Believe happy New Year is still in order, after all, the year remains very young. Sometimes, I sincerely think that this world is just like a musical chair. One starts the day in the morning and ends with night only for night to give way to another morning and so it continues ad infinitum. Then the days give rise to the week and the month and then the year.
What exactly then, one wonders, is the difference between one day and another? What also, is the difference between one year and another? I’m not sure I know, save for activities which assume differences based on the fact that we have chosen to allocate them to different times and days and weeks and years. If somehow, we choose to do the same things day in day out, then the disparity would become blurred. For some of us particularly from the eastern part of the country, the days heralding the New Year are very significant. It is a period of festivities when many people come home to celebrate with loved ones.
It is a reunion time when people who you would not otherwise see would come home to share with others who are either at home or in other parts of the world. Growing up, it was a time of excitement; a time that we wore new clothes and a time to celebrate with rice and meat. Rice was such a big deal that most of us with humble beginnings looked forward to Christmas and new year celebrations to guarantee rice menu and of course with the meat. Meat occupied so important a place that a story is told of three friends who visited a family in a far place during Christmas. As they arrived, the host served them rice and meat.
Not too long into the lunch, two of the friends who could speak passable English started speaking grammar. You can bet that the grammar would have been lined with mechanical blunders. The third visitor who could not speak English went for one piece of the meat and secured it for himself. He, thereafter, muttered in vernacular, “You people can continue with your grammar, all I know is that our host provided three pieces of meat for us. That means that each of us is entitled to one piece and I have taken mine”.
From an economic perspective, the year 2017 was not an easy one for most Nigerians. It was a year that recorded a lot of dramatic outcomes. The year was the second year of our economic recession. In the second month of the year, the already terribly bashed Naira suffered the greatest humiliation in its life. The Naira depreciated beyond the N500 mark. In fact it briefly touched N520 per dollar in the parallel market. Not too long before, it had exchanged for about N200 per dollar, and the massive crash to N520 was therefore quite historic.
The Central Bank of Nigeria was forced to rise to the occasion to defend the Naira. Most of the measures put in place by the CBN were effective as the foreign exchange market became liquid, demands were met promptly as against the earlier system of rationing and scarcity gave way to surplus. The Naira gradually began to recover and settled somewhere around N365 per dollar.
In the second quarter of 2017, Nigeria officially exited recession with the economy growing by 0.55%. This was the first time the GDP became positive in 6 consecutive quarters. Some of us had predicted that the country would soon get out of recession. We also had pointed out that our exit from recession was not going to translate into better life for our people as the economy remained dangerously poorly structured. Dependence on oil was, and is still prevalent. Attempts made at diversification sadly remained unproductive because we seemed to be focusing on replacing one set of primary commodities with another set which is even more exposed to external shocks that are not within our control.
True to that prediction, a few quarters after the country recovered from recession, life has become more difficult. Unemployment continues to rise from about 14% earlier in the year, to the present 19%. The real situation is actually much worse as the underemployed and unemployed account for over 40% of the population. Youth unemployment data is even scarier! There is hardly any family that does not have someone who is unemployed. Of course, unemployment has a direct relationship with crime and insecurity. That means that the higher the number of unemployed people, the higher the rate of crime and insecurity. Any wonder why the year 2017 and in fact this New Year have been marked by unacceptably very high levels of insecurity in different guises.
Inflation, as measured by the National Bureau of Statistics, has been on a downward spiral in the recent times, even if it remains very high at close to 16%. Recall, however, that inflation was hovering around 19% not too long ago. This has been one big elephant in the room. At these levels, the sufferings and hardship experienced by the people cannot but be excruciating. Poverty levels seem to have been on the increase as 70% of the populace live below poverty line of $1.90 per day.
Many Nigerians chose to relocate from the country through all kind of routes in search of greener pastures. A large number embarked on the very dangerous voyage to Europe through Libya. This has since created a national scandal that has led to the repatriation of hundreds of the migrants from Libya. The number of Nigerian refugees and asylum seekers abroad grew astronomically in 2017. This had direct correlation with the misery index in the country.
The effect of inflation on other economic parameters cannot be overemphasized. For instance, our national budgets must be discounted by the average level of annual inflation figures for any meaningful comparative analysis of one year’s budget against another. The proposed 2018 budget size of N8.6t may look larger than the 2017 budget of N7.44t. But this is in nominal terms. In real terms, the 2018 budget is smaller than that of 2017 because if you discount the budget by the average inflation figure of 16%, the budget size shrinks to N7.2t in 2017 prices, which is over N200b less than the N7.44t of 2017. This is the way inflation affects everyone in the economy. Therefore, in spite of the growth recorded in terms of GDP, Nigerians became poorer and more miserable in 2017. The gap between the haves and the have nots also widened. We can only hope that 2018 would mark a departure from this trend. There is nothing in the horizon, however, to support this hope, this year being an election year where governance may become less of a priority as politicking takes centre stage.
Another issue that dominated economic discourse was the debt profile of the government and its sustainability. As at June 2017, the total debt of both the Federal and State governments denominated both in Naira and Dollars stood at the Dollar equivalent of about $64b. Given the need to bridge infrastructural gap and revenue shortfalls, it did appear that the only option available to government was to borrow. However, the government was confronted with a Catch-22 situation as debt service was consuming a very large chunk of our revenue. By the recent admission of the Debt Management Office (DMO), as at June 2017, we used over 34% of our revenue to service debt. This figure, however, differs from the one put up recently by the World Bank, which stood at about 60%.
Regardless of which figure is correct, the reality is that our debt profile is at the verge of unsustainability in spite of the fact that in terms of Debt to GDP ratio, we were still at a comfortable 20%. The major challenge that the government needs to think through given the present state of things is how to fund the deficit budgets that has become the tradition, without piling up more debts. The 2018 budget provides for a deficit of about N2t which is technically the same amount provided for debt service for the year. It means that the debt stock would increase by another $6.6t if the budget is to be fully implemented. How to safely finance this deficit remains a puzzle.
Again, a lot of state governments were unable to pay salaries in spite of bailout funds and different tranches of Paris Club refunds they received from the Federal Government. Some states were still owing several months of salary areas even as the year came to an end, thereby exposing its workers to serious misery and hardship. As the country struggled, little or no attention was paid to healthcare delivery and education. We had consistently allocated less than 5% of our annual budget to healthcare leading the country to become the 6th lowest country in the world in terms life expectancy which stood at 54years as at last year. Education also suffered the same fate of poor budgetary allocation and the net result was that 40% of adult population was illiterate while over 10million Nigerian children were out of school.
Insecurity and crime assumed an alarming dimension in 2017. Boko Haram that had been “technically defeated” according to the military, refused to surrender as more and more violence was perpetrated by this deadly group. Fulani herdsmen continued to run riot leaving blood in their trail in different towns and villages in the country. The most recent being the new year attacks in Benue and Taraba states that left scores dead. Other forms of crime, including kidnapping, cult wars, armed robbery and ritual killings became recurrent decimals across the country, forcing many communities to live in constant fear.
Nevertheless, it was not all bad news in 2017. The government’s focus on agriculture seemed to have yielded some positive results even if food did not significantly become generally cheaper. A few states made progress with rice production. The same story is also true about yam tubers, cocoa and fish. Oil prices were on a recovery mode even if we did not have a hand in it. Towards the later part of the year, we witnessed oil prices of close to $60 per barrel and as at the time of writing, it had gone further up to about $65 per barrel. Our production and output have also been on the upward trend, averaging over 1.75m barrels per day, owing to the relative peace in the Niger Delta.
The accretion to foreign reserves had also received a great boost in 2017 such that we can see figures of $40b towards the end of the year. Recall that earlier in the year, our foreign reserves had dipped to an all-time low of around $25b which could barely cover 4 months of import. In spite of the good news from the oil and gas sector, the year ended with the return of fuel scarcity in the country. The situation doesn’t seem to have abated even as I write. Matters are not helped by the fact that we import virtually all the petroleum products that we use in the country. Our refineries continue to operate at very low capacity levels. Adequate attention doesn’t seem to have been paid to the issue of local refining of petroleum products.
The year 2018, like I had noted earlier, is going to be a short year considering that political activities will soon dominate the airwaves while governance may be forced to go on vacation as the public sector heads into the political arena. It therefore becomes imperative that the managers of the economy ensure that the economy is insulated from the negative effects of a heated polity. This becomes expedient given the lingering fragility of the economy and the recovery that has not yet been fully consolidated. The government needs to seriously address the issue of infrastructure which is the single biggest factor affecting productivity and restricting growth. If the rail lines are not fixed, if the airports are not upgraded, if the roads remain death traps, if we do not fix power, I’m afraid we would make no progress in our growth journey.
The managers of the economy need to put on their thinking caps and deal with the funding of Infrastructure since this year’s budget did not depart from the practice of allocating a mere 30% of the budget to capital expenditure while recurrent expenditure gulps a whopping 70%. We do not only need to think about how to properly budget for our infrastructural deficits, but also how to raise the required funding for it and how to retire the funding so raised. We must also think of other models that would help actualise the projects and attract private sector funding to this all important area. Efforts at expanding the revenue base of the country are commendable. We, however, need to see more concrete results. In my view, results can only come if we engage more people in economic activities while at the same time improving the productivity of our people. A situation where 4 out of every 10 qualified and willing people do not have anything to do in terms of jobs cannot guarantee optimal productivity. Infrastructure is also very key in expanding the frontiers of productivity.
Again, over 80% of our foreign exchange earnings is still dependent on oil. Everyone agrees this is dangerous given that countries around the world are getting ready to phase out hydrocarbon fired cars in favour of electric cars. This threat is very real and should force us to seriously begin to work on the diversification of our economy.
In the midst of the foregoing, there is every evidence that the Nigerian society has a very worrisome level of income disparity. Economic indicators show that the rich are getting richer while the poor are getting poorer. The social and political implications of this ugly development are too serious to ignore. It appears that some people have taken more pieces of meat from the proverbial Christmas plate of rice to the complete denial of others. It is important that every segment of the society is given its own piece of Christmas meat or they may be forced to resort to self-help in order to get their share.
In conclusion, I must state that the future will remain bleak if we do not pay attention to some of the issues highlighted above. All the same, welcome to 2018.