The Nigerian economy is currently in dire straits with major economic indicators looking grim amidst increasing vulnerabilities. This has been the story of the economy since May 29, 2015, when President Muhammadu Buhari, who is set to be sworn in for another four years, assumed office.
The underlying fundamentals of the economy have remained weak. Buhari, despite promising in 2015 to revamp the economy, has failed to achieve this in the last four years.
That Nigeria whose Gross Domestic Product (GDP) used to grow at an average of seven percent prior to the Buhari’s administration has continued to totter with growth hovering around two per cent should be discomforting to the federal government. The latest data released by the National Bureau of Statistics showed that GDP growth rate slowed to 2.1 percent in the first quarter of 2019, compared to the 2.38 per cent recorded in the fourth quarter of 2018. This shows that under Buhari, Nigeria’s population growth rate of about 2.7 percent has completely outstripped economic growth.
More worrisome is that Nigeria has overtaken India as the country with the largest number of extremely poor persons. Another data that matters for economic growth, which has continued to weaken in Nigeria is the rising state of unemployment estimated to be about 24 percent.
Poverty and unemployment combined under Buhari are the greatest challenges facing Nigeria. This has been identified as the major factor responsible for the increased state of banditry, killings, kidnapping and other forms of insecurity in most parts of the country.
In addition, the country’s revenue generation level has remained low, even as the federal government has been accumulating liabilities faster, compared to assets. Despite the positive spin about Nigeria’s benign debt to GDP currently around 20 percent, the country expends about 60 percent of its revenue on debt service. That is why less than two years after the country exited a biting economic recession, the alarm bells have started ringing again, with warnings of a possible relapse. The country’s widening deficit also means that it would certainly borrow more going forward to meet its obligatory expenditure.
Arguably the biggest fiscal drain in the economy today is its opaque fuel subsidy regime, which the president vowed to end prior to his victory in 2015. It was estimated to have risen to N731 billion in 2018.
According to a recent World Bank report, the calculations for fuel subsidy are currently based on heavily inflated fuel consumption estimates of 60-70 million litres per day, with the government subsidizing neighbouring countries’ petrol consumption.
Indeed, the Nigerian economy, which has a lot of untapped potential, has been punching below its weight. Therefore, going into the next level projections, President Buhari, who is faced with hard choices, must be decisive if he wants to succeed in the next four years.
The government must work hard to shore up its revenue and must ensure that it achieves a greater level of economic diversification in the next four year, so as to insulate the economy from perennial external shocks.
President Buhari must end the current fuel subsidy regime, which has continued to create a huge fiscal hole and also muster the political will to deregulate the petroleum industry for efficiency and transparency.
There is the need to prioritize the economy over politics this time around, by ensuring that he appoints only men and women, who are competent, have integrity, character and strong vision for the country’s future as ministers.
In addition, the president must pay greater attention to the Economic and Recovery Growth Plan (ERGP). There is also an urgent need for reforms in the power sector so as to lift the level of electricity supply in the country, which would definitely have a multiplier effect on the output as well as address the rising spate of insecurity, proactively in the country and not plunge the economy into a food crisis.
Finally, the government must take advantage of the current rising oil prices to build fiscal buffers.