At the time of President Muhammadu Buhari’s first coming in 1983 as head of the military regime that overthrew civilian President Shehu Shagari, Nigeria’s economy was already showing signs of stress from falling oil prices and an overvalued currency.
Growth had begun to decelerate from 4.2 percent real growth recorded in 1980, to a -13 percent contraction in 1981, -1.05 percent slide in 1982, and another -5.05 percent contraction in 1983 (World Bank estimates).
The oil glut of the 1980’s was largely fingered as the culprit as Nigeria’s economy was even more tied to oil then, than now.
A surplus of crude oil caused by falling demand following the 1970s energy crisis meant that the inflation adjusted real 2018 dollar value of oil fell from an average of $106 per barrel in 1980 to an average of $23 per barrel in 1986.
Nigeria suffered a sharp drop in government revenues on account of the slump and rising cost of foreign debt service.
Buhari responded by imposing austerity economic policies when he came to power, cutting down on imports and government expenditures, and trimming the civil service.
In 1984 the economy however contracted by -2.02 percent, meaning most of the policies enacted by Buhari and his team to kick-start growth had largely failed.
Buhari’s tenure was short-lived though as he was soon overthrown in another coup in 1985 led by General Ibrahim Babangida.
Come 2015 and Buhari was again elected as President of Nigeria, at a time of falling oil prices, slowing growth and growing economic stress.
And unluckily again, in the 32 years since he last ruled the country, Nigeria had still not managed to wean itself off of oil (at least in terms of its impact on the macro-economy through dollar inflows and the FGs fiscal health), as proceeds from the sale of crude accounted for 95 percent of Nigeria’s dollar earnings and 70 percent of the Federal Governments budget.
Once again the familiar oil fuelled boom bust cycle seemed to have occurred.
GDP growth that printed at 6.31 percent in 2014, slowed to 2.70 percent in 2015, -1.6 percent in 2016, 0.8 percent in 2017, and estimates of 1.8 percent for 2018.
In other words growth rates more than halved (since the most recent peak) and a prolonged U or L shaped recovery from the recession seems to be staring the country in the face.
Brent crude oil prices also fell from an average of $98.89 per barrel in 2014 to $52.32 in 2015, $43.74 in 2016, $54.15 in 2017 and $71.4 in 2018.
On the basis of the above analysis alone one could argue that Buhari has been extremely unlucky in the timing of his entry into Nigeria’s political space, either through the barrel or ballot.
But that would not be entirely accurate.
This is because Nigeria has seen periods of low oil prices before that combined with high growth rates.
Another reason would be that at any period between 1999 and 2018, oil as a share of Nigeria’s Gross Domestic Percent (GDP), has never been lower and today is at somewhere close to 10 percent.
Between 1999 and 2002, which coincided with the period when another ex-military dictator Olusegun Obasanjo came to power in his first term, Brent oil prices were much lower than today and averaged $17.44 per barrel (1999), $27.6 per barrel (2000), $23.1 per barrel (2001), and $24.36 per barrel (2002).
Growth rates for the same periods were 0.47 percent (1999), 5.3 percent (2000), 4.4 percent (2001) and 3.78 percent (2002), according to World Bank data.
In 2008/2009 at the depths of the great recession when oil prices fell from as high as $147 (2008) to below $35 per barrel (2009), Nigeria still managed 6.9 percent expansion for 2009.
So what might account for the lacklustre economic performance this time around given we have seen periods of low oil prices before that didn’t translate to mediocre growth rates?
The key seems to lie in making your own luck, by having counter cyclical buffers in place to ease the fiscal stress as in 2009 or embarking in wide ranging reforms to attract private capital and ease the strain on the government’s balance sheet as was the case between 1999 and 2002.
That means that policy responses and choices in the context of an economic crises, do matter.
Doing simple things like quickly adjusting your currency (which helps to act as a stabilizer), when the price of your main export earner collapses by more than 50 percent from its recent high, getting rid of wasteful (fuel) subsidies, especially when they are becoming increasingly unsustainable, pushing inefficient government owned enterprises off the government balance sheet and unto the private sector through privatisation to free up funds for more critical spending (health and education), having a pipeline of infrastructure projects that can be financed by private capital, are all necessary steps to help staunch the bleeding and return the virtuous growth cycle.
It may also help to reduce/ eliminate regulatory tolls, and harassment of the private sector.
In that sense the fault may not lie in the stars, but in our (bad policy making) selves.
Patrick Atuanya
