• Wednesday, May 29, 2024
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BusinessDay

At 60, A big economy with baby steps

Nigeria: A live action ‘Lord Of The Flies’ Reenactment

If Nigeria were to be a public sector employee, it would have retired this year, going by the mandatory retirement age of 60 years. This would mean that it’s time for the country to start reaping the fruit of her labour.

The case is however not the same for Nigeria, a country that is 60 years old which has the largest economy in Africa but is likened to a new-born baby who is still learning to crawl and it is looking forward to the day it will be able to stand.

Since Nigeria’s independence in 1960, the country has seen a total of 14 years where annual Gross Domestic Product (GDP) growth rate was negative, as analysed from the World Bank data.

“Nigerian economy remains well behind its age,” Ayorinde Akinloye, a Research Analyst at CSL Stockbrokers said, linking the reasons to “poor economic policies and in some cases poor implementation of economic plans by economic managers.”

While acknowledging the fact that Nigeria’s economy seems on track, Akinloye explained that the country’s economic managers should cease from making the same mistakes that the “current economic powerhouses made in the past” as they should have learnt from their experiences.

BusinessDay’s analysis of World Bank’s data put Nigeria’s average economic growth between 1961 and 2019 at 3.78 percent but analysis for the last decade shows the economy of Africa’s most populous country has been deteriorating.

For instance, economic growth in Nigeria averaged 1.2 percent between 2015 and 2019. Problem with that is the population grew two times faster at an average of 2.6 percent per year. Those five years were a painful squeeze for Nigerians who grew progressively poorer, as economic growth was too slow to create sufficient opportunities for a rapidly rising population.

For over 180 million Nigerians who are not fortunate to be among the 10 percent of the country’s rich cycle, a deteriorating economy means a tough standard of living.

The GDP per capita level in Africa’s most populous nation has seen diverse fluctuations over the years to $2,387 in 2019, about 1 percent decline from $2,396 in 2018, according to World Bank statistics.

This amounts to about N862,000 per year (using the exchange rate of N361 for those years), N72,000 per month, and N2,400 daily (assuming 30 days monthly).

When considering Nigeria’s inflation rate which has mostly been at double digits, particularly, the last four years which saw the average of 13.9percent within the years 2016 and 2019, the country’s per capita income of N2,400 daily is grossly insufficient due to eroded purchasing power.

The most recent report by the National Bureau of Statistics (NBS) reveals that Nigeria hit yet a higher level of monthly inflation of 13.2% in August 2020, which was the highest inflation recorded in 29 months since March 2018.

The high cost of living in Nigeria which has continuously been on an upward trajectory has made it almost unbearable for millions of Nigerian who have become poorer due to lack of jobs and poor earning capacity.

Exacerbated by the outbreak of COVID-19, Nigeria’s joblessness rate of 27.1 percent is 4 percentage points higher than the 23.1 percent reported in Q3 2018 and 19.7 percentage points more than 7.4 percent recorded in Q2 2014.

Since 2017 when oil-dependent Nigeria emerged from its economic recession, not only has the country’s economic growth been sluggish but only a few sectors triggered the expansion, further undermining the country’s capacity to create enough jobs to meet the growing number of labour market entrants.

“Nigeria has demonstrated that the private sector remains the most organized controller of resources. Thus, the government needs to allow the private sector to control more resources in the country while the public sector acts as a policymaker and regulator for checks on manipulative practices,” a Lagos-based analyst said.

Long before the pandemic started spreading across the globe late last year; Nigeria’s economy had been gasping for breath for five years.

While health experts have warned that persons with an underlying health condition are likely to contract COVID-19, economists have explained that countries with underlying economic challenges are expected to be hit the most by the impact of the pandemic.

Nigeria retains a long list of economic reforms that can unlock economic growth and reduce poverty but have been stuck.

Decrepit infrastructure and the lack of a functional rail system, for example, means Apapa, which houses Nigeria’s main port, remains a crying shame.

Infrastructure deficit in Nigeria has been a key challenge as the nation’s capital stock has been plummeting from a peak of N105.06 billion in 1981 and has since struggled to rise back up, according to the analysis of World Bank’s statistics. Data by the world lender puts the capital stock of Nigeria at N70.3 billion as of 2018, barely 70% of the infrastructure capacity in 1981.

This is not so surprising considering that capital stock as a percentage of GDP has also been on a downward trend, from accounting to 89.4% of GDP in 1981 to a mere 19% in 2018 and 14.7% in 2017, which represents a decline of over 70 percent points in 39 years of data records availability.

The lack of infrastructure in Africa’s largest economy has been highlighted by many analysts as one of the key reasons why it is finding it difficult to attract the long term Foreign Direct Investment (FDI). Nigeria’s net FDI in terms of the balance of payment has been negative for over four decades from 1977 till 2019 except for just 1980 which was a positive balance.

A look at FDI net inflows as a percentage of GDP shows that Nigeria has been struggling in this regard, hovering between 0 and 2% as the average from 1970 till 2019 was 1.52% of national GDP for the nearly 50-year period.

“It is easy to be pessimistic because the country has not made enough progress as we would have liked,” Andrew S.
Nevin, Partner – West Africa Financial Services Leader and Chief Economist said, adding that even though it’s not where it is supposed to be, the economic progress has been good, particularly in the last ten years that he has been in the country.

Endurance Okafor & Favour Olarewaju