30 April 2018

Nigerian Economy Still On the Brink of Recession

Photo: @NGRPresident/Twitter
President Muhammadu Buhari arrives in Washington DC ahead of his four-day working visit to the United States.

Quantum Global Research Lab, an independent research arm of Quantum Global, has ranked Nigeria as the 14th most attractive economy for investments flowing into the African continent--News Report, March 29, 2018.

ADDRESSING the sixth edition of the African CEO Forum in Abidjan, Cote d'Ivoire, Professor Mthuli Ncube revealed that the top ten nations are: Morocco, Egypt, Algeria, Botswana, Cote d'Ivoire, South Africa, Ethiopia, Zambia, Kenya and Senegal.

On every continent the most attractive economy for investment is also the largest. The USA leads in investment attraction in North America; Brazil in South America; China in Asia and Germany in Europe. Only in Africa do we have the anomaly of the acclaimed economic giant not being the most attractive for investors. Nigeria is not even second or third. The giant of Africa is ranked 14th. It was once ranked as low as 29th. This means that Nigeria is never the first port of call when business people are seeking for investment opportunities in Africa.

Some of the reasons are not difficult to discover. Annual Gross Domestic Product, GDP, growth is one of the most important variables foe determination of a nation worthy of attention. In that regard, the World Bank's recent release of projected global GDP growth should help explain some of the reasons.

The World Bank recently released its 2018 economic growth forecasts for nations all over the world. Global Gross Domestic Product, GDP, is supposed to grow by 3.1 per cent during this year. Sub-Saharan Africa will grow marginally faster - up by 3.2 per cent. But, Nigeria, the presumed largest economy on the continent will manage only 2.5 per cent growth - if it succeeds. By contrast Kenya will jump by 5.5 per cent, Tanzania 6.8, Senegal 6.9, Cote d'Ivoire is expected to expand by 7.2 per cent and Ethiopia by a whopping 8.2.

Even in Africa, Nigeria is not top ten; add the nations of Asia like China, India and South Korea, among others, and you can see that our 2.5 per cent only drags down the global average. How on earth does the nation reduce the average rank as topmost attraction?

Just last week, the Central Bank of Nigeria, CBN, warned the Federal Government that we need to work hard to prevent Nigeria from sliding back into recession. CBN has it reasons. The GDP growth for 2017 was a mere 0.8. Despite the penchant for making a mountain out of two grains of sand by politicians, most economists know that the euphoria which officially accompanied the modest growth was totally unjustified. An economy growing at 0.8 per cent is on the brink of another recession or what is referred to as the double dip.

One factor which might trigger a return to recession is the annual failure to pass the national budget on time. Despite the enormous efforts of the Minister for Budget and National Planning, to get the budget to the National Assembly in early November, it is again being delayed and might not be signed until mid May - if not later. No nation classed among the top twenty anywhere in the world has had leaders who are so collectively irresponsible as Nigeria's leaders in Abuja.

Sense of urgency and purpose

The budget gets delayed year-after-year making it difficult for people in the private sector to plan for the year and votes are released so late in the year that they make very little impact on GDP growth. In 2018, Nigeria is proving once more to the world that it lacks the leaders to manage a great economy in the new millennium. The sense of urgency and purpose is totally lacking in Abuja.

The only redeeming possibility lies in the fact that war drums are sounding in the Middle East again. This time, the United States and Russia are rattling sabers. Any direct confrontation between the world's mightiest military powers will drive up the price of crude oil. Nigeria might still be saved from the folly of her leaders by blood-letting in the Arab world. Another oil windfall might be divinely on the way.

If that occurs, it will provide respite for only a few months and we will have to face the harsh reality that Nigeria's population is now closer to 200 million and we have more mouths to feed in a nation which failed to feed 150 million.

The Economic Recovery and Growth Project, ERGP, notwithstanding, the nation which had not grown at anything close to five per cent since 2013, will need to grow at seven per cent or more from now on - otherwise the per capita income will continue to drop and Nigerians will continue to sink into poverty. Forget 2018, the GDP growth for this year will hardly reach two per cent. At the end of this year, Nigerians will be poorer than they were in 2006.

The economic outlook for the short and medium terms is bleak. Nigeria lacks the leadership and the ideas required to move the nation as fast as it should. Four more years of this will constitute a monumental disaster.

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