If you have ever helped to take a critically ill person to the hospital or witnessed such a scene, then you can draw a parallel between your experience and the flurry of activities in the last couple of days aimed at salvaging the Nigerian economy. This economy is already in the Emergency Room. Whether or when it comes out better will depend on the availability of the relevant personnel, and of course their willingness to treat the patient.
Sometimes relations of a sick person are pained by a seeming indifference of the medical personnel, from nurses to the doctors, who for whatever reasons do not seem to understand the anguish of the relations, who want their loved one to live and not die. Perhaps the medics are not indifferent, really. They could just be trying to figure out what should be done, or how best to do what they know should be done. Yet, everyone also knows that the timing of the treatment could determine whether the patient survives or dies.
That the Nigerian economy is critically ill is no longer in doubt, even to those who previously lived in denial perhaps because of their privileged positions. The economy is dangerously descending the precipice, headed for a crash. Nigerian Economic Summit Group, the economic think tank and advocacy group, captured the mood of the country in the caption of its recent communique, “OF HOPE AND DESPAIR … NOT TOO LATE TO TURN THE CURVE” issued at the end of a meeting of its Board of Directors in late July.
“Today, the country is stuck in an economic morass. Most macroeconomic indicators are spiralling out of control, inflicting severe hardship on more Nigerians. Even though the economy continued to recover in the first half of the year, economic growth was dominated by sectors with low contributions to output and weak job-creating capacity, while the oil sector remained in recession for eight consecutive quarters,” NESG said in the communique signed by its president, Asue Ighodalo, on behalf of its Board of Directors.
Our macroeconomic indicators tell the nation’s woes. Headline inflation is 18.6%, more than double the Central Bank of Nigeria’s price stability threshold of 9%, NESG noted. The cost of debt servicing is well above the Federal Government’s retained revenue given the meteoric rise in public debt, and you wonder how that can be sustained.
By April this year, the government’s retained revenue was N1.6 trillion, while N1.94 trillion had been used to service our debts. Since there is no free lunch, even for the government, the excess of debt servicing over revenue had to be borrowed. Consequently, the CBN’s Ways and Means financing to the Federal Government (simply, the government’s borrowing from the central bank) had risen to N19.6 trillion as of May 2022, and the country maintains an unsustainable fuel subsidy regime.
Low-income earners are now said to be spending as much as 60 per cent of their incomes on food as prices soar. That defines the type of outlook such people have beyond now. To them, the future hardly exists, as all efforts will now be concentrating on the short term.
The country’s problems are fundamental. The Nigerian disease could be best described as a General Malady, the type of sickness that is from top to bottom, head to toes. This is a country that has lived on and gloated over its potential, but has done very little to translate the potential into tangible assets. But nobody ever eats potential, Dr Akinwumi Adesina, the President of African Development Bank, told a gathering of Nigeria’s business leaders in Lagos in 2012, when he was Minister of Agriculture.
NESG captured this reality in its statement. It reminded us of the fact that we cannot appropriate the benefits of the current high price of oil caused by the Russia-Ukraine war. That is not because we do not have oil, but because of low crude oil production largely due to oil theft, pipeline vandalism among others.
Last week, a former Executive Secretary of NEITI, Mr Waziri Adio, disclosed that the country was at some point losing about $4 billion a year to oil theft, according to a study carried out by the agency, but noted that the government did not pay attention to the alarm raised by the agency.
While not benefiting from high crude oil prices, Nigerians have also had to bear the brunt of the high prices of refined petroleum products, again not because we do not have refineries, but because we cannot or do not want to maintain them so they can function well. Consequently, we have to import the products at higher prices and turn around to subsidise their consumption. Does this make sense? Is there any surprise then that Nigeria’s external reserves have been declining this year, being pressured on both sides? Is there any wonder that our Naira has come under so much pressure in 2022? In one week, it lost as much as 11 per cent in the parallel market, where it hit an all-time high of at least N710 to a dollar.
There is still hope for the economy to turn the curve, says NESG. That is if appropriate and timely steps are taken by the authorities. The group’s position tallies with that of the Governors Forum, which has also added its voice powerfully to the search for solutions to Nigeria’s economic quagmire. Both groups made their positions known in separate declarations.
While the recommendations are from different sources, they have a lot in common, including calls to eliminate inefficiency in the use of resources, rationalization of government programmes and departments, and changes in the nation’s fiscal and monetary policies.
The government must tackle the revenue challenge facing the nation, return to the path of debt sustainability in the face of dwindling revenues, and work to ensure food sufficiency, NESG says.
The government must also as a matter of urgency take steps to end the prevailing practice of multiple exchange rates and commence a gradual and phased removal of the controversial fuel subsidy, and also address the insecurity challenge that has threatened food production, the economic think tank advocated.
On their part, the governors, who hold the reins of power at the state level, have presented a long list of actions they want the federal government to take in order to halt the nosedive of the economy. In all, they have 33 action points needed to accomplish this, according to their letter to President Muhammadu Buhari.
The truth remains, however, that Nigeria’s ailment is deep-seated and has been around for a long time. It is clear that cosmetic or perfunctory actions will fail to address it.