Trust Bola Tinubu, Nigeria’s self-assured yet bumbling president. He will claw at any piece of seemingly good news. Recently, when the National Bureau of Statistics (NBS) reported that Nigeria’s Gross Domestic Product (GDP) grew to 3.19 percent in the second quarter of this year, from 2.51 percent at the same period last year, Tinubu was overly exultant. His newspaper, The Nation, screamed on its front page: “Tinubu hails GDP surge, assures of stronger economic performance.” Describing the anaemic and shallow GDP growth rate as a “surge” shows how Tinubu grasps at straws, denying reality.
Interestingly, while Tinubu was gloating about the GDP figure, Dr Ngozi Okonjo-Iweala, Nigeria’s two-time Finance Minister and current Director-General of the World Trade Organisation (WTO), was lamenting Nigeria’s perennially sluggish GDP growth rate at this year’s annual conference of the Nigerian Bar Association, NBA. So, who is right?
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Well, for context, let’s start with why GDP matters. In the 1940s, the United States government asked the economist Simon Kuznets to develop a system of national accounts. Kuznets came up with the concept of GDP and made a profound statement: “Growth is a rising tide that lifts all boats”. In other words, GDP, the sum of the value of all goods and services produced within a country, and thus the measure of the size of a country’s economy, is the route to job-creation, poverty-reduction and better living standards. Some economists argue that GDP is not a perfect determinant of wellbeing since it only measures things with monetary value and not unpaid but valuable work, such as being a housewife. Yet, GDP is the best available anti-poverty metric. And examples from some countries show it.
Take China and India. Over the past four decades, both countries, together, lifted an astonishing 1.1billion people out of poverty as they enjoyed a step-increase in GDP growth and the superlative economic dynamism lifted all boats. As one writer put it, growth-driven poverty reduction in China and India “must count as one of the most dramatic improvements in human welfare in the history of the world.”
Sadly, not so in Nigeria. Even when the economy was growing at about 7 per cent average annual rate between 2004 and 2010, it was largely a jobless growth; it hardly created jobs or reduced poverty. The World Bank called it “the poverty/growth puzzle” and wondered why the rapid economic growth in Nigeria did not generate greater poverty reduction and how the economy of the size and wealth of Nigeria had such high poverty rates. But the World Bank answered the questions itself. The bank said that “the quality and quantity of the growth has proved insufficient to generate the productive jobs needed by a rapidly growing population.” In other words, the problem was two-fold: one the quantity of growth; the other, the quality.
“Describing the anaemic and shallow GDP growth rate as a “surge” shows how Tinubu grasps at straws, denying reality.”
Truth is, for Nigeria to meaningfully generate jobs and reduce poverty, its economy must grow at an annual rate of well over 10 per cent, given the country’s population. Second, the growth must be far greater in the right sectors, notably in the labour-intensive sectors like agriculture and manufacturing rather than in the capital- or technology-intensive oil and services sectors that employ few people. Finally, growth must be linked to productivity, which is the ability to produce more things – food, goods, services, name it – per hour of labour. It is productivity that leads to a steady fall in prices and improvements in quality, and, thus, to better jobs and living standards. Growth and productivity must be in tandem with each other. But economic growth and economic productivity are a function of the right policies and macroeconomic conditions.
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Yet, the truth, often ignored, is that Nigeria has, over the past nine years, suffered from catastrophic economic policies under APC-led administrations, first under Muhammadu Buhari, now under Tinubu. All the “basic organs of the economy” that Dr Okonjo-Iweala listed in her NBA speech and said should be protected under a social contract have been blatantly violated and bastardised by the APC-led Federal Government since 2015.
Think about it: eroding CBN’s independence and using it as a “fiscal agent” to print money recklessly; interest-rate and exchange-rate manipulations; excessive budget deficits; non-transparent extrabudgetary spending; excessive public debt, with debt-to-GDP ratio now at well over 50 per cent instead of “well below 40 per cent” for an economy at Nigeria’s level of development and vulnerability; and excessive debt-service-to-revenue ratio, at nearly 80 per cent. All of these were the hallmarks of the Buhari administration, and some of them, particularly excessive spending and borrowing, and the lack of budgetary and government transparency, are the hallmarks of the Tinubu administration.
And the consequences have been devastating for Nigeria. Compared with the period between 1999 and 2014, all elements of the Nigerian economy totally collapsed under the APC-led administration from 2015 to date. Take a few examples. Nigeria, under President Obasanjo and Dr Okonjo-Iweala, as Finance Minister, secured $18bn debt relief from its $30bn Paris Club debt in 2005, and cleared the remaining $12bn in 2006; today, Nigeria’s external debt is over $50bn. Indeed, according to a recent report, Nigeria became the third largest debtor to the World Bank’s International Development Association (IDA) as of June 30, 2024. As for domestic debt, Nigeria owed N4.14 trillion in 2005; today, it is N121.67 trillion. In 2014, the exchange rate was N147 to $1, even though the naira was floating; today, it is about N1,600 to $1. In 2014, Nigeria was Africa’s largest economy by GDP; today, it is the fourth largest, with a GDP per capita of $1,109, ranked 24th lowest in Africa. What about the decades-high unemployment, inflation and exchange rates? What about the haemorrhaging of multinational companies due to harsh operating conditions? It’s been nine years of absolute disaster!
Now, let’s come to GDP growth itself. Buhari inherited an economy that was still growing in 2015, despite the economic crisis triggered by the collapse of world oil prices. However, due to his misguided policies, the economy went into a recession in 2016, for the first time in two decades, with a negative growth rate of -1.5 percent. The economy exited recession in 2017 but slipped back again in 2020. Since then, growth has been anaemic, at about 2/3 percent, insufficient to tackle Nigeria’s deepening unemployment and grinding poverty. That’s why describing the new 3.19 percent growth rate as a “surge” is both laughable and delusional.
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In any case, what about the quality of the GDP growth? Well, it was driven by the services sector, particularly financial services, which grew at 28.79 percent, and by the oil sector, which grew by 10.15 percent. Agriculture and manufacturing, the real sectors of the economy, only grew marginally. Yet, it is these sectors that can create jobs and reduce poverty. Of course, with interest rates, that is, borrowing costs, at 26.25 percent and with very high input costs, thanks to the scarcity of foreign exchange, manufacturing cannot grow. And agriculture will remain in the doldrums because the improvements, such as better growing techniques, the availability of fertiliser and ever better tools, that have revolutionised agriculture worldwide have eluded Nigeria, where farming is still stuck in the primitive age.
So, Okonjo-Iweala is right to lament Nigeria’s anaemic and shallow economic growth. And, with apologies to George Orwell, Tinubu is wrong to give an appearance of solidity to pure wind. Over the past nine years, his party, APC, first under Buhari and now under Tinubu himself, has utterly misruled Nigeria and destroyed its economy. Tinubu should own the failure and stop his chest-beating. There’s nothing, absolutely nothing, to gloat about!
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