Though it may be inaccurate to say that Nigeria is a failed state, signs that its economy has gone down south, despite spirited efforts to turn things around, are many and scary. Following are some of the signs, in no particular order, of the gravity or impact. Each is troubling, to say the least.
For an emerging market, whose economy has vast agricultural and mineral resources, waiting to be exploited by international monopoly capital and technology, to provide consumer goods for a large number of citizens who cannot produce their own needs, Nigeria’s expected 2021 Gross Domestic Product growth rate of somewhere between 1.7 and 2.0 per cent is disappointing.
Interestingly, the International Monetary Fund predicts a generous growth rate of 6.3 per cent for emerging markets and developing economies. This is way above the rate projected for Nigeria, the biggest economy in Africa with more than 200 million citizens.
The National Bureau of Statistics says Nigeria’s current inflation rate is 16.47 per cent, up by 0.72 per cent at the end of December 2020. The difference also reflects the rate at which the Consumer Price Index deteriorated to the disadvantage of Nigeria’s poor masses.
Palgrave MacMillan, a think tank, argues that inflation in Nigeria is caused by government’s expansionary fiscal policies, devaluation of the naira and the impact of climate change on the domestic agricultural industry.
Whereas overheads gulp about 70 per cent of government budgetary expenditure, the exchange rate of the naira to the US dollar is N380, going by the usually ignored Central Bank of Nigeria rate, or N485, going by the generally preferred parallel market rate.
The CBN’s Monetary Policy Committee fixed its monetary policy rate floor at a high 11.5 per cent. But bank prime lending rates to the agricultural sector ranges between four and 24 per cent, whilst maximum lending rate is 14 to 32 per cent.
To the uninitiated, prime lending rate is the rate that banks lend money to their creditworthy customers, while the discriminatory maximum lending rate is the rate that banks lend to perceived risky customers.
How can the preferred agricultural sector, supported by the special purpose CBN Anchor Borrowers Fund, which enables participating financial institutions to borrow at the Micro, Small and Medium Enterprises Development Fund rate of two per cent, to lend out to farmers at nine per cent, be borrowing at such back-breaking rate?
You can only imagine the rate at which banks are lending to other, government-forsaken, sectors, thus subverting the perennially ineffectual CBN’s directive. Poet Geoffrey Chaucer’s quip, “If gold rust, what will iron do,” aptly describes the twist.
The NBS recently released the depressing report that 23.3 million Nigerians, or 33 per cent, of the labour force are either unemployed or marginally employed. That suggests that the resulting lack of effective demand, or consumers’ financial capability to buy whatever they desire, will not have expected positive multiplier effect on the very sluggish economy.
The disruptions caused by the new, still developing, digital technology, further accentuate the dire state of employment in the country. The analogue skills-set of Nigeria’s workforce does not fit the demands of the digital 4th Industrial Revolution.
Apart from the usual ups-and-downs of an economy that is dependent on a mono-product for about 90 per cent of its foreign earnings, and uncontrolled importation of strategic products, like petroleum products, industrial raw materials, machinery and consumer goods, the Nigerian economy has the misfortune of falling into the hands of malevolent and incompetent leadership.
The NBS says Nigeria’s debt at the end of 2020 stood at N32.92 trillion, with N12.71 trillion being foreign, and N20.21 trillion being domestic. The reason for this is in the following explanation given by the CBN Governor Godwin Emefiele.
“Debt is a fiscal responsibility. Debt is never a crime or sin. The private entity also borrows to survive. What matters most is the debt quantum (whatever that means), and debt usage as well as a result of the shortage of income generation.
“When you compare the income and expenditure and it (being the debt, one presumes), is efficiently used, it is part of government’s responsibility. But where the fear is (in) when it is above the threshold.”
If you too feel lost with the CBN Governor’s seeming disoriented, disjointed, explanations, you may choose to consider the timely alarm raised by another Godwin, Edo State Governor Obaseki, who recently disclosed that government had to print more money for the Federal Accounts Allocation Committee to meet its obligations to fund state governments in March 2021.
Excerpts from his statement say: “We are in… huge financial trouble. The oil companies, who are the ones producing, are no longer investing in oil… So, in another year or so, where will we find this money that we go to share in Abuja? When we got to FAAC in March (2021) the Federal Government printed an additional N50 to N60 billion to top-up for us to share.”
While some faceless CBN staffers deny the claim by Governor Obaseki, former President of the Chartered Institute of Bankers of Nigeria, Okechukwu Unegbu, warns that printing of money to augment doles from the FAAC is not in the interest of the country. Enough said.
The de-industrialisation still being experienced by the Nigerian economy, due to infrastructure deficit, wrong-headed macroeconomic policies and legal framework that does not quite lead to the ease of doing business, despite spirited efforts by the office of Vice President Yemi Osinbajo, has led to capital flight and slowing of Foreign Direct Investment.
The nationwide insecurity further compounds the situation. Note the insurgents in the North-East, and bandits, whom Sheikh Ahmad Gumi says should not be referred to as criminals, in the North-West.
Remember also, the predatory herdsmen in the North-Central, militants, whose activities seem to have abated somewhat, in the South-South, and the combination of Internet fraudsters and ritual killers in the South-West. These send shivers down the spines of unarmed law-abiding citizens.
It is strange that the shameless Caretaker/Extraordinary Convention Planning Committee of the witless ruling All Progressives Congress political party found the temerity “to commend the President (Major General) Muhammadu Buhari (retd) for the (ineffective) counteractions against the spate of insecurity in some parts of the country and (so therefore), pass a vote of confidence in Mr. President.”
Anyway, the forum of governors of the opposition People’s Democratic Party, not exactly better, Siamese twin of the APC, one might say, has “noted and condemned the alarming drift of Nigeria, which, if allowed to continue will make Nigeria a failed state…”
They add: “Security of lives and property of Nigerians is no longer guaranteed under the present government as a result of leadership incompetence and mismanagement of the nation’s affairs.”
If you wonder how Nigeria got to this sorry pass, you should look no further than the constricting constitutional framework that forms the grundnorm of this nearly woebegun nation. Both political and economic initiatives have been over-centralised in a federal polity that has been led, in the most part, by malevolent incompetents.
The fate of Nigerians is tied to the whims and tomfoolery of misfits, with no love for Nigeria. It is looking as if some people just love the fact that other Nigerians have sunk into the poverty bind that is difficult to escape.
Nigeria’s economy has gone south