Foreign reserves: Nigeria’s foreign reserves have followed a pattern similar to the other indicators since the beginning of civilian rule. In the Obasanjo and Yar’Adua periods, reserves high enough to finance, on average over 7 and 10 months of imports respectively. However, in the six years of President Jonathan, it has declined to about 6.3 months of imports. (Figure 4). When compared with other oil exporting African countries, in the first two periods, Nigeria’s foreign reserve accumulation was stronger than those of other countries. However, in the recent period, Nigeria is just about catching up with others. Although stabilization funds exist, the federal government has struggled to replenish them, despite high oil prices. FIGURE 2: Fiscal Balances 2000-2013 Premium Times The quality of growth Apart from the growth rates that do not match economic realities, there are serious questions about the quality of Nigeria’s growth. Sustained growth over the years has not made a dent on poverty, or led to broad-based improvements in living standards. While some indicators improved in the early post military era, many have now nose-dived, as no conscious effort has been made to skew policies in favour of socio economic wellbeing. Some examples: Life expectancy is just 54 years, eight years lower than in Ghana and 20 years lower than in Brazil. The rate of childhood malnutrition is 24 percent, more than eight times the rate in Mexico. Basic literacy among 15- to 24-year-olds is just 66 per cent, compared with 99 per cent in South Africa. Official estimates of poverty rate vary from 41 per cent to 56 per cent, depending on whether the poverty line is drawn at 2,500 calories per day or at US$1.25 per day. However, according to a recent study, 74 per cent of the population lives below the economic empowerment line. This is a more stringent definition than “poverty line”. As a result, there are still 32 per cent of the population that are above the official calorie-based poverty line but are not “economically empowered. Infrastructure continues to be a major challenge: electric power, transportation infrastructure, telecommunications infrastructure and Internet and broadband access is limited. Water and wastewater systems are nonexistent outside a few cities. Reputation for widespread corruption remains high, ranking at 139th out of the 176 countries on Transparency International’s 2014 Corruption Perception Index. World Bank governance and business environment indicators are much weaker than for oil exporting or African peers. Nigeria ranks 158th out of 189 economies for trading across borders. Global Competitiveness Report of the World Economic Forum for 2013-2014, ranked Nigeria 120th out of 148 countries in the Global Competitiveness Index. Nigeria’s budgetary process is now adjudged one of the weakest in the world. In the annual “Open Budget” Survey, Nigeria’s ranking has declined progressively since 2006, and in the latest ranking for 2012, Nigeria scored 16 per cent. This does not compare favorably with the performance of South Africa (90%), Uganda (65%), Ghana (50%) and Angola (28%) FIGURE 3: Government Debt 2000-2013 Premium Times The size of the economy Many Nigerians are somewhat puzzled about the new size of the Nigerian economy relative to their quality of life. Yes indeed, the Nigerian economy is now the largest in Africa, but size does not correlate with quality of life. Apart from a higher per capita income due to the larger size of the economy, many of the other indicators merely confirm that the economy has been underperforming all along, as several indexes now put Nigeria at a much lower ranking than other African countries. Sadly, the government is focusing on trumpeting the good ratios, rather than focusing policies on how to improve some of the poor ratios below: Though Nigeria’s per capita income rises in line with nominal GDP but it remains well below peer group medians as well as those of oil-producing Angola and Gabon. FDI now falls to less than 1% of GDP, which shows that Nigeria has one of the lowest levels of FDI inflow in the Africa region. With non-oil fiscal revenue now falling to around 4% of GDP, the overdependence of the economy on oil is even more stark than in the past, and compared to other countries, Nigeria now has one of the weakest revenue mobilization ratios of Sub-Saharan Africa peers. Financial market development which is usually measured by money supply in percent of GDP is now just around 19% of GDP. Compared to Mauritius (99 %), South Africa (74 %), Kenya (42 %), and Angola (37 %). These show that Nigeria has one of the least developed financial markets in Africa. FIGURE 4: Foreign Reserve Accumulation in Months of Imports – Nigeria and Other African Oil Exporters Premium Times All things considered, the 6-7% of GDP growth rate is neither unprecedented, nor a superior achievement, relative to past governments. The performance is not the result of policy choices, but favourable external environment. While the revision to GDP is a credible exercise that confirms the size of Nigeria’s economy, it also shows how poor performance has been all along. It’s time to focus on better economic outcomes. Note: PREMIUM TIMES relied on Federal Government of Nigeria publications, International Monetary Funds and World Bank web sites for this report.
Posted on: Mon, 22 Dec 2014 20:57:13 +0000
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