Tomatoes are displayed for sale at a food market in Lagos, Nigeria, on December 16, 2013. Large-scale importation of foodstuffs like tomato paste has contributed to a dip in Nigeria’s economy. AKINTUNDE AKINLEYE/REUTERS
Those who argue that, ultimately, the economy determines everything got the upper hand this week when Nigeria’s economic recession took over the Sallah message of political leaders throughout the country, beating the insurgencies or other problems confronting the country to second position or no mention at all. Leaders of the APC, the ruling party came together for the government in their Sallah messages issued at different times.
Party leader,President, & vice-president
Bola Ahmed Tinubu
Acknowledging that the country is going through difficult economic times, President Buhari took off in his Sallah message on Sunday by blaming it on past indiscretion and a worldwide economic downturn. Arguing the impossibility of separating the current crisis from the cumulative effects of these two domains, the president went on to provide perhaps the most elaborate list of the areas of intervention on the part of the government towards resolving the crisis. By his list, these are “rail and road constructions, projects in the housing sector, support for farmers and for small and medium scale industries, youth and women’s empowerment programmes, support for revival of industries are all designed to reinvigorate the economy and enhance living standards of ordinary people”. Taking it to the realm of theology, the president who insisted that the government is getting it right in security and in fighting corruption declared, “we will get the economy right by the grace of God”.
When his second in command, Vice-President Yemi Osinbajo intervened, he implied an economic crisis but said a key reason for it is vandalisation of pipelines in the Niger Delta and the subsequent loss of about 60% of oil earnings. But the vice president is certain that soon, that problem would be over. While acknowledging popular disenchantment with the ‘Change’ mantra, Osinbajo said the regime is, however, “very focused, calm and extremely confident that God is on our side and this country will not be the same”. Like the president, the Vice-President who is also a pastor in his own right went theological, saying Buhari is God’s instrument for fulfilling a purpose, estimating the said purpose to be consummated by 2018.
In a rather upbeat tone, John Odigie-Oyegun, the APC National Chairman credited the regime with legitimate and innovative means to sort out the crisis, acknowledging too that “indeed, Nigeria is passing through challenging times in its socio-economic life”. Centralizing support for the regime’s value re-orientation campaign, “Change Begins With Me’’, the party chief averred how it would “institutionalise the best practice and time-honoured values of honesty, hard work, patriotism, abhorrence of corruption, accountability and integrity in our everyday life.”
Taking a slightly more critical and focused stance, Bola Ahmed Tinubu, a leading chieftain of the APC challenged Nigerians to confront the current economic situation as the opportunity “to do something never done before”. Specifying what doing something never done before could be, Tinubu said “The present circumstance demands that we engage in a discourse concerning the type of “post-oil era” economy we truly want and what are the ideological underpinnings and policy thrusts needed to erect this new architecture”. He prioritized citizen role and responsibility as the other side of government’s own intervention in crushing the recession.
Bukola Saraki, the Senate President put it to prayers and support for the president as the way out. The embattled political big wig told State House correspondents last Friday that the country was no doubt in a condition no one with blood running in him would not have felt.
Atiku Abubakar, a former Vice President and the first to issue a formal Sallah message is sure the current situation would soon give way into prosperity, urging for prayers and belief in the president’s ability to restore the economy. Atiku said much earlier, what the president said on Sunday about the crisis being a cumulative effect of “a lot of things left undone for too long by the nation’s past leaders”.
As leaders of the ruling party rallied behind the government in a politically correct move, Newsweek, the US based weekly was presenting its own insight on the matter. In a September 11th, 2016 essay “Why Relative Size Doesn’t Matter to Nigeria’s Economy”, Newsweek predicts the likelihood of borrowing from international financial markets as the getaway from the crisis. The opinion piece by Aubrey Hruby is reproduced below but with the challenging comment on a picture of baskets of tomatoes in a Lagos food market promoted upstairs:
Nigeria is used to making big headlines—it has Africa’s biggest population, Africa’s biggest film industry, and Africa’s biggest bravado.
But in August, Nigeria made the news for being smaller. The West African oil giant recently lost its crown as the largest economy in the region to South Africa after the International Monetary Fund (IMF) recalculated the sizes of the two economies using current exchange rates. The news was capped by the announcement on August 31 that Nigeria had officially entered recession after its economy contracted for the second consecutive quarter. The competition for the title of largest African economy will continue to see-saw and stir economic rivalry. But as Morten Jerven, the author of Africa: Why Economists Get It Wrong, cautions: “We know much less based on these GDP numbers than what we would like to think. These are soft estimates, and to compare one to the other is certainly meaningless. For decades no one could care less about the size of the GDP or the accuracy of these estimates. For the past years we get one news story after the other of this suddenly being bigger than the other.”
The real story is not which country is surging ahead, but rather how slow both are growing. With the recent floatation of the Nigerian naira and the trials of the South African rand, however, the two economies are now practically equals in an elusive quest for growth.
In South Africa, some experts are now predicting that the rand will have a sharp fall again before the end of 2016. Unemployment is still high at 26.6 percent, even though it fell very slightly during the last quarter. Many households are under financial pressure, and retail sales have slowed. The South African Reserve Bank has forecast zero percent growth for 2016. The only hope for preventing a negative slide is the mining and manufacturing sectors.
Nigeria, for its part, remains burdened by rapidly declining government revenues due to low oil prices—an issue that is part of a vicious cycle of renewed militancy in the Niger Delta , ongoing security challenges in the northeast, an inflation rate that reached 16.5 percent in June ( an 11-year record ), and investor uncertainty.
Given this situation, the debate over whether or not Nigeria ultimately holds the title of largest economy is nothing more than a distraction from troubling economic realities. The IMF now predicts that the Nigerian economy will contract by 1.8 percent in 2016, despite population growth of 2.67 percent. Instead of debating relative size, Nigerian officials and those with business interests in the country need to focus on working through the short-term economic pain of much-needed reforms. Now is the time to lay the foundation for a more sustainable, diversified long-term period of growth. Thankfully, the administration of Nigerian President Muhammadu Buhari appears prepared to make difficult reforms in the face of undeniable economic distress.
In order to break the immediate budget crunch and spend its way out of recession, Nigeria will likely have to borrow from international markets. On the surface, the country seems well-positioned to borrow—it has a low debt-to-GDP ratio, hovering around 11.5 percent as of December 2015, significantly less than those of South Africa (50.1 percent), Brazil (66.23 percent), and India (67.2 percent)—but existing debt service has already become difficult. The Debt Management Office announced in March that it expected to have to use 35 percent of government revenue to service debt. Continued low revenue levels stemming from the oil slump combined with the high costs of government salaries constrains traditional economic stimulation through spending without Nigeria being willing to borrow at a higher than anticipated rate.
Mobilizing revenue domestically has become a priority. A combination of import substitution, tax reform, trade facilitation and encouraging Nigerian naira-rich banks to invest in non-oil productive industries will conserve foreign exchange, create jobs and diversify government revenues in the medium term. In April, President Buhari put an emphasis on cutting food imports, stating: “Our bill for the importation of food and dairy products is very high. We want to cut it as much as possible by developing our local potentials.” One example among many is tomatoes: Nigeria is currently the largest producer of tomatoes in sub-Saharan Africa, but also the largest importer of tomato paste. Investments in infrastructure, particularly in storage and distribution, will help to make it easier to create value-added products locally. Boosting local investment will be more helpful than restrictive import policies.
Improving tax collection is also critical: in 2013, 75 percent of registered firms refused to pay taxes, and 65 percent of registered taxpayers had not filed returns in the previous two years. In terms of tax to GDP ratios, Nigeria ranks at an abysmal 3.1 percent while Kenya has remained above 15 percent for over a decade. But Lagos state has shown dramatic progress is possible, increasing its tax revenue by more than 800 percent since 2003 and using internally generated revenue for 75 percent of its budget.
Focusing on how to extend Lagos’s success is far more productive than falling back on the overall relative size of the Nigerian economy in Africa. While it is true that Nigeria has weathered economic crises before, the country should not have to wait until an uptick in oil prices saves it from slow growth as happened in 1974, 1987, 1995-1997, and 2007. This time around difficult reforms will hopefully combine with the country’s resilient, entrepreneurial spirit to set Nigeria on a new, more sustainable path to growth.
