President Muhammadu Buhari after taking the oath of office as the President of the Federal Republic of Nigeria said: “I belong to everybody and I belong to nobody.”
To an economist’s mind, this declaration could have meant that Buhari has set the goals of building an economy that works for everyone. One year down the line, there seems to be nothing to show in the economic front that the President intends to build an all- inclusive economy. Buhari’s vision to diversify the economy, which relies on oil for more than 70 per cent of revenue, has not translated into big investments, and infrastructure to support local manufacturers does not exist yet. That is the missing link and Nigerians have not heard enough on how this government is going to improve and make the business environment more conducive and put food on their table. There has been little on fiscal policies to drive the growth agenda.
The government had promised to reflate the economy in order to steer it out of recession. As at the time of writing this article, the promised N350 billion that was to be released into the economy to pay contractors so that they can return to work, is yet to be released in the middle of July. As of today, the level of unemployment has reached a very high proportion and to add to this is the fact that there is hunger in the land. Many workers are facing difficulty because their salaries and wages have not been paid. It is not just a problem of government workers but also that of the organised private sector. Many are cutting down on salaries while some are laying-off workers. The argument being put forward by the organised private sector is that there is mounting finished inventories in companies’ warehouses. Lots of unsold finished products as a result of low purchasing power of the citizenry are being stacked in warehouses.
Nigerian consumers have in recent times, faced the problem of a general rise in the prices of goods and services as a result of the hike in prices of petroleum products and the devaluation of the naira. These policies have reduced the purchasing power of consumers and have led to increase in the poverty index in the country. The prices of most of the food items in May 2016 increased. The prices of pepper, tomatoes, yam, rice, garri, onions, palm oil, sweet potatoes, meat, Irish potatoes, beans and vegetable oil increased by 140%, 77.58%, 25.60%, 17.04%, 13.33%, 13.10%, 10.71%, 10.32%, 8.33%, 7.58%, 6.48% and 0.52% respectively. Meanwhile, the price of fish remained unchanged.
The movement in the prices of food items during the month resulted in a 2% increase in Food and Non-Alcoholic Index. There were increases in Transport, Housing, Water, Electricity, Gas & Other Fuels divisions between April and May 2016. Indications are that the price movements in consumer goods and services in May 2016 would increase the CCPI to 198.31 points, representing a month-on-month increase of 2.75%. The reality and magnitude of the spike to 15.6% was not surprising. This is the highest price level in Nigeria since February 2010. The inflation trajectory rose sharply since February 2016 when it spiked to 11.4%. The current inflation spiral has been caused by both fundamental cost pressures, periodic scarcities of essential commodities and forex unavailability. The transmission effect on consumer prices was elevated mainly by an astronomical jump in the price of diesel from N130 per litre to N185 per litre. “Diesel fuel is critical to distribution and logistics in the delivery of goods to the market. It also explains the widening differential between rural and urban inflation.
Besides, there is shortage in some commodities as a result of the insurgency in the North-East of Nigeria that has not allowed farmers work in their farms. The economy has slipped into recession and it is compounding the already difficult situation.
The sad thing is that the current government does not seem to understand the magnitude of the problem not to talk of how to tackle it. As it is, the government is looking for a microwave solution to the nation’s economic woes. Despite what seems as government’s seriousness and sensitivity in handling some of the economic issues, the nation is not getting the right results. The nation is not getting the results because the various governments are not doing the right thing. Nigeria’s economic problems require a robust and fundamental approach.
Nigeria needs inclusive and consistent growth. A cursory look at the state of the economy in the last three to four years shows that Nigeria has not really posted any meaningful growth. Even in time past, when Nigeria was posting an average of 6 per cent and 7.5 per cent Gross Domestic Product, GDP growth rate, it did not result in meaningful employment. World Bank President, Jim Yong Kim, had at the IMF/World Bank Spring Meetings in 2014 stated that Nigeria is one of the top five countries that have the largest number of poor. Nigeria, he said, ranked third in the world while India ranked number one with 33 per cent of the world’s poor. China is ranked second with 13 per cent of the world’s poor, followed by Nigeria where seven per cent of the world’s poor live. He said that Bangladesh has six per cent share of the world’s poor while the Democratic Republic of Congo has five per cent of the world’s poor population. Jim Yong Kim said these five countries are home to 760 million of the world’s poor, adding that another five countries, Indonesia, Pakistan, Tanzania, Ethiopia and Kenya would encompass almost 80 per cent of the extreme poor.
Today, more Nigerians are dropping from the middle class into poverty as a result of harsh economic policies. Nigeria has not taken steps to have sustainable inclusive economic growth.
It has neglected the critical components that bring about inclusive growth. In elementary economics, the four key components that drive growth are consumer expenditure, investment, government spending and export. In Nigeria today, the level of disposable income in the economy is very low. Workers can hardly meet their needs and just cannot save. Savings which drive investment is non-existent in Nigeria. Inclusive growth is principally propelled by the consumer spending. This is why in countries like US, retail shop expenditure data are key measure of how the US economy has fared. The level of personal income of the citizenry is a key factor in determining meaningful growth. The second factor is investment. How well has this government done in attracting foreign investment into Nigerian economy? How has it encouraged local investors to expand existing facilities and venture into new areas?
The third component is government expenditure. A growth-focused government spends a large portion of its budget on critical infrastructure that an economy requires for growth. A look at the profile of government budget in the past six to seven years shows that bulk of government expenditure has been going into recurrent expenditure rather than capital expenditure. This has resulted in huge infrastructure deficit in the country. It is a shame that Nigeria is still battling with power supply. No nation can progress industrially without regular power supply. It is equally shameful that Nigeria is an import-dependent economy. It exports crude and imports finished petroleum products. In the same vein, it exports primary commodities without value addition and import the finished products back into the country. Basic food items such as rice and beans are imported. Yet, this government has no visible plan to change the trend. It is all rhetoric on economic diversification. The hope Nigerians had placed on the change mantra of the government is fast becoming despair. The President Nigerians thought will build an economy that works for everyone has not delivered after one year plus in office. It is now doubtful if the President meant what he said at his inauguration ‘I belong to everybody and belong to nobody.’ The poor are groaning.