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By Dele Sobowale
Urgency is needed in implementing a coherent and credible package of monetary, fiscal and structural policies as the window for bold reforms is closing as the 2019 elections are fast approaching.” Gerry Rice, IMF Spokesman, in Reuters.
The International Monetary Fund, IMF, quite rightly, is concerned about the emergence of a coherent economic policy package which will not only bring an end to the current recession but which will propel the country to sustained economic growth of five to six per cent per annum. Given the nation’s population growth, still estimated at close to three per cent per annum, the minimum Gross Domestic Product, GDP, that will begin to provide hope for the future cannot be less than six per cent. The question is: has such a plan been developed?
The IMF is again right by pointing to the 2019 elections – which some might regard as still too far away. But, in reality, Nigerian elections start a full one a half years before Election Day. By December of 2017, Nigerian politicians would have abandoned governance partly and their time will be increasingly absorbed by politics. Government work eventually takes second place. Any comprehensive economic policy package which will take us through to 2019 had better been put in place before this year ends. Otherwise it will not receive the attention it deserves. At, any rate, the need for urgent economic recovery package is already very critical as the recent protest marches have revealed. Nigerians want improved economic conditions resulting in higher aggregate personal incomes and job creation as a minimum. Other indices of economic recovery such as improved power supply, infrastructure, education, health services and personal security will also help create the impression of progress. The question, here again, is: has the Federal government started to work on them?
The answer to the two questions is: yes. Now, most readers, quite rightly, would ask the question: where are the signs of progress? It is a legitimate question. But, before providing the answer which hopefully will satisfy the IMF and fellow Nigerians, an observation is required.
The late Arthur Burns, Chairman of the Federal Reserve Board, under President Nixon, once made the point that if a nation allows a bad economic situation to persist for too long without correction, suddenly, there are no good options left. At the risk of being accused of repetition, it had been pointed out on this page as far back as September 2015, four months after the Buhari administration started its tenure, recession had already been predicted for 2016. But, at the time, Buhari had no cabinet and stubbornly refused to do so until last week of October 2015. Below, read the predictions about 2016 recession which were ignored by the new government.
THE RECESSION NEXT YEAR — 2016.
“Economy could slip into recession, CBN warns.”
PUNCH, September 23, 2015, p 31.
BEING ECONOMICAL WITH THE TRUTH
The report went on to state that “The Monetary Policy Committee of the Central Bank of Nigeria on Tuesday warned that the country’s economy could slip into recession next year if proactive steps are not taken by the Federal Government to revive key sectors”. Ordinarily, people reading that statement, and believing it, would be excused for thinking that the CBN and Governor Emefiele don’t already know the same truths which render their statement more political and self-serving than economic. Unfortunately, the CBN and the Monetary Policy Committee already know that a recession in 2016 is inevitable.
The call for “proactive steps”, meaning vital fiscal policy, betrays their failure to level with Nigerians and the international community – the latter has a vital interest in our economy and its confidence in Nigeria is crucial to our recovery from impending recession.
The CBN knows better than anybody else that as China goes, so goes much of the global economy these days. A most recent survey showed that Chinese factory output had fallen to its lowest level in six and a half years. Big economies on the skid cannot be turned around in a hurry.
The same Central Bank is aware that exports of crude are expected to fall to 56.66 million barrels in November of this year. That is 1.89 million per day instead f the 2.04 million planned. December shipments are not expected to be significantly higher.
What sort of proactive steps can be taken between now and December to avert a total year decline from last year? Economics is not magic. Even if it is, where is the magician now?
THE ECONOMIC FACTS CONFRONTING US NOW.
The CBN and keen watchers of the Nigerian economy are aware that the National Bureau of Statistics, NBS, announced that the Gross Domestic Product, GDP, of the Nigerian economy grew by 2.35 per cent in the second quarter of this year – which ended in June. It was the second quarter in a row that the economy will record less than budgeted performance. Incidentally, 2.35 per cent growth, when the population continues to grow at close to 2.85 per cent, means that the average Nigerian is getting poorer. Furthermore, the NBS projects that year-end GDP growth will be about 2.63 per cent. That is still less than half of the budgeted growth. Additionally, the third quarter is over and there was no economic stimulus to accelerate the rate of GDP growth from the abysmal 2.35 per cent recorded in the second quarter. As we enter the fourth quarter, the focus of the Buhari administration has been on fighting corruption and Boko Haram. Economic policy makers are not required for those. There has been a distinct absence of focus on the economy as evidenced by the fact that neither a Chief Economic Adviser, CEA, nor a Minister of Finance, had been appointed.
By contrast one of the first major appointments made by Obasanjo in 1999 was the CEA. Like it or not, a strong economy is the bedrock on which the nation stands. Neither corruption nor Boko Haram can be successfully fought if the economy is in shambles.”
That was in October of 2015 and the recession predicted came on schedule. Latest figures from the Nigerian Bureau of Statistics, NBS, indicate that the economy shrank by 1.5% last year. The bad news is, the economy contracted. The good news is that after a half-year decline of 2.3%, the end year result was better – meaning that the economy had started mending in the second half of 2016. The IMF and other keen observers are aware that total recovery cannot be guaranteed unless the Federal and state governments do more to hasten recovery. Rather than view the IMF’s call as meddlesomeness, Nigerians should regard it as a wake-up call to bring new proposals out that will make the nascent recovery sustainable.
Fortunately, the Federal government is frantically developing such a programme titled ECONOMIC RECOVERY and GROWTH PLAN, ERGP. Details are still sketchy, but, the general outlines are becoming quite clear. From explanations received from highly reliable official sources, “The Economic Recovery and Growth Plan, ERGP, a Medium Term Plan for 2017-2020, builds on the SIP and is developed for the purpose of restoring economic growth while leveraging the ingenuity and resilience of the Nigerian people – the nation’s most priceless assets. It is also articulated with the understanding that the role of government in the 21st century must evolve from that of being an omnibus provider of citizen’s needs into a force for eliminating the bottlenecks that impede innovations and market based solutions.”
That is a lot of promises which must be redeemed later if the latest attempt at achieving sustainable economic growth is not to end up as an empty trope of nice words based only on good intentions.
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