494 views | Chinelo Ofoche & Izuchukwu J. Okoye | October 3, 2019
As Nigeria celebrates its 59th independence anniversary, it is imperative to assess how the average citizen is faring economically. As the Federal Government continues to enunciate accomplished and envisaged policies, the word on the streets tells a different story. Her not-so-passionate fiscal, monetary and economic policies continue to impact adversely on the Nigerian economy with dire consequences for the common man.
The saying “let market forces decide” is a commonly accepted economic dictum, that affords all and sundry freedom to make choices based on their disposable income and purchasing power. Universally, the four traditional market forces are; government, international transactions, supply and demand and speculation and expectations. Alas, the FGN through seems to have become the main driver of the economy. With Nigeria’s economy emerging recently from recession, residual inflation, rising cost of living and diminishing disposable income continue to exacerbate hunger and poverty. As Nigeria has overtaken India as the world poverty capital, it is evident that FGN’s economic recovery plan has fallen short projected benchmarks. Remedial palliatives, quick-fix measures, ad-hoc stipends, are not making the desired impact. Meanwhile, growing national debt, subsisting deficit-ridden national budgets, and the much devalued Naira remain core concerns. Nigeria’s present economic ranking is not the best as her economic freedom score is 57.3; which translates to its being 111th freest economy in 2019. She is ranked 14th among 47 sub-Saharan countries.
The Federal Government in placing a ban on imported rice and other food items, while a positive measure, seem to have overlooked the diminished food supply from the Northeast food basin, due to disruptive climate change and activities of Boko Haram. For the common man, the Jollof Rice Price index, as a measure of the economy, continue to spiral upwards; from an average of N4900 per pot in July 2016, to N6300 in June 2019. Presently Nigerians spend 56% to 60% of their income on food. And concerns persist that the approved thirty thousand Naira national minimum wage, though insufficient, is not being implemented by State governments or the organized private sector. Considered from the perspective of the “motor park economist,” nothing is working. A 50kg bag of rice has gone from N7,000 in 2014, to N15,000 in 2016 and N21,000 in 2019; a small two-pound ice fish has gone from N150 to N400 during the same period. Simply, put things are hard for Nigerians and there’s not much to celebrate as the country heads towards its sixtieth year.
Ironically, as Nigeria’s Diaspora remittances have grown to $23bn annually, Nigeria continues to borrow. Unquestionably, borrowings and devaluation of the Naira continue to impact negatively on Nigeria’s economy. To sure up its IGR base, the FGN recently decided to hike the Value Added Tax (VAT), from 5.0% to 7.2% without consideration of its consequences to the buying power of Nigerians. If hiking the VAT was to raise capital, why is Nigeria set to borrow N2.5bn from the World Bank? As things stand, the extant VAT regime tends to place undue burden on payers and vendors, since its remunerative and regenerative modalities are still evolving. As it is the accrued costs are passed on to poor consumers.
Understandably, prevalent fiscal and economic policies are made with the best of intentions, and to realize the FGN’s promise to move Nigeria to the “Next level.” But it is now clear to all that these economic policies are not so people-friendly; and are not working optimally. This may explain why the FGN decided to change its economic advisory team; swapping the erstwhile Economic Management Team (EMT), with the Economic Advisory Council (EAC). The change is also a tacit acknowledgement, that despite the Economic Recovery and Growth Plan, Nigeria’s economy remains in the doldrums.
Why do we borrow? Is there any salvaging value in the dual track policy of devaluation and borrowing? What happened to the funds borrowed previously; why borrow more when states are dithering on paying back their bailout loans. There’s need to evaluate Nigeria’s overall indebtedness – external and domestic – relative to our annual national budgets, since Nigeria’s increasing public debt profile in recent years is deeply worrisome. Nigeria’s total public debt rose from N17.28 trillion in 2017 to N24.41 trillion in 2018. Recent DMO figures indicate that after the first quarter of FY2019, Nigeria’s total debt further increased by 2.3% and now stands at N24.95 trillion. Sadly, almost 50% of Nigeria’s revenue is presently dedicated to debt servicing.
More troubling, the national budget continues to rise annually with bigger deficit overhang. Starting from 2016, the budget has gone from N6.06 trillion, with a deficit of N 2.20 trillion to N8.83 trillion with a deficit of N1.86 in 2019. Recently, the FGN announced its projected 2020 budget as N9.79 trillion, with a deficit of N2.142 trillion. The twin-track policy of borrowing and deficit budgeting does not augur well for Nigeria, since so far the returns in concrete development and quality of life terms not commensurate to the expenses. Deficit budgeting and borrowings could be countenanced, if the loans are used to finance growth and development, boost investments, thus growing employment and the overall economy. The question that arises in the present circumstance is whether it is meaningful to continue borrowing to finance recurrent expanses, more so states that owe N614bn are finding it hard to repay the loans to the FGN.
It needs to be acknowledged that the set goals of previous borrowings were largely not achieved, due to poor economic policies, poor planning, and poor implementation. The resultant fiscal indiscipline presently translates to hunger and poverty; plus huge unemployment, legion of out of school children, and to a certain degree, poor returns on investment and capital flight. It’s the poor man in whose name these policies and borrowings are made that bears the brunt. Government needs to rethink its economic and fiscal methods, in the compassionate interest of the common man.
Ofoche is a Senior Adviser at Selonnes Consult, Awka. Okoye is a Research Associate at Selonnes Consult, Awka.