It is no longer news that the volatility of the oil price is affecting oil dependent economies globally. Some countries that have economic reserve like UAE and Saudi Arabia are at least still absorbing the shocks while are having abysmal times like Venezuela, Nigeria, and Brazil etc.
The Nigerian economy which is the point of concern has suffered extreme set back with real growth slumping all time lowest full year contraction since 1991, the 27 pages report from National Bureau of Statistics for Q2 2016 has called for a serious worry though government spoke persons have come out to dispel fears and that the economy will survive the contractions and will make a leap in Q3 all through to Q4. This is the prayer of all Nigerians who cannot afford regular meals, this is the wishes of Nigerians who have lost their jobs to the inability of their employers to fulfil contractual salary obligations the most recent being Aero Contractor workers, this is the demand of the Nigerians that are coping with high prices of commodities and it is the very cry of Nigerians that cannot longer afford payment of rent and have their belongings thrown out to the street. Schools are resuming now and many hopes have been lost on fees payment, transportation to and from school of the children and feeding as well.
At the wake of this economic crisis, government was recalcitrant to declare state of emergency on the economy and the Jonathan administration played politics of ‘It is Well’ with our economy. First there was the paper fraud called rebasement of the GDP which does not have any impact on the common Nigerian on the street who hustle day and night to make ends meet. This rebasement happened before the oil prices slumped and government was riotous without any significant investment in infrastructure and the real sector. There was no Joseph to caution the Pharaoh but even if there were Joseph, the Pharaoh might not listen to the advice. The boom ended with negative oil shocks caused by so many factors from the fact that US that usually buy crude oil from Nigeria, Saudi Arabia and Algeria is now competing in supply to the Asian Market; OPEC is no longer cooperating to freeze or cut supply, create artificial scarcity for prices to surge, Iran and Saudi Arabia are waging war of wit but we will wait to see in Mid-September if cabal will reach compromise; there have been regular attack on oil infrastructures by militant in the Niger Delta area that has automatically cut supply and hence lower import proceed. The European Market is going through hard-hitting period and demand for oil is low, hence, the global oil glut. Crude oil market for the reasons stated has bowed to Economics 101 that resulted in negative price shocks. The chart above (source-NY Times.com) summarizes the negative shock.
We voted for change from supposed inactive and ineffective government but the new government dispensation has been without any significant economic road map. We do not know for sure the CVs of the economic team; we do not know the constituent of the think tank of the economy. The government muscled political will to partially deregulate the downstream sector which has been long overdue but without any plan to ameliorate the shock from price hike. Removal of subsidy is not alien to the world at least not to the western world but you don’t remove subsidy without some palliative measures. We know when Jonathan Administration attempted removal of subsidy, our streets were occupied and he rather raised the price but there was an establishment of SUREP. Part of the suffering in the land is price and transportation shock from subsidy removal, where are the programmes and initiatives to cushion the effects of the PMS Price increment?
Theoretically, before subsidy is removed, there should have been huge investment on road infrastructure, the rails would have been opened and functional that will avail low transport costs and transporters should have been empowered but we are still waiting for these to happen. The railway projects have politicized and we hear our leaders play promise-and-fail game with the wellbeing of the people, we read more on the pages of the newspapers than we see in reality.
IMF warned some months ago on the direction of the economy but government called it a doomsday prognosis and in May 2016, the honourable Minister of Finance said during Senate session and after NBS released Q 1 scorecard that we are in Technical Recession and promised that the economic outlook is bright and Nigeria will survive the economic onslaught but at the end of Q2, the report is devastating and calling for concerns.
GDP Contribution :
According to National Bureau of Statistics (NBS), “In the Second Quarter of 2016, the nation’s Gross Domestic Product (GDP) declined by -2.06% (year-onyear) in real terms. This was lower by 1.70% points from the growth rate of –0.36% recorded in the preceding quarter, and also lower by 4.41% points from the growth rate of 2.35% recorded in the corresponding quarter of 2015. Quarter on quarter, real GDP increased by 0.82% During the quarter, nominal GDP was N23,483,954.78 million (in nominal terms) at basic prices. This was 2.73% higher than the Second Quarter 2015 value of N22,859,153.01 million. This growth was lower than the rate recorded in the Second Quarter of 2015 by 2.44% points.”
It is mind burgling that as the Minister of Information was quoted as saying the economy is out of the Presidents hand at a time, I think it is becoming real the kind of issues we have in our hands and I have quietly prayed for Mr President for wisdom to steer the affair of the state but I think it is time for our leaders to learn and apply the principles of engagement. Each time an economic analysis is released in the United State or in the UK, there is always the statement from the President or Prime Minister in person and that session will critique and present action points, make realizable commitments in facts and figures but we are in the dark in Nigeria. We want a change of the economic team, we need our dear president to be more engaging, we need to know the core of the challenges and steps fashioned beyond the war on corruption and name calling syndrome. The argument on the war of corruption is for another day. The President has worked hard on the antigraft war but I think it is not being appropriately fought. Government needs to plug the holes even before the war else the recovered will be stolen again and that becomes a vicious cycle. How much of Abacha recovered loot is in the account of individuals?
Agriculture Growth According to NBS:
The report also states that “Agriculture is made up of four sub-activities, namely: Crop Production; Livestock; Forestry; and Fishing. In nominal terms, the sector grew by 13.24% year-onyear. This was higher than the growth rate recorded in the corresponding quarter of 2015, but lower than that recorded in the First Quarter of 2016 by 4.07% points and 0.91% points respectively. Growth in the sector was driven by Crop Production output, which accounted for 93.45% of overall nominal growth in the sector as a result of the onset of the harvest season. Agriculture contributed 19.71% to nominal GDP during the quarter under review. This was higher than the shares recorded in the corresponding period of 2015, and the First Quarter of 2016 of 17.89% and 19.17% respectively.”
It is sad to know the approach government of the day has taken in the development of the Agric sector. Imagine the Governor of Imo State reducing staff work days to 3 for acclaimed low productivity and that he wants them to go back to the farm. This is Venezuela approach and he has to be stopped. The same governor also said the staff of the state civil service are not computer literate and the question is, has he organised any training for them? He wants them to go to the farm, where are the tractors and equipment that will enhance commercial farming? If he wants people to go and back to the farm with hoes and cutlasses to start making ridges, he has failed in situ.
Imagine government approach to agriculture. Government has to effectively subsidize agric business with machineries and crop assistance, fertilizer and others and ensure we sufficiently feed our nation in a short time target then start exportation. This is the solution to the economic challenges at hand.
It is good for all of us to go back to the farm but the youth were not sent to school to make ridges again but to be innovative in the use of modern technology to drive food production. Until technology bubble, the most comfortable people in the US and EU are farmers and still they are. Government should invest in this sector and replace the contribution of oil to the budget with the sustainable agriculture which we were known for before the oil boom that has boomeranged today. The oil has not done us any good, if it was not discovered in Nigeria, we would have been better today and our politicians would be rent seekers and not penthouse owners, corruption would not have been our problem, we probably be one of the most industrialized nations in the world, our rail lines would have become a complex connections and the life expectancy of a Nigerian would have been higher and more fruitful than it is today.
Manufacturing according to the Report:
“In the Second Quarter of 2016, Real GDP growth in the Manufacturing sector was negative 3.36%, which was 0.45% points higher than the growth rate recorded in Second Quarter of 2015. Growth was also 3.64% points better than rate recorded in the First Quarter of 2016 indicating that conditions for manufacturers were improving. (Figure 6). On a quarter-on-quarter basis, the sector declined slightly by 0.20%. The contribution of Manufacturing to real GDP was 9.42% in the Second Quarter of 2016, lower than 9.55% recorded in the corresponding period of 2015, and 9.33% in Q1 2016.”
This is expected since we import almost all what we use and even the raw materials that can be produced in Nigeria for the few manufacturing firms are imported. Exchange rate hike that resulted from oil price shocks has affected the manufacturers and they no longer can afford cost of production from high cost of diesel to high cost of raw materials.
Government needs to be real in electricity generation and distribution. The political will Mr President exerted on deregulation of the downstream should be applied on electricity generation and distribution. The Bank of Industry should the empowered to help manufacturers beyond the activities now. They can be given tax holiday and zero interest and keenly monitored loan to grow our manufacturing sector and also enabling policy that will reduce or stop importation of the line of product from the lines.
Construction Real Growth:
According to NBS, “The real growth rate of construction was negative 6.28% (year on year) in the Second Quarter of 2016, a decline of 12.69% points from the rate recorded a year previous. Relative to the preceding quarter, there was also a decline of 0.91% points. Quarter on quarter, the activity grew by 5.12% in real terms. Its contribution to total real GDP was 4.30% in the Second Quarter of 2016, marginally lower than its contribution of 4.50% in the previous year, but higher than the contribution of 4.13% recorded in the preceding quarter.”
It is also bad to see that construction is on downward trend and that shows negative growth in the building of road and infrastructure.
Many of the economic indexes are having a free fall year on year without curious action been taking to safe the soul of Nigeria.
Unemployment is at its peak, inflation rate is at damaging stage, the rate at which people lost their jobs in the financial sector, the construction sector, the manufacturing sector is alarming, prices of food is all time high and as seen in the report also the real growth was negative and that is where the engine room of the nation belongs, the SMEs.
In conclusion, our President should be more engaging, he should shun Aso Rock politics of sycophancy and belligerent advice of people that are doing hide-and-steal on the welfare of Nigerians and come out, buy fuel from the petrol station and from his personal pocket, burn it on the road compare it to when he was a common Nigerian like others. Our President’s wife should go to the market to buy food stuff from her pocket, prepare the meal and compare it to when she was in a kitchen in Kaduna. We Nigerians know where the shoe pinches and we demand solution before the like of Venezuela crisis will befall Nigeria. God forbid! Let the government start operating as though there is no oil and we would survive, let the President monitor the activities of the Ministers and we would see real growth in the construction and all sectors.
Finally, government should re-enact the whistle blowing channels available for Nigerians to shout out loud and be heard by the credible people in government. Let the local and state government activities be monitored and let the immunity clauses be removed including that of the President. We have seen jubilant dancing of the discovery of Nickel in Kaduna State, another distraction? Yes we can extract and export but food production and sales cannot seize and so long as there are human on earth, there would be demand for food. Agriculture and some sustainable extractive industry sectors are the answer to our problems in Nigeria and let’s go ahead and make the magic happen.
We need the message to go to Mr President. Give us Economic Road Map and Action Plan!