Chinelo Ofoche & Izuchukwu J. Okoye ||
As Nigeria celebrates its 59th independence anniversary, it becomes imperative to assess how the average citizen is faring economically. The Federal Government continues to enunciate presumably accomplished and envisaged policies, yet the word on the streets tell a different story as a combination of her not-so-passionate fiscal, monetary and economic policies continue to impact adversely on the Nigerian economy with dire consequences for the common man. Government’s best intended policies it seems, are affecting poor Nigerians adversely.
The saying “let market forces decide”, even though a cliché, is a commonly accepted economic dictum. The goal is to afford all and sundry freedom to make choices based on their disposable income and purchasing power. Put differently; “each according to his needs and resources.” Universally, the four traditional market forces are; government, international transactions, supply and demand and speculation and expectations. Unfortunately, the Nigerian government through its fiscal policies seems to have become the main driver of the economy. With Nigeria’s economy emerging recently from recession, residual inflation, rising cost of living and diminishing disposable income continue to exacerbate hunger and poverty. Nigeria having overtaken India as the world poverty capital makes the Nigerian economy a very topical issue. It is increasingly evident that the economic recovery plan has fallen short of government projected benchmarks. All remedial palliatives and quick-fix measures – ad-hoc stipends – are not making the desired impact. Moreover, the prevalent trend of growing national debt, subsisting deficit-ridden national budgets, and the much devalued Naira remain core concerns. Nigeria’s present economic ranking is certainly not the best. Her economic freedom score is 57.3, which translates to its being 111th freest in 2019; she is ranked 14th among 47 sub-Saharan countries.
The federal government in placing a ban on imported rice and other food items, while a positive measure, seem to have overlooked the diminished food supply from the Northeast food basin, due to disruptive climate change and activities of Boko Haram. For the common man, the Jollof Rice Price index, as a measure of the economy, continue to spiral upwards, moving from an average of N4900 per pot in July 2016, to N6300 in June 2019. Presently Nigerians spend 56% to 60% of their income on food. Meanwhile, a persisting concern is that the approved thirty thousand Naira national minimum wage, though insufficient, is not being implemented by State governments and the organized private sector. From the perspective of the “motor park economist” nothing seems to be working. A 50kg bag of rice has gone from N7000 in 2014, to N15000 in 2016 and N21,000 in 2019; a small two-pound ice fish has gone from N150 to N400 during the same period. Simply, put things are hard for Nigerians. There is not much to celebrate as the country heads towards its sixtieth year.
At a time when Nigeria’s Diaspora remittances have grown to $23bn annually, Nigeria continues to borrow. Unquestionably, borrowings and devaluation of the Naira continue to impact negatively on Nigeria’s economy. To sure up its internally generated revenue base, the Federal Government recently decided to hike the Value Added Tax (VAT), from 5.0% to 7.2% without due consideration of its possible consequences to the diminishing buying power of Nigerians. If Nigeria is hiking the VAT to raise capital, why is she set to borrow N2.5bn from the World Bank? As things stand, the extant VAT regime, in force since 1997, mimics sales tax and tend to place undue burden on payers and vendors, more so its remunerative and regenerative modalities are still evolving. Whatever the accrued costs are; they are simply passed on to the poor consumers.
The prevalent fiscal and economic policies are supposedly made with the best of intentions, and with a view to realizing the federal government’s promise to move the nation to the “Next level.” But it is now clear to all and sundry, that the prevailing economic policies are not so people-friendly; and indeed may not be working optimally. This may explain why the FGN decided to change its economic advisory team both in nomenclature and membership: swapping the erstwhile Economic Management Team (EMT), with the Economic Advisory Council (EAC). The change is a tacit acknowledgement, that despite the Economic Recovery and Growth Plan (ERGP), the Nigerian economy remains in the doldrums.
Why do we borrow and what are we borrowing for? If the essence of borrowing is attained, why do we devalue the Naira? Is there salvaging value in the dual track policy of devaluation and borrowing? Have we looked into what happened to the previous funds borrowed? And why borrow more, when states are refusing to pay back bailout loans given to them recently. As a backgrounder, we need to evaluate where Nigeria stands on its overall indebtedness – external and domestic. We need to also look at the most recent expenses as represented by annual national budgets. Nigeria’s overall public debt mosaic over the past four years presents a worrisome trend. It has been on the increase. In 2016, Nigeria’s total public debt increased by 37.4% rising from N17.28 trillion in 2017 to N24.41 trillion in 2018. Recent figures released by the DMO indicate that after the first quarter of fiscal year 2019, Nigeria’s total debt has just increased by 2.3% and now stands at N24.95 trillion. A very sad trend being that presently almost 50% of Nigeria’s revenue is dedicated to debt servicing.
What is more troubling is that the national budget continues to rise, with bigger deficit overhang every succeeding year. For the last four years, starting with 2016, the budget has gone from N6.06 trillion, with a deficit of N 2.20 trillion or 36.30% to N8.83 trillion with a deficit of N1.86 trillion or 21.06% of the total budget in 2019. Recently, the Federal Government announced its 2020 projected budget as N9.79 trillion, with a deficit of N2.142 trillion. The combined twin-track policy of excessive borrowing and deficit budgeting does not augur well for Nigeria. This is especially so, since the return in concrete development and quality of life terms are hardly commensurate to the expenses. These deficit budgeting and external or domestic borrowing could be countenanced, if in essence the loans are used to finance growth and development, and boost investments with a view to growing employment and the overall economy. Unfortunately, the question that arises is whether it is meaningful to continue borrowing to finance recurrent expanses, when previous borrowings have not yielded the desired results. This is more so, when states that owe N614bn are finding it hard to repay the loans to the FGN.
Realistically, it needs to be acknowledged, that the set goals of previous borrowings were largely not achieved, due to poor economic policies and planning, poor feasibility study prior to the time of borrowing, and corruption or embezzlement of the borrowed funds. Synoptically, the resulting fiscal indiscipline presently translates to hunger and poverty, weak economic growth that imposes on the country huge unemployment, legion of out of school children, poor returns on investment, and to a certain degree, capital flight. It is the poor man in whose name these policies and borrowings are made, that bears the brunt of it all. Government needs to rethink its economic and fiscal methods, in the interest of the common man.
Ofoche is a Senior Adviser at Selonnes Consult, Awka. Okoye is a Research Associate at Selonnes Consult, Awka.
Mr. Obaze is the former Secretary to the State Government of Anambra State, Nigeria from 2012 to 2015 - MD & CEO, Oseloka H. Obaze. Mr. Obaze also served as a former United Nations official, from 1991-2012, and as a former member of the Nigerian Diplomatic Service, from 1982-1991.
Selonnes Consult Ltd. is a Strategic Policy, Good Governance and Management Consulting Firm, founded by Mr. Oseloka H. Obaze who served as Secretary to Anambra State Government from 2012-2015; a United Nations official from 1991-2012 and a Nigerian Foreign Service Officer from 1982-1991.