>>>>>>>>> The Editorial This Morning >>>>>>>>> TOPIC: Jonathan and comatose economy NEWSPAPER: The Punch Newspaper A recent report by the African Development Bank has once again confirmed all the missteps and ineptitude in the management of the nation’s economy and provided sufficient reasons for its critical reappraisal. The verdict from the AfDB, that effectively negates the “good news” about the economy that has been coming forth from the Federal Government, is that the Nigerian economy is still in dire straits. This government is sorely in need of a new idea and stronger firepower to fix the torpid economy. Based on what were considered as favourable reports of growth from some international financial institutions, the managers of the economy had been regaling Nigerians with stories of a rosy economic outlook, especially a growth rate of 6.7 per cent, said to be one of the fastest in the world. But in its downbeat assessment, the AfDB noted that the efforts of the Federal Government to reduce poverty through programmes such as SURE-P and You WIN were “weak,” as the “proportion of people living below the national poverty line has worsened from 65.5 per cent in 1996 to 69 per cent in 2010.” As part of the depressing numbers, it went on to put the rate of poverty in the rural areas of the country at over 73 per cent. Also linked to the increased poverty rate is pervasive malnutrition, spawned mainly by people either not eating enough or not eating right. AfDB’s verdict that 41 per cent of Nigerian children are stunted and 23 per cent underweight is particularly disturbing. So also is the assertion that 24 per cent of Nigerians are unemployed, compared to 21 per cent three years ago. The projection is that the labour market will swell from 3 million in 2012 to 8.5 million in 2015. With about 40 million Nigerians jobless, the smaller package by SURE-P is so puny that it is meaningless. These, indeed, are alarming signs of economic complacency. That is not to say there is nothing to applaud. According to the Finance Minister, Ngozi Okonjo-Iweala, inflation has come down to 8.4 per cent from 12 per cent; the exchange rate, though high, has been relatively stable between N155 and N160; foreign reserves have built up quite nicely from $32 billion in August 2011 to about $47 billion (before dropping to $46 billion), including $5.1 billion in Excess Crude Account. She also cited as good news fiscal deficit of about 1.8 per cent of the Gross Domestic Product and the reduction of domestic borrowing from N852 billion in 2011 to N644 billion in the 2012 budget and N588 billion in 2013. But this is not enough. For those who bear the brunt of excruciating economic hardship, it will be difficult to fathom or appreciate any such growth. The Jonathan administration, therefore, got itself into an awful tangle by trying to dismiss the AfDB’s assessment as “political” and “devoid of truth.” There is no reason for this. The kernel of the AfDB report is that government has yet to develop and pursue jobs-led growth. At the micro-economic level, these gains are immediately blighted by soaring unemployment and crushing poverty, as captured by the AfDB. Nigeria cannot continue to be a by-word for the paradox of plenty: rich in resources but with 69 per cent of the people living in poverty. Youth unemployment is a serious problem anywhere. It will definitely create extreme challenges in 2015. This is the real story. Being a natural resource-rich country, as an American economist, Jeffrey Sachs, argues, is bad for growth. Because it is capital-intensive, it only involves a small proportion of the population in the extraction of the resource. Its added income and rent also accrue to a few, while the appreciation of the country’s currency affects the entire population. This is unlike agricultural exports, which generally involve much more of the population and provide increased income to all producers, diffusing the adverse consequences of currency appreciation. This is the dilemma of the heavily import-dependent Nigerian economy. With a rapidly vanishing manufacturing sector, Nigeria imports practically anything from toothpicks and bottled water to heavy industrial machinery. It has been argued that due to overdependence on crude oil sales – which fetch over 90 per cent of the country’s foreign exchange earnings – the Nigerian economy has become so fragile and predictable that any volatility in the global oil market is bound to have an effect on the economy. Apparently using her membership of the World Trade Organisation as justification, the country has flung open her borders and ports for unbridled influx of cheap and low quality goods, thus succeeding in killing many of the hitherto thriving industrial activities. A typical example of this is the death of textile companies, which used to be the largest employers of labour, next only to agriculture. Cheap imported and smuggled textiles from China, coupled with a very harsh business environment, have driven the local companies out of existence. With unending deterioration in power supply and banks lending at over 20 per cent to the real sector – supposedly the largest employers of labour in a sound economy – it is not surprising that manufacturing is contributing a paltry 3.7 per cent to the GDP. Remove crude oil, which has been witnessing increased export and favourable pricing, and the vulnerability of the economy, will be laid bare. Undeniably, underpinning the country’s social and economic crisis are corruption and poor resource management. How can it be explained that at the turn of the century, Nigeria was able to save and pay off her debt when crude oil prices were just rising to about $50 per barrel, but is now into heavy borrowing when the commodity is going for over $100 per barrel? There is an urgent need to correct the current situation where Nigerian political office holders earn the highest wages in the world in a country where 69 per cent of the citizens are poor. This newspaper has consistently called for a drastic reduction in the cost of governance and will continue to do so. Thankfully, with the discovery of shale oil all over the world, crude oil prices are bound to dwindle and Nigerians will realise the need for frugality in resource management. Even Okonjo-Iweala, an apostle of ratio of debt to GDP, agrees that there will be a need for diversification of the economy, for it to be less dependent on oil. Nigeria must return to agriculture, which used to be the mainstay of the economy before the discovery of oil. The power situation must also be tackled head-on to set the stage for the rebirth of manufacturing. Nigeria’s infrastructure will also have to be upgraded, while the wild beast of high interest rates should be tamed. Without these fundamental steps, Nigeria will continue to enjoy statistical growth without economic development. Evidently, the claims of growth have always been a subject of contention by those who believe there is nothing to celebrate in growth that does not bring succour to the citizens in the areas of job creation, poverty alleviation and general improvement in living standards. Soaring unemployment is a real crisis – not a false alarm. The country desperately needs bold moves that demand a new thinking from Jonathan and his economic team. To unravel the oil sector corruption, it is important to look higher up the chain. We need economic policies that will create jobs and grow wages and incomes. What is the worth of growth when there is no development? (c) The Punch Nigeria 26/08/2013
Posted on: Mon, 26 Aug 2013 09:25:41 +0000
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