*Economic policy trust has floundered without requisite actions….
Though Nigeria has been projected to grow by 2.5 percent this year after contracting 1.6 percent in 2016, the news is not cheery as population expansion at the same rate may pressure growth in per capita terms, according to a report by the London-based Financial Times (FT).
“Nigeria is expected to grow 2.5 percent this year after contracting 1.6 percent in 2016. But the population is also growing at 2.5 percent. So in per capita terms, things are going nowhere,” FT noted.
The paper explained that the reasons for the projected ‘recovery’ are based on 2016 dismal performance, which made it difficult for the economy to fall further, adding that if doing nothing at all – a reasonable description of the Muhammadu Buhari-led government – the baseline effect of 2016 would have worked its magic.
It further stated that the oil that makes up so much of government revenues is now flowing faster compared to the previous year. In June, production was 1.7 million barrels a day, 10 percent higher than a year ago.
It sums up the policy stance of the current administration at best as doing nothing, likening it to a ‘dead cat bounce’.
The term ‘dead cat bounce’ derives from the fact that even a dead cat will bounce if it falls from a great height.
“If you imagine a dead cat soaked in crude oil and dropped from a 50-storey building, you get a rough picture of how Nigeria’s economy is performing these days.”
On the corruption plank that brought the government to power, FT states: “Like weeds shorn of their leaves, graft will doubtless spring back as lush as ever once the Buhari strimmer is back in its box.”
Proffering solutions, FT said: “One should, they say, never let a crisis go to waste,”, adding that the advice has clearly not reached Abuja, where the economic collapse brought on by swooning oil prices was supposed to spur diversification.
“It has not happened. The danger now is that having apparently come through the worst, Nigeria will simply go back to business as usual. If oil prices recover, so will headline growth. But the structure and basic dynamics of Africa’s largest economy will remain unchanged.”
It laments that Nigeria frustrates because of its vast potential of 190 million people, among the sharpest, most driven and entrepreneurial on the continent. But perverse incentives have diverted the energy of the best and the brightest to mostly unproductive activities: making money through political connections, speculation, round-tripping, and arbitration.
“When President Buhari was elected three years ago, he promised to end all this. The economy would be transformed. Manufacturing would be re-energised. So would agriculture, which employs three-quarters of the population but contributes only a fifth of output. The government would wean itself off oil revenue. Buhari — stern, principled, incorruptible — was said to be the man to see this through.
“Little has come to pass. Buhari took six months to name a cabinet and became embroiled in a necessary but distracting fight with Boko Haram. He has spent much of the past year convalescing from a mystery illness that has sapped his presidency of vigour and set off a merry-go-round of political jockeying to succeed him. There has been practically nothing in the way of coherent economic policy,” it noted.
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It, however, acknowledges some promising signs: Agriculture is getting more attention, and there are tentative improvements in rice and other crops. If all goes to plan, by 2019, the country will have a $12bn oil refinery courtesy of Aliko Dangote, Nigeria’s richest man. This is an installation that could save billions in unnecessary imports of refined products.
Equally, it noted that Nigeria’s constitution is working and that in Buhari’s extended absence with illness, the competent and dynamic Yemi Osinbajo has been running the show.
Foreign exchange policy is seen to have improved but the danger is that Nigeria fixates on issues and continue to talk about them after 20 years they were tabled.
“In April, a ‘growth and recovery plan’ was published, laying out plans to cut red tape, improve the tax take, reform state-owned enterprises and move towards a market-determined exchange rate. Such policy prescriptions have been discussed for 20 years. The danger is Nigeria will still be talking about them 20 years hence.
“The immediate prospect is for a vicious and enervating power struggle to succeed Buhari, whom few expect to contest the 2019 election. Whoever emerges victorious will doubtless promise to stamp out corruption, diversify the economy and rationalise the oil sector. Cats not only bounce. They also have nine lives,” it said.
Frontpage February 7, 2018