Nigeria has come a long way in the last 12 months – economically bruising some businesses, structurally implementing some unpopular reforms that cut across sectors and reportedly managing to raise some bars, according to public office holders.
In an attempt to look back on things that have played out in both government and private sectors, we observe a series of upbeats on policies which have made it seem 2019 was all about planned changes that tend to directly influence both the macro and micro economics of the country.
In this round up, while highlighting challenges inflicted by elevated unemployment, fluctuating inflation, political instability, power shortages, low crude prices to predict the prospect for 2020, we will reel through some national economic backdrops that defined the year 2019.
Sometime in June-July, just after the country was recovering from the customary anxiety of the electioneering process that defined most of the first and second quarter of 2019, the nation was tensed up as the Central Bank of Nigeria (CBN) included milk to items it restricted Forex on.
While Forex ban on items isn’t a new development as the CBN had initially entered into it in 2015 when it pulled up about 40 items restricted to access Forex for importation, the seemingly harsh decision booted the country awake.
The argument of the apex bank was to encourage local production. While the CBN seemed to be right, many analysts did not buy into the idea. Careful study reveals that Obasanjo did the same with cement production in his presidential days.
The former president banned importation to see local production thrive, as claimed. Of course, we saw local production scaled up but till today, 20 years after Obasanjo is out of office; the price of cement is still on the high side.
The debate did not quite die down easily as analysts didn’t see why food, an important aspect of livelihood and health of children, should be put on the line.
However, now that other national events have suppressed the debate, it remains to be seen the result of the local production target as the apex bank is anticipating.
Although, unlike rate of unemployment that seems to be on the increase, inflation rate has been rising and falling. It has not been stable but has mostly been leaping, too.
In fact, the National Bureau of Statistics (NBS) confirmed that as of November 2019, inflation rate in Nigeria stood at 11.85%. While this figure is an increase, it is also the highest level since April last year when it peaked at 11.61 percent.
Despite interventions from the government to reduce inflation rate, it seems we might be starting off 2020 on the high side as cost of food stuff in the market keeps leapfrogging.
When inflation dropped in August 2019, there were speculations that things were beginning to turn for good. Although, some argued that the announcement by the NBS were political and influenced.
August did not just pass like other months. It left behind what Nigerians have not recovered yet from. It was the month of the border closure that led to the hike in price of rice especially. Like the milk ban, the border closure was in the government’s pursuit to scale local production.
Ever since, Nigerians have been forced to patronize local rice from indigenous farmers. While citizens are affected by this policy, a host of West African countries such as Ghana, Togo and Benin Republic have been hurt as they are experiencing economic meltdown in their respective countries.
The border closure has further helped foreign countries to see how much Nigeria matters in Africa.
Godwin Emefiele, the CBN Governor was reappointed to paddle the affairs of the apex bank. But, this wasn’t the case for the FIRS Boss, Babatunde Fowler, who despite writing a self-recommendation letter to the presidency was denied a reappointment.
Under Fowler, we saw a long list of tax defaulters published, a list that included Obasanjo, among other prominent figures.
EFCC Cases -Kalu, Saraki and others
In 2019, a Lagos Division of the Federal High Court sentenced a serving senator and ex-governor of Abia State, Orji Kalu, to 12 years in prison for N7.65 billion fraud.
The news was, at first, unbelievable due to the profile of the convict. Some said it symbolizes a new trend as more high ranked officers might have to taste similar verdicts.
Saraki, the former senator is still in a case with the EFCC. Where this case will lead is yet unknown as legal processes cannot be predicted.
Gross Domestic product
Despite an economy characterised by unfavourable policies and political instability, the country managed to remain progressive, reviewing the value of its GDP as of the 3rd Quarter of 2019.
Stats from NBS indicate that the aggregated GDP stood at N37.8tn in nominal terms. According to NBS, this performance was higher compared to the aggregate of N33.36tn recorded in the third quarter of 2018.
2020 and beyond
To say there is prospect for Nigeria if well-managed would come off cliche.
Emerging economy forecast is already predicting a stiffer 2020 given the economic hardship and widespread deficit in infrastructures.
Lagos Chamber of Commerce and Industry (LCCI) made this projection in its end of the year review of 2019.
Muda Yusuf, LCCI Director General, expressed this fear when he noted that most policies introduced by the current administration may influence a weak economy come 2020.
According to Muda, “We expect economic growth to remain subdued at around 2 per cent by 2020…” adding that “consumer demand, as well as private sector investment, will most likely remain weak”.
Tackling the challenge to change the narratives will therefore demand strategic planning coupled with balanced economic solutions to curtail the economic downturn. Speaking in this light, Muda hinted that incompetence on the part of the government may further influence limited economic growth in 2020.
The director general said, “We are of the view that failure by government to fix structural constraints with regards to fixing power challenges and rehabilitating deplorable road networks, will perpetuate the poor productivity and performance of the sector.
“In our opinion, continued protectionist measures of government will most likely limit growth in 2020.
This means that policy makers have a key role to play to reposition the country on a smooth ride. For tangible growth to be recorded in 2020, government must endeavour to put the interest of the masses forward at all times in order to reduce the hardship of living and doing business in Nigeria.
Pointers for the government to bear in mind include:
- Fallen property value
- Increased inflation rate
- Increased elite dependency rate
- Increasing tax
- Exchange rate depreciation
We must, equally state here that in growing the economy, there is little to what Forex bans can offer. Instead, government should consider subsidising a number of means of local production to help the economy thrive.
While the presidency expressed optimism of a robust economy in 2020, financial analysts are taking the other side of the table.
In the view of Bismarck Rewane, leading financial analyst and CEO of Financial Derivatives Company Ltd, the “outlook” of 2020 is “challenging” given the “border closure that might extend beyond January”, “increase in VAT rate”, persistence in “current account deficit” among others.
With VAT recently gearing from 5% to 7.5% and CBN unapologetically upholding its sponsored forex-ban; the economy in 2020, according to Rewane, stands the risk of recording continued rise in inflation rate as policy uncertainties influence shrinking economy.
As 2020 approaches, the implication of this development further poses a threat on both Foreign Direct Investments (FDI) and Foreign Portfolio Investments (FPI) as policy uncertainty will only beat down investor’s confidence.
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