President Muhammadu Buhari’s two years in office are, perhaps, the most difficult in the country’s economic history.
It was the period the country’s economy slumped into recession for the first time in more than a decade.
After two quarters of consecutive negative growth, the National Bureau of Statistics, NBS, confirmed in March 2016 that the country was in a recession. The Minister of Finance, Kemi Adeosun, described it as the country’s “worst possible time”.
She attributed the situation to a “cost-pull inflation”, exacerbated by continued decline in oil revenue earnings and foreign reserves, weakening balance of payments, rising public debt, weak capital market, rising inflation, increasing infrastructure and housing deficits as well as rising unemployment.
From an average price of $38 per barrel in December 2015, Organisation of Petroleum Exporting Countries, OPEC, reference basket of crude oils fell to an all-time low of just above $22 per barrel in mid-January 2016.
Sustained attacks on oil facilities in the Niger Delta coordinated by the Niger Delta Avengers, NDA, significantly cut the country’s oil production from 2.2 million barrels per day at the beginning of 2016, to about 1.6 million barrels per day.
The NBS said headline inflation rate was in double digits, at about 12.92 percent, with unemployment rate at about 12.1 percent.
Commodity exports dipped by 34.6 per cent, while imports declined by 7.8 per cent during the period.
The overall business environment had plunged to its bottom.
The World Bank Doing Business Report 2016 said it was more difficult doing business in Nigeria during the year than in the previous years. The bank described Nigeria as one of the poorest business destinations in the world.
Out of 189 countries surveyed in the report, Nigeria improved marginally by just one step, from 170th position in 2015 to 169.
To address the situation, the government targeted the structural causes of the inflation by releasing over N770 billion in the 2016 fiscal appropriation for capital projects in key sectors of the economy.
These included power, works and housing, interior, transport and agriculture.
Another amount of over N400 billion was also released for social intervention programmes designed to impact the lives of the vulnerable segment of the population.
The social intervention programmes the payment of N5, 000 stipend to the most vulnerable people in the society and funding the schools feeding programme, designed to generate a lot of economic activity in local government areas.
Although now rocked by a few allegations of alleged default in payment, the programme originally also covered payment of salaries, stipends or allowances to graduates who enlisted as primary schools teaching assistants under the N-Power programme.
A presidential commission headed by Vice President Yemi Osinbajo was also inaugurated to proffer solutions that would help improve the ease of doing business in the country. Beyond that, Minister of Budget & National Planning, Udoma Udoma, said the 2016 Budget was deliberately packaged to pursue macroeconomic policies and growth strategies to reflate the economy.
Apart from the adoption of a novel Zero Base Budgeting system to complement the aspiration, Mr. Udoma said the thrust of government policies was investing in infrastructure and social development.
He said the ZBB system, which was new to the country’s budgeting process, required ministries, departments and agencies, MDAs, to carry out fresh evaluation of all projects/programmes before allocation of fund based on the priorities of government.
Did the budget realise its objectives? The answers to the questions were mixed.
While some economic analysts said the government realised its target, many others were doubtful.
The lead director, Centre for Social Justice, and budget monitoring expert, Eze Onyekpere, said the budget failed to meet several of its targets. Although the government had projected inflation rate to grow at about 12.92 percent, Mr. Onyekpere said the opposite was the case during the year, as spiraling trend continued to about 18.72 per cent in January 2017.
He blamed the situation, which culminated in the country’s economic recession on the Buhari administration’s policy inconsistencies.
“The government is not working in harmony to promote a coherent policy position with clear timelines, targets, indicators of success and measurable goals,” he said.
One area Mr. Onyekpere pointed at was the non-alignment of fiscal policies of the government with the monetary policy. He noted more attention appears to have been given to monetary policy than fiscal.
He cited the example of the intervention by the Central Bank of Nigeria, CBN, which negatively affected the value of the Naira.
Mrs. Adeosun appeared to agree with Mr. Onyekpere when she said the government needed to undertake adjustments in monetary policies to support key job creation sectors, particularly manufacturing.
“We are funding the rehabilitation of abandoned airport projects. Significant funding is going into agriculture, because of the time sensitivity of the sector.
“Government had to intervene to ensure food production was restored to bring down rising food prices. Funding was equally directed to defence, to rebuild and retool the capabilities of the army to fight the war against insurgency in the North East part of the country.
“This helped government in realising one of its cardinal agenda of restoring security not only in the North East, but also in other regions across the country,” Mrs. Adeosun said.
CBN’s introduction of the flexible foreign exchange policy, which opened interbank trading window that was purely market-driven had removed controls on the Naira exchange rate.
With the introduction of the policy, the official exchange rate band, which CBN kept at between N197 and N198 to the dollar, gave way, while the rate at the parallel market took an upward swing.
Following the new policy, Naira began a free fall, initially exchanging for about N343 to the dollar, till it hit the bottom at over N510 to the dollar in the first quarter of 2017.
The impact of the policy shot inflation rate through the roof, as cost of living squeezed the people.
Yet, CBN governor, Godwin Emefiele, was unfazed. He remained optimistic the policy was capable of further deepening and stabilising the foreign exchange market.
Despite claims by the Manufacturers Association of Nigeria, MAN, Mr. Emefiele said there was no going back on the bank’s policy of not allocating foreign exchange for the importation of 41 items classified as “Not Valid for Foreign Exchange”.
The affected items were those the CBN said Nigerians have sufficient capacity to produce in-country, to conserve foreign exchange for use in supporting local industries.
To redress the crisis in the oil sector, the government stepped up its policy on reforms, redirecting the Nigerian National Petroleum Corporation, NNPC, operations on the path of profitability. The national oil corporation, which has not been publishing monthly reports of its activities and financial status has been doing so regularly every month.
Besides, the fuel supply and distribution system in the last two years have largely been sanitized, with the introduction of the downstream liberalization regime.
The Minister of State for Petroleum Resources, Ibe Kachikwu, said the government took steps to reduce upstream contracting period to an average of six months, from initial average of two years.
He listed other achievements to include prompt remittance of oil proceeds to the Federation Accounts; review of the old models of contracts like crude oil swap, which he said saved the NNPC about $1billion annually.
Recently, the NNPC said it was in the final stage of signing deals worth $6 billion to exchange more than 300,000 barrels per day of crude oil for imported petrol and diesel. The deals are part of government’s efforts towards increased reliance on NNPC for fuel supply, to put a permanent end to fuel importation by 2019.
The government, which took a bold step at its inception to remove subsidy from the fuel pricing template, has assured consumers that despite the myriad of challenges it was facing in the downstream sector of the oil industry, it would ensure retail pump price of petrol, was maintained at N145 per litre.
During the year, Mr. Kachikwu said the government successfully secured a $80 billion memorandum of understanding with several Chinese investors interested in coming to help develop various infrastructures in the country’s oil and gas industry.
In December 2016, Nigeria was one of three members of OPEC granted exemption from oil production output cuts initiated by the group to stabilise the oil market and boost global crude oil prices.
The exemption took off with an initial period of six months, beginning from January this year.
OPEC delegates said the cuts were likely to be shared again by a dozen non-members led by top oil producer Russia, which reduced output in tandem with OPEC from January.
OPEC’s cuts have helped to push oil back above $50 a barrel this year, giving a fiscal boost to producers, many of whom rely heavily on energy revenues.
The exemption, which followed diplomatic moves by the government to gain a reprieve to compensate for the massive loss of production capacity as a result of years of attacks by Niger Delta militants on oil facilities in the region, has so far yielded huge benefits.
On May 25, the OPEC output reduction deal was extended for another nine months to March 2018 to further battle a global glut of crude.
The country’s oil production capacity, which plunged below 1.6 million barrels per day, has, in the last three months moved closer to completely returning to about 2.2 million barrels prior to the attacks.
Again, the Nigerian Delta region is witnessing several months of peace, as the Niger Delta militants have since ceased fire and moved out of the creeks, thanks to the consultation initiated by the government with leaders and youth in the area on the need to embrace dialogue and give peace a chance.
Consequently, oil revenues are gradually building up again, fueling optimism among Nigerians that the economy has brighter prospects of healing from recession.
INFLATION: Business environment
The NBS reported in its consumer price index for April that the country’s inflation rate slowed at 17.2 percent although it remained at almost double the upper limit of the CBN’s 6 to 9 percent target.
In January, inflation rate had risen to about 18.72 per cent, before dropping for the first time to 17.78 per cent in February and 17.26 per cent in March, and 17.24 in April.
The intervention of government to improve the business environment and encourage fresh investors appears to be yielding good fruits.
The President’s Business Council announced recently that registration of new businesses can now commence and be completed online within a maximum of 48 hours.
The council said issues concerning new business registration, access to loans, certification of products, issuance of visas and import inspection for prospective small and medium-scale entrepreneurs have been addressed under the new reform regime it initiated.
But there are complaints among Nigerian entrepreneurs, particularly the youth, on the harsh conditions of the business environment.
A PREMIUM TIMES’ report revealed that poor access to loan facilities, poor infrastructure and other impediments stifle the growth of Nigerian startups, as many small business owners interviewed said the government’s rhetoric on easing the business environment has largely not been matched with concrete actions.
In spite of challenges in other areas of food production, Nigeria is making a silent but fast-paced, revolutionary march towards self-reliance in rice production, the most popular staple food in the country.
In an official statement that followed the launch of the Anchors Borrowers Programme, ABP, in November 2015, the Central Bank of Nigeria, which coordinates the programme, “set aside N40 billion from the N220 billion Micro, Small and Medium Enterprises Development Fund for farmers at a single-digit interest rate of 9 per cent.”
The ABP mainly targets small-holder subsistence farmers with a view to helping them scale their businesses to commercial level. It also targets millers with the aim of increasing their capacity utilisation.
At the launch, Mr. Buhari disclosed that Nigeria was spending not less than one trillion naira on the importation of food items that could have been produced locally, a situation the CBN said was contributing “greatly to the depletion of the nation’s foreign reserves, especially in the face of low oil revenue resulting from falling oil prices.”
In Kebbi state, for instance, almost all farmers interviewed in a PREMIUM TIMES’ special report said ABP helped them significantly improve their livelihoods – though they had complaints.
With the bumper harvest recorded last year, millers and rice merchants, including those based outside Kebbi, have seen a veritable market in the state. The demand for rice is rising, thus pushing more people to the farm to satisfy the demand.
There was no worry about sale, farmers said. They have multiple options: sell to millers, directly to consumers, merchants or the state government which in turn sell to millers.
However, farmers alleged the list of beneficiaries was padded, with state government officials adding names of friends, family members and political cronies who diverted the loans for other purposes.
“I submitted 1,700 names, but at the end of the day 3,200 were given,” said a farmer, adding that, “They are neither farmers nor intending farmers. We even protested.”
The government, however, denied the allegations.
MIXED REACTIONS TRAIL PERFORMANCE
Niyi Adekunle, Executive Director, Grandlotto, explained that the government must move beyond the rhetoric of urging the youth demography to embrace agriculture, describing it as ‘simplistic’.
According to him, government would need to provide adequate training for the youth and bring in experts to develop Nigerian agricultural and research institutes, before the nation would experience development in agriculture.
Okoeguale Eugene, said there is nothing to celebrate, adding that Mr. Buhari’s presidency has only shown that it is not too different from past administrations.
“I give up on Nigeria, they (government and the ruling party, APC) have nothing to offer other than pain and suffering,” he said.
“My advice to Nigerians is just be the better version of you and enjoy what is left of Nigeria; the government don’t care about you so stop caring about them.”
Mohammed Adamu, reacting to the administration’s performance thus far, said, “Although, there are some weaknesses, at least, things like security, fight against corruption, N-power programme, deserve to be celebrated.”
Abiodun Atobatele, a social commentator, talking about the general way out, said, “While we spend billions trying to provide electricity by importing power plants, China, Germany, India, USA all produce generation equipment locally. It cost their economy nothing!
“Think! The sustainable solution lies only in education. A healthy well educated population will perform magic,” he said.
Commenting on a statement credited to an APC stalwart, Tony Momoh, which urged Nigerians to “Stone us (APC members) if we fail after two years”, Adeyeye Femi, a student unionist, said the party may likely not be praised.
“Tomorrow makes it two years (that Mr. Buhari took over power).
I don’t know what would happen tomorrow; Democracy Day or Stoning Day?” he asked rhetorically.
Rojaye Aiyenioo, another Nigerian said, “Of course there is nothing to celebrate. My vote was wasted; APC are liars.
“In two years, everything is in shambles…Buhari would for now remain the worst president ever. There is no point talking about the loopholes now because they are just too many; instead of Nigerians counting our blessings, what we are talking about is sickness, hunger and all sorts.”
Abdullah Mustapha said, “For me, we ought to celebrate war against corruption and gradual restoration of security across the nation.
“Buhari has won war against corruption and Boko Haram insurgency in the north east,” he added.
Sani Haruna, on his part, said, “I think Maiduguri people have a lot to celebrate,” adding that the city has been delivered from the stranglehold of Boko Haram and its local economy is gradually picking up.
Speaking to PREMIUM TIMES, Okhai James, a Lagos-based finance expert, urged the government to adjust its economic policies, especially as it concerns multiple foreign exchange rates.
For Charles Onuoha, a Lagos-based entrepreneur, the government must fix electricity as it is central to the productivity of Nigerians, especially the youth.
“Fix electricity and half of Nigeria’s developmental problems will be solved,” he said.