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The first level of the democratic Buhari administration ended last week. To say it was difficult will be putting it lightly. We saw real economic growth drop from 3.6 percent a year into recession, shrinking by over two percent at its worst. The economy has somewhat recovered from those depths, but the current two percent growth is nothing to write home about. Especially given that our population is growing at around 2.7 percent a year implying that on average, Nigerians have been getting poorer since 2015. This is even before you start to talk about inequality.
The unemployment numbers have been even worse. The unemployment rate increased from just over eight percent when Buhari took to over 23 percent the last time we measured it in 2018. The result is that more people have probably been thrown into poverty, but we can’t say for sure because we haven’t officially measured it in over a decade. Maybe we are scared of what we may find.
On the macroeconomic stability front things haven’t been good either. No one needs a reminder of the foreign exchange crisis that gripped the nation while the central bank was playing demand management games. Inflation shot up from under nine percent in mid-2015 to a peak of over 18 percent before dropping to the 11 percent range it is now. Still some way from the central bank’s target of a single digit inflation rate. Many other problems persist. Bank lending has refused to grow. Foreign direct investment has not recovered back to what it was in 2014. The federal government’s finances are in a big mess and debt has piled up so high that servicing the debt now takes up roughly 60 percent of all federal government revenue. As a result, the federal government has leaned on the Central Bank for indirect financing, risking even more macroeconomic instability in the near future. I won’t attempt to give the admin a grade on the economy but if this was university, they would be repeating the course.
To be fair the Buhari administration inherited a difficult situation. The price of oil crashed to $30 a barrel in the early months of the administration and oil production was also hit by militant activities in the Niger Delta. The fiscal buffers were also not there. The excess crude account was already very low, and the foreign reserves were already heading towards a precarious point. Still, the decisions made given what was an emergency economic situation were baffling and played just as big a part as the oil crisis itself. Not to mention the irony that we are right back where we were in terms of our exposure to oil prices. Four years later and after at least two years of relatively high oil prices (yes $70 a barrel is high) we are perhaps in worse shape than before the 2014 crash. The excess crude account is virtually empty, the sovereign wealth fund is still tiny, and the Central Bank is also hopelessly exposed. If the oil price crashes to $40 a barrel next month we will back in crisis faster than you can say abracadabra.
But perhaps the biggest disappointment is what did not happen. In the last four years there was no significant reform of the country’s security architecture despite calls from almost all parts of the country for “restructuring”. There was no significant judicial reform. The judiciary is still mostly exactly how it was in 2015 except for some public media trials. There was no significant tax reform despite the obvious need to improve general government revenue. And you must be wearing rose tinted glasses to say that there is a significant improvement to infrastructure. Power has marginally improved, but the sector is a quarter to collapsing. The less said about the seaports the better. The airport terminals that were almost completed in 2015 were launched with much fanfare. And you still can’t drive from Lagos to Ibadan or Benin to Abuja or Enugu to Jos without wondering if there is something wrong with Nigeria. Not to say that there are no improvements, but if infrastructure is the poster child for the last four years then that poster isn’t very good.
All that being said, past performance is not always an indicator of future performance. In video games the next level is typically much harder than the last one. We hope that won’t be the case this time around. We hope that the Buhari government can turn things around and deliver on his mandate for a better Nigeria. I don’t think there are many who will doubt his intentions, but intentions are not enough.
Let’s also not forget the governors, who combined are just as powerful and influential as the presidency. But I will save that discussion for next week.
Dr. Obikili is chief economist at Business Day.