Just over a week ago I was heading back to Abuja from Jos. Just after Mararaba we hit a bit of traffic. After waiting for nearly twenty minutes, a huge inconvenience by Abuja standards especially on a Sunday, we finally got to see the main cause of the traffic. A bus had broken down while trying to make a U-turn and there were a couple of hefty looking men trying to push it out of the way. They were pushing it slowly and were making progress but, as evidenced by the traffic build up, were not pushing it fast enough. In this instance the problem was not the amount of effort they were putting in. The problem was that the bus had broken down. The engine was not working.
The release last week of the fourth quarter 2019 GDP data made me remember this incident. For those who are unaware, the economy grew by 2.55 percent in the fourth quarter compared to the same quarter in 2018. For the whole of 2019 the economy grew at 2.27 percent. That growth is a long way better than the collapsing economy we saw in 2016 when the economy shrunk by 1.6 percent. So, I guess we should be thankful for that. However, this 2.55 percent growth is still wholly inadequate. As at last estimate the population is growing at about 2.59 percent. Which means on average Nigerians are still getting poorer. Even more worrying given the already high level of poverty and unemployment. Far away from the kind of growth we need to see to move the needle on that.
In some sense the performance of the economy is just like the incident with the people pushing the bus. The bus has broken down and needs to be fixed. Pushing the bus out of the way is of course necessary and if they get lucky, they may be able to push the bus to speeds of five or even ten kilometres per hour. But they can never hope to get the bus to speeds of 70 to 80 where it needs to be to function as a bus. Same with the economy. There are a lot of people working very hard both in government and in the private sector to “push” the economy forward. But the economy is fundamentally broken. All that pushing, while useful, cannot replace the fundamental job of fixing the engine. If the engine is not working properly then the sluggish growth will continue.
If you look at the sectors of the economy responsible for growth in 2019 then it becomes clear that the engine is faulty. The oil industry was a major driver thanks in no small part to the Egina platform that came on stream and boosted oil production. But it is unlikely that growth will continue. There are rumours of the petroleum industry bill being passed this year but until it passes, we must wait and see. The second major driver, at least in the fourth quarter, was the financial sector thanks to the one-off policy tricks that forced banks to rapidly expand their loan books. The verdict on that one is still out but again it also looks unsustainable.
Finally, the only major sector that appears to be powering on is the telecommunications sector. That looks set to continue because we continue to see investment go there. If you want to know where growth will be tomorrow look at where people are investing in today. The two big sectors that employ a lot of low skilled labour, agriculture and trade, continue to struggle though. Agriculture continues to grow at near the slowest pace in two decades and the trade sector continues in technical recession no thanks to the border closure.
All that slow growth is due to the core parts of the economy that remain broken. International trade policy remains broken. The foreign exchange market remains broken. The economy continues to systematically not invest enough in education and health, instead burning value on energy subsidies. The security challenges which underpin any economy remain difficult. The infrastructure deficit continues to close only at very slow pace. And investment in Nigeria, beyond short term government paper, continues to be non-existent. If we want to get the economy growing fast enough to start to reduce poverty and unemployment, then all those things and more need to be tackled. Until then we continue pushing at the new Nigerian rate of growth.
NONSO OBIKILI
Dr. Obikili is chief economist at BusinessDay.
