“The glory of this present house will be greater than the glory of the former house,” says the Lord Almighty, “and in this house, I will give peace” Haggai 2:9. This is one prayer and declaration most (all) Christians profess upon starting a new chapter or phase in their endeavours. Sadly, this is not Nigeria’s reality as an economy. Instead, it is the case of “the glory of the former house is greater than the latter.”
This is evident in a recent analysis carried out by one of our analysts which revealed the pitiable state of the Nigerian economy. To put into context, Africa’s biggest economy, Nigeria, relinquished its position as the fastest-growing economy among frontier peers (Next 11) between the periods of 2000 to 2009 to become one of the slowest growing economies (ranked 8th of 11) in the last decade (2010-2019). Nigeria which grew at an average GDP growth of 7.68 per cent in the 2000s slowed growth to an average of 3.81 per cent in the last decade. We could term this “a horrible performance”.
Obviously, Nigeria proved wrong Goldman Sachs, a global investment bank which named her in 2005 among countries it expected would become the world’s largest economies in the 21st century. Instead, Nigeria ended as the world’s poverty capital. Coupled with her failure to enact some growth-stimulating reforms across key sectors of the economy, volatility in the crude oil market which accounts for over 90 percent of Nigeria’s FX has contributed immensely to the underperformance of the Nigerian economy.
This is a clarion call for the federal government of Nigeria to fast track necessary reforms or risk another decade of slow growth similarly warned by the Brookings Institution and Goldman Sachs in Q1 2019 if Nigeria’s overdependence on the volatile crude oil market isn’t reduced.
As we hope for a prosperous year 2020 and a more glorious decade, we shouldn’t be quick to forget that some economies of the world like China are drifting swiftly away from the production and sale of vehicles powered by fossil fuels, India declaring its intentions to make all new vehicles electric by 2030; Nigeria has to wake up to the profound disruption that vehicle electrification could bring about. Volvo, Jaguar and Land Rover, Volkswagen, Mercedes, Audi and BMW have all promised to roll out electric models in the new decade.
The cycles in crude oil prices have buttressed the fact that it isn’t wisdom to run an economy at the mercy of the oil market. The last five years (2015-2019) did the damaged to the Nigerian economy with oil prices averaging $55 per barrel against $104 per barrel in years preceding that period (2011-2014). In the later periods, oil production also slumped to 1.2 million barrels after a wave of militant attacks on oil installations.
While Nigeria cannot determine shocks in the oil market, it can strengthen its buffers to cushion the effect of these shocks by developing other key sectors of its economy. One way is to open up the economy for an influx of private capital. Statistics from the National Bureau of Statistics show Nigeria losing FDI battle. On average, Nigeria has attracted $222 million each quarter in 2019, an alarmingly low amount for a country estimated to need $31 billion in investment each year for ten years to bridge vast gaps in infrastructure.
What this means is that despite obvious opportunities, foreign capital is not rushing into Nigeria, as the government continues to maintain a stranglehold on sectors that can attract foreign investment at the detriment of the economy and the people.
We call on the federal government to learn from moves of countries like Ethiopia, Ghana and Egypt; who are putting incentives in place to attract capital. The clamour for bold reforms isn’t exhaustible and very much urgent.
