Recent news from Nigeria about easing economic growth and export revenues, depreciating currency, stunted equity market, insolvent sub-nationals and whittled consumer spending power has painted a pretty gloomy picture. For the astute minds, however, all these were not unexpected, given the peculiarity of the crystallizing confluence of headwinds for the year. The real GDP growth rate of 2.35 percent in the second quarter of 2015, which is the lowest real quarterly growth rate since the capture of the quarterly GDP series in 2007, further heightened the rabble-rousing.
For a one-dimensional economy like Nigeria that relies on crude oil proceeds for about 53 percent of government revenue and 95 percent of foreign exchange earnings, any year with weak oil prices was always going to be challenging. The nature and quantum of the oil price decline, and the changing dynamic in the global oil market space, which has resulted in loss of market for Nigeria’s crude oil, has further exacerbated this difficulty. Add that to the uncertainty around every election year, lack of fiscal buffers, a 2015 budget skewed 90/10 in favour of recurrent expenditure over capital expenditure, raging insurgency in the North-East, and insolvency of more than 75 percent of the sub-national governments, and you have a multi-challenged economy on your hands.
The combined impact of all these aforementioned challenges, however, pales in comparison to the singular effect of the transition to a new administration. This change in administration suggests a complete shift in how the business of governance is conducted, and hopefully a turn in the right direction. Although we have witnessed mute fiscal policy since the change of guards on May 29th, anecdotal evidence, however, suggests cleansing of the Augean stable is in progress and gaining traction. This process is expected to birth institutions that are better empowered to perform their constitutional roles without undue interference. We are hopeful that at the end of the tenure of this administration, the foundations for effective and efficient systems of governance and institutions that the citizenry will be ready to defend with their lives would have been laid. We also expect that a number of economic growth enablers would have been activated.
The fact that many of the key economic growth enablers are yet to be activated is the main reason why I’m positive about Nigeria’s economic prospects. An economy that has remained one of the fastest growing globally over the past decade and a half, in spite of self-inflicted harsh operating conditions, is an economy that should be watched with keen interest. Although actual growth has slowed in 2015, we see this as a temporary blip, with a potential for growth that can only be imagined by discerning minds.
Amazingly, the potential for growth can easily be translated into actual growth through commonsensical decisions. Imagine the quantum of activity that will be engendered by stable and affordable power supply, and how the whole value chain of the energy industry will be transformed! One can only imagine how the dynamics of competition, and cost across industries, and the economy as a whole will change with the introduction of modern railway services. How the comatose health sector has succeeded in keeping the majority of the workforce alive and thriving is one of the greatest miracles of our time. That we still have a sector called education, given the quality of our graduates, will make those that conceived formal education chuckle. Despite all these challenges, the Nigerian economy has continued to weather the storm and produce impressive growth figures.
If the solutions to our problems were to involve reinventing the wheel, I would have given up on the possibility of the country ever surmounting these issues. Thankfully, the solutions are within reach, and have been tried and tested with great success in those jurisdictions we now call developed nations. All we need is a government that is in tune with the times, and realises that it has no business running businesses. If the government concentrates on providing the enabling environment for businesses to thrive, and limit itself to regulatory oversight, then we will be closer to actualising our growth potential.
When Nigerians are finally ready, and the consensus between the elite and the masses is reached about the need to put the common wealth of the nation to common use, I see a great empire finally emerge from the ruins of individual greed and despondency to unimaginable heights of prosperity and economic strength.
Olugbenga A. Olufeagba
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