X-RAYING THE ECONOMY IN 2010: EXPERTS SCORE GOVERNMENT LOW
LIKE in the previous years, the outgoing year has its mixed bag of fortunes for various stakeholders in the economy. Changes witnessed during the period was in the mould of the proverbial new wine bottle with the old unsavoury content, making the larger populace to be in growing expectation of divine intervention, while elected and selected government officials celebrate their 'spoils of war', garnished with jumbo pays.
While some analysts took solace in the supposedly improvement in the Gross Domestic Product (GDP), others said that the improved figure released by the Nigerian Bureau of Statistics (NBS) was a mere paper work, scripted to assuage the frayed nerves of the populace.
The revised estimate for real Gross Domestic Product by the NBS indicated that the economy grew by 7.23 per cent first quarter of 2010 as against 6.7 per cent it had earlier projected for the quarter.
In its latest report, the NBS estimated that the economy on nominal basis expanded to N6, 399,716.09 in the first quarter of 2010 from N5, 004,850.00 recorded during the corresponding quarter of 2009. This indicated N994, 866.09 increment.
Financial analysts who spoke with The Guardian also commented on the easing of the credit crunch by the Central Bank of Nigeria (CBN) through lowering of the interest rate benchmark.
They all agreed that the decision ameliorated the dryness of the credits with the recapitalisation of money market with about four billion meant especially for the failed banks.
While analysts and stakeholders are worried about the consequence of the CBN's action: a rise in inflation, the CBN governor had said, increased inflation can be more tolerated than a depressed market.
Speaking with The Guardian, a public affairs analyst based in Abuja, Jide Ojo said that 2010 would go down as a year of mixed fortunes for Nigeria. The budget was proposed to stimulate the economy but the majority of Nigerians were yet to feel positive impact of the stimulus package.
His words: 'A number of positive developments in 2010 for me are the passage and signing into law of the Asset Management Company of Nigeria as well as the inauguration of the board.
The other is the tsunami that swept away the board of the Nigerian Stock Exchange in August.' There was also the sustained reform of the banking sector with the classification of the banks into four groups with different capital bases; namely, international, specialised, regional, and national banks. The CBN also initiated idea of having a 10-year reform for the Nigeria banking industry which the CBN governor at a pre-convocation lecture at Bayero University, Kano in February 2010 said was aimed at 'enhancing the quality of banks, establishing financial stability, enabling healthy financial sector evolution and ensuring that financial sector contributes to the real economy.'
'The CBN also set limit of maximum of two terms of five years each for bank chief executive officers (CEOs). In September 2010, CBN withdrew the licence of 224 microfinance banks and thereafter restored the licence of 37 of them. There was also the reported crackdown on the bank debtors as four non-executive directors of Finbank were suspended for 90 days by Central Bank of Nigeria on September 27 for failure to pay their debts totalling N20 billion.
'The year has also witnessed crusade against corruption by the anti-corruption agencies. The Federal Ministry of Justice and the Economic and Financial Crimes Commission used plea bargain mechanism to mete out punishment to some erring companies and individuals.
'This was adopted in the handling of the Halliburton bribe scandal as well as the case of the former managing director of Oceanic Bank. News report has it that $170.8 million has so far been recovered as penal fines by multinational companies involved in the $180 million Halliburton bribe scandals while assets and cash recovered from Mrs. Cecilia Ibru, former managing director of Oceanic Bank was estimated at N191 billion.
'However, in spite of the over N5 trillion annual and supplementary budget for 2010, not much has been achieved in terms of infrastructure development. Many of the power, road and other basic infrastructural projects are yet to be completed. While work is progressing on some, others have been abandoned due to paucity of funds.'
According to the Minister of Finance, Nigeria's domestic debts stood at about $28.5billion as at last September, while the external was about $4.8billion, yet government is planning to borrow more funds. Plans are afoot by the current administration to obtain $900 million loan from the export-import (EXIM) bank for the implementation of the $500 million Abuja-Kaduna Railway project and the $400 million National Public Security Communications project.
This penchant for accumulating more debts is worrisome, more so as we approach the next general elections in April 2011. It is on record that the current government from 2007 is master of policy inconsistency. What guarantee is there that these loans will be well utilised and what happens if there is a change of government in May 2011 after the April polls?
Nigeria with Index of 0. 478 currently occupies 113 position on the Worldwide Trends in the Human Development Index, 1970-2010. This is unenviable. On the 2010 Corruption Perception Index, Nigeria ranks 134 out of 178 countries.
This also shows that the fight against corruption is far from being won. The recent lift of ban on some imported goods like toothpick, matches, energy and health drinks, furniture, textile fabrics, cassava and vehicles which are 15 years old and below leaves a sour taste in the mouth.
Nigeria is still largely import dependent; the manufacturing sector remains moribund even as Bank of Industry is being provided with some intervention fund to revive some of them. One of such is the N100 billion Cotton, Textile, Garment Revival Fund.
The major distortion in the economy is the disproportionate ratio of capital expenditure vis-a-vis the recurrent. Even the 2011 budget presented to national assembly on December 15 has barely N1. 05 trillion out of N4.2 trillion budget for capital expenditure. This is a queer way to grow the economy.
More so, Nigeria continues to run a deficit budget while failing to block the leakage in the system. Are we still dreaming of Vision 20: 2020? It's indeed long way to economic freedom for Nigerians given the soaring unemployment and poverty despite the multi trillion naira budget which has remained largely an annual ritual, a mere hollow promissory note without concrete achievements.
The most unfortunate thing is that our parliamentarian has refused to pass most of the anti-corruption bills such as the Anti- Money Laundering, Anti-Terrorism and the Freedom of Information Bills.
Also speaking with The Guardian, Eze Onyekpere, The Lead Director of Centre for Social Justice (CSJ), explained that the 2010 budget like any other budget is supposed to give direction, anchor fiscal, monetary and other economic policies of government and provide the enabling environment for the private sector to create wealth, add value and grow jobs. As an economic stimulus budget, which was expansionary, it was expected to translate into practical programmes and projects to jump-start a wobbling economy. These expectations are mainly built around capital expenditure components of the budget.
His words: 'However, in the President's 2011 budget speech, he acknowledged that only N749.75 billion of the 2010 capital budget has been released for the first, second and third quarters of 2010. The fourth quarter releases will bring the total capital expenditure to N900billion, but it was yet to be released as at December 15 2010 when the President was reading the budget speech.
'The President also stated that the average capital utilisation rate across MDAs is just under 50per cent as at the end of October. Essentially, less than N374.875 billion out of a capital budget of N1.764 trillion has been utilised, which is less than 21.25per cent of total capital expenditure for 2010.
'And if the N900 billion is computed as a component of the capital vote of N1.764trillion in the 2010 budget, it will amount to a paltry 51per cent of appropriated capital expenditure; as a percentage of the overall budget, it will amount to no more than 17.5per cent.
'This is not even an expectation as at December 31 2010 but the expectation at the end of the extended financial year in March 31 2011. This is the background for the assessment of the performance of the economy in 2010. The stimulus capital budget has underperformed by 78.75per cent by the end of the year while the recurrent expenditure involving salaries and overheads have been disbursed in full.
'The Excess Crude Account has also been frittered away from over $20 billion in 2007 to under $1billion. However, the withdrawals from the fund were not done in accordance with the law because the country (at the federal, state and local government levels) cannot point to capital investments or investments in human development that have accompanied the disbursement of such huge sums of money.
'The Amnesty programme of the government stabilised oil production in the Niger Delta and the oil production benchmark of the budget was met and exceeded. Non oil revenue however underperformed by over 25per cent. Although the economy was reported to have grown by more than 7per cent within the year, such growth did not reflect in new jobs or the sustenance of existing jobs.
'This was acknowledged by the President in his plan to provide a N50billion stimulus package for job creation in 2011. Thus, unemployment was at an all time high.
Inflation was high within the year hitting 13.4per cent during the month of October while our external reserves have been depleted to an all time low when compared against the huge reserves left by the Obasanjo administration. With a prevailing 12 months deposit interest rate of 3.97per cent payable by banks to depositors and savings deposit rate of 1.43per cent, the current high prime lending rate of 16.50per cent and the maximum lending rate of 22per cent shows the failure of the Central Bank of Nigeria to perform its statutory duties.
'The MTEF 2011-2013 noted that credit to the private sector had been on the decline while credit to Government continued to grow at a faster rate. Available data from Communique No.73 of the Meeting of the Monetary Policy Committee of the Central Bank of Nigeria held November 22-23 2010 showed that in October 2010, aggregate domestic credit (net) grew by 19.69per cent over the December 2009 level, and by 23.63per cent when annualized. Credit to government (net), which grew substantially by 53.35 percent over end December 2009 (or 64.02 percent on annualised basis) was the major source of expansion in aggregate credit. Credit to the private sector grew marginally by 3.22 percent (or 3.68 per cent on an annualised basis). With little credit to the private sector economic growth has not received the requisite boost.
'The lifting of the import ban on cassava products, toothpicks, etc, did not also portend well for the economy. It appeared to be a backward movement that will work against industrial growth and capacity utilisation in Nigeria. The national economy continued to leak from wasteful expenditure in the executive and legislature.
'The jumbo pay of the lawmakers is a case in point. Various procurement frauds that were revealed within the year also showed a country that losses a lot to corruption. Also, the MTEF 2011-213 indicated that Nigeria lost a lot of custom revenue through duty waivers by the administration.'
'However, the revival of the power sector reform programme for the implementation of the Electric Power Sector Reform Act through the launching of the power sector roadmap and the appointment of capable leadership for the Nigeria Electricity Regulatory Commission appears to be a step in the right direction considering the debilitating impact of inadequate electricity on the economy. Workers also got a new minimum wage, which was an improvement to the old wage.
'The fact that 2010 is a prelude to the elections provides Nigerians the opportunity to elect credible managers of the fiscal system and the economy and to interrogate the current managers on what steps have been taken to improve the economy. For the year 2011, Nigerians should strive to be more engaged in fiscal governance; to contribute ideas to the passage of the 2011 national, state and local government budgets; to seek redress in court through section 51 of the Fiscal Responsibility Act for illegal and unwarranted expenditure and to vote out those who have so far mismanaged out economy.
'As a last resort, Nigerians should revolt against fiscal and economic tyranny (in accordance with preambular paragraph four of the Universal Declaration of Human Rights) when our resources are brazenly stolen and mismanaged by a few in the high echelons of the executive and the legislature and their private sector collaborators.'
Emeka Chiakwelu, the principal policy strategist at Afripol Organisation in his report worried about the structural imbalance of Nigerian economy saying that it was still a major concern.
Nigeria's economy is wholly one commodity based economy, which is based on the export of crude oil. The lack of diversification of the economy hampers the flourishing of domestic economy, together with enhanced specialisation can transformed an economy to arrays of commodities exporting economy other than oil.
The export of crude provides foreign reserve that has become as war chest in the maintenance of fairly and relatively strong naira. With diversified economy the problem of unemployment in Nigeria can be ameliorated.
Chiakwelu also said that Nigeria was running a big deficit with China of about $5.48 billion and China was a growing major business partner with Nigeria, saying the only way Nigerian could close the gap was to export more goods to China other than oil, but Nigerian economy with its fundamental problem could not be able to do that in the nearest future, while noting that Nigeria has trade surplus with many western countries including United States at the tune of $5.5 billion.
The policy strategist also said that the greatest threat to Nigeria's standard of living other than inflation was unemployment; even with progressively growing economy at the rate of 7.3 per cent was not producing enough jobs to make a reasonable impact on employment.
The finance Minister Olusegun Aganga stated that unemployment in Nigeria was about 19.7 per cent but financial and economic experts at Afripol Organisation quantified that the real unemployment figure might be higher when rural and urban joblessness among the Nigerian youths was factored into equation. The collecting of data on employment will be probably cumbersome, if not difficult in rural areas where modern technology is scare and out of reach.
The manufacturing sector recorded a lower output from '7.03 per cent in 2009 to 6.43 per cent in 2010' due to lack of electric power and amount of raw materials from abroad and foreign exchange becomes an impediment to flow of raw materials coupled with the government higher tariffs.