A recent statement by President Muhammadu Buhari, after a meeting with the 36 state governors, that the country’s economy was in bad shape in spite of government’s efforts to put it on the growth path, is not only worrisome, it is, indeed, a cause for concern by all well-meaning Nigerians. It calls for immediate policy actions to bolster the economy in order to put it on the path of sustained growth.
Yet, the President’s statement on the parlous state of the economy did not come as a surprise to watchers of the economy for a number of reasons.
First, the policy framework being implemented by the Federal Government is faulty and outdated. For the first six months after the President assumed office in 2015, he had no minister and the economy was gradually sinking, a situation which, unfortunately, indicated that the administration did not have an implementable economic plan, which the government could put into action.
To indicate the pitiable situation of the economy, the Central Bank of Nigeria, in a recent report, indicated that the country’s balance of payments position entered into a deficit position, to the tune of about $4.5 billion in the third quarter of 2018, from a surplus of $505.9 million in the previous quarter
Second, government increased the pump price of Premium Motor Spirit to N145 per litre and later devalued the country’s currency. For prudent management of the economy, it ought to have first devalued the currency before announcing an increase in the pump price of PMS. By putting the cart before the horse, it became difficult for the Federal Government to increase the price of PMS the second time. Thus, it was compelled to bear the cost of running a huge and staggering subsidy of N744 per litre on the 50 million to 60 million litres of PMS supplied daily to fuel stations across the country. We want to state categorically that for a government that was looking for money to fund its recurrent expenditure and capital projects, embarking on such a staggering and gargantuan subsidy was a policy in the wrong direction.
Third, when a government devalues its nation’s currency, it must immediately put a concurrent economic stimulus package in place to stimulate sustained production and engender increase in employment opportunities across all sectors of the economy, particularly in those critical sectors that will ensure sustained diversification of the economy and in the import substitution sectors. Unfortunately, the Buhari administration did not put in place an economic stimulation package. Thus, the economy, sadly, degenerated into a recession before an economic recovery and growth plan was put in place.
Fourth, for a government that spends about 50 per cent of its annual revenue servicing debts, it must significantly beef up its revenue base and cut losses. For example, if PMS is a consumption item, then Value Added Tax should be chargeable on it.
We, therefore, consider it ridiculous for the Buhari administration to blame all the present woes of the country on the past administrations. Three and a half years on, unemployment has continued to increase in the country, manufacturing has continued to contract, the country has continued to be a dumping ground for made in China goods and Nigeria’s economic situation has continued to worsen.
To indicate the pitiable situation of the economy, the Central Bank of Nigeria, in a recent report, indicated that the country’s balance of payments position entered into a deficit position to the tune of about $4.5 billion in the third quarter of 2018, from a surplus of $505.9 million in the previous quarter. Also, the country’s current account balance, which was in a surplus of $4.45 billion in the second quarter of 2018, ran into a deficit $3.105 billion in the third quarter of the same year, an indication of increased payments for imports over the period relative to receipts from exports.
The report also showed that earnings from crude oil and gas accounted for a massive 94 per cent of the Federal Government’s total export earnings, while receipts from non-oil export decreased by as much as 50 per cent, thus making a mockery of the Federal Government’s success in the diversification of the economy into agriculture and
manufacturing.
It is also sad to note that it appears that the managers of the economy are out of tune with basic realities. For example, with the current downturn in the price of crude oil in the international oil market, which has driven oil price below $60 per barrel, it is foolhardy and imprudent for the Budget 2019 oil benchmark to be put at an unrealistic price
of $60 per barrel.
We are, however, happy that the President himself is coming to terms with the realities on ground with his address to the governors, which incidentally, questioned his current economic policy framework. The President should, therefore, adopt new and realistic policy options that can sustainably pull the country’s economy out of its present abyss and frog jump it into sustained growth. State governors too must come together, think and re-think on the way forward. A situation where states depend on the centre for financial spoon feeding will do no good. States must think of how to manage their affairs without recourse to frequent financial bailouts from the Federal Government.
