Nigeria is at another of its four-yearly crossroads around the electoral calendar in 2019. Just like 2015, political risks around elections are conjoined with economic uncertainty-in 2015 due to sharp declines in global oil prices and investor reticence; this time much of the economic woes are results of wrong policy choices.The economy is in a weak place – GDP did not reach 2% in any of the three quarters reported in 2018 (1.95% in Q1; 1.50% in Q2;and 1.81% in Q3); in the last reported quarter, non-oil economic sectors grew combined 2.32% while the oil sector returned to negative territory in the last two quarters, contracting by -3.95% and -2.91% in Q2 and Q3 respectively. In spite of resurgent oil prices, full year 2018 GDP growth is unlikely to reach 2% while population grows by around 2.8%.
Most economic sectors remain muted-agriculture grew by 1.19% and 1.91% in Q2 and Q3 respectively; solid minerals by 2.86% and 3.58%, manufacturing by 0.68% and 1.92%; construction sector growth crashed to 0.54% in Q3 after growing by 7.66& in Q2; trade barely grew 0.98% in Q3; hotels and restaurants(accommodation and food services) only grew by 2.66% in Q3; the real estate sector remained in a long term contraction; just as the financial sector also recorded a quarterly contraction of 4.81%. Other sectors did poorly as well-education, health and public administration, with the key exceptions being transport, telecommunications and utilities. Our economic recovery post-recession (if it can be called a recovery) is at best tepid, and risks of a second recession remain!
Economic reforms have essentially been suspended since 2015-downstream deregulation in the oil and gas sector has not happened; the legislative attempts to reform the upstream have been undermined by the president; the power sector has not substantially improved in three and a half years and policy regression is likely; there has been no significant privatisation; and no worthwhile sectoral reforms have been carried out. The current government is evidently not well disposed to or at best ambivalent about private capital and prefers state control or crony capitalism if recourse must be had to the markets as some recent transactions illustrate.
There are difficulties beyond the economic front, arguably with security and corruption as well-Boko Haram is strongly resurgent in the North-West, deadly banditry reigns in Zamfara, Kaduna and Katsina in the North-West, and herdsmen have decimated North Central Nigeria and increasingly threaten communities in the South; and the anti-corruption effort has since lost much credibility; in spite of all these, Buhari remains more likely than not to be re-elected. His poor and largely uneducated base in the North-West and North-East though confused, may still vote for him. He may also still carry the crucial South-West vote and if things get difficult, the evidence so far suggests Buhari is not unwilling to deploy strong arm tactics in order to retain office. The evidence of recent elections in Ekiti and Osun States and the travails of the current Chief Justice of Nigeria, Walter Onnoggen are instructive in that regard. Atiku Abubakar cannot be written-off however and may yet spring a surprise-his alliance with fellow presidential aspirants in the opposition PDP have strengthened the party’s hand in the North-West states of Kano, Jigawa, Sokoto and even Buhari’s home state of Katsina; Buhari appears to have completely lost the Middle-Belt; and the South-South and South-East remains strongly pro-PDP. The outcome of the vote, in the end will be decided by voters in the mainly Yoruba South-West. The elections will be close, and the international community may have a role to play in the aftermath!
Nigeria’s social context is very dire-poverty, unemployment, insecurity, quality of education and health and living standards have all gotten much worse in recent years; and insecurity due to the activities of boko haram, Fulani herdsmen, so-called bandits in Zamfara and other parts of the North-West, cult groups, vigilantes, militant groups and violent transport unions could reach a head in the midst of disputed or controversial elections. Nigeria’s short and medium term scenarios remain plodding along with suboptimal growth and unused potential in both political and economic terms or soaring to its true potential if strong economic and political reforms are implemented;but if the country mismanages it’s politics and elections in 2019 or down the road in 2023 or allows ethnic and religious fault lines to continue to expand while socio-economic conditions deteriorate, a meltdown scenario is easily possible!
The IMF and World Bank projects 2.3% and 2.2% GDP growth respectively for Nigeria in 2019 (population growth will outstrip economic growth again this year, so poverty will likely increase and per capita income will reduce) while the Federal Government of Nigeria foresees growth around 3.0% in its budget-the World Bank/IMF are more likely to have the more accurate estimate. Global oil price projections for 2016 by the International Energy Agency, OPEC, IMF and World Bank range from the IMF’s conservative $50.30 per barrel to the World Bank’s quite optimistic $74, while IEA projects $56.25 for Brent Crude-the projections suggest Nigeria’s budget oil price benchmark of $60 per barrel may be very optimistic! And Nigeria may not get an oil price rescue from our macroeconomic and fiscal challenges! The country enters 2019 with a handful of risks around oil price shocks, budget deficits and sovereign debt servicing (Nigeria now expends 66% of its revenue on debt service!), growth and politics; after the elections in February and March 2019, policy must move decisively to avoid fiscal and economic crises.