy.
The largely subsistence agricultural sector has not kept up with rapid population growth, and Nigeria, once a large net exporter of food, now imports a large quantity of its food products, though there is a resurgence in manufacturing and exporting of food products. In 2006, Nigeria successfully convinced the Paris Club to let it buy back the bulk of its debts owed to the Paris Club for a cash payment of roughly $12 billion (USD).
The global drop in the price of oil should be an eye opener for Nigeria but I doubt we will learn our lessons. A country that failed to diversify its economy all through 17 years of its democracy cannot be termed a serious one.
The fall of the Naira against the Dollar can be simply traced to the disability to manufacture enough to saturate the local market, let alone export. Hence, our over dependence on the Dollar basically because we import almost everything we use in this country. At that point where we decided to feed only on imports, we threw away the purchasing power of the Naira to the Dollar on a platter. Today, that “Unconscious” decision has come back to haunt us and then all of a sudden we are in a frenzy, expecting a miracle to happen in one year, pretty hilarious.
If there should be a time to revive the economy, it should be now! The government of the day is saddled with the great task of setting the economy back on to the right track to a resurgence. It is not going to be an easy task but it is one that is possible if we put the proper structures in place and that can only mean one thing; a critical review of existing policies and enactment of new ones. It’s so sad that a country like Nigeria with its growing population which really should be our strongest link to attracting investors is still romancing with anti-investment policies. So much for a country that really wants to grow.
We should start looking at alternatives immediately and of course we may need to focus less on derivatives and be more focal on manufacturing/production in order to strengthen the Naira. One laudable feat the government the has been able to embark on is the currency swap deal with China. Once that ball is set to roll, we can have enough time to rejuvenate the manufacturing/production sector of the economy before the “Yuanification” of the economy just like we did with the Dollar over the past decades.
I am so much optimistic about the currency swap policy IF and ONLY IF we follow through with the plan and not prance around like we did with the Amnesty Programme launched in the Niger-Delta.
This piece was originally published in Leadership newspapers of 23/08/2016