Economic revamp without impact

WALE Edun indulged in some chest beating recently that resulted in headlines assuring Nigerians that the country’s economy has been revamped.  The Minister of Finance and Coordinating Minister of the Economy’s job is tough. Still, he will have more difficulty convincing fellow citizens that things are better since the Bola Tinubu administration took office in May 2023.

After the Federal Executive Council meeting on June 26, the minister justified his claims with figures concerning the country’s debt stock, which declined by 15 per cent in dollar terms and should improve Nigeria’s ratings and give confidence to investors. However, domestic debt rose 25 per cent in naira terms due to exchange rate movements and fresh borrowings of N8 trillion.

One important point made was the securitisation of the controversial Ways and Means advances and that the government has so far refrained from seeking funding from the Central Bank to settle external debt service obligations, fund share capital cash calls, or pay salaries.

Edun reported improvements in revenue collection and expenditure controls due to the deployment of new technologies and the collection of operating surpluses of revenue-generating agencies by law under the Fiscal Responsibility Act.

The minister admitted that the improvements outlined were a matter of perception. For him, “If we want to be positive, all we will say is that the glass is half full, we are halfway there. If not, we can be negative and try and say the glass is half empty.”

For the ordinary Nigerian, there is no glass. It is the way of politics and politicians to make promises when seeking office only to fall short or struggle to deliver when they land in the saddle.

Nigerians are disappointed by the performance of the Tinubu administration despite the high level of goodwill that heralded its inception. It inherited a battered economy from an incompetent predecessor, but Tinubu vowed not to make excuses.

While the government would be right in taking steps to correct the anomalies of the past, citizens cannot afford to wait forever to feel the impact. The removal of petrol and electricity subsidies and the devaluation of the naira continue to take a devastating toll on businesses, lives, and livelihoods.

Nigeria’s unemployment rate rose to 5.0 per cent in the third quarter of 2023 after subsidy removal up from 4.2 per cent in the previous quarter.

Food inflation has topped 40 per cent since March and headline inflation rose to 33.95 per cent in May up from 33.65 per cent in April.

Prices of staples have risen by an average of 200 per cent within the past year. The World Bank projects that the poverty rate in Nigeria will climb to 40 per cent by the end of 2024.

Companies have been hit hard. The CBN hiked the basic interest rate by 775 basis points over the past year to tame inflation without avail. Several multinationals have shut down and international oil companies have scaled down operations due to high operational losses.

Nigerians are not having a good time and is not the time for self-adulation.

The government must stop giving the impression that it has excess funds created by naira devaluation with lavish spending that seems unabating despite public outcry. The government remains large, unwieldy, and expensive.

The Senate has said it would approve a new presidential jet if requested. These are some reasons why organised labour finds it difficult to agree with the government on the new national minimum wage.

Tinubu has rolled out the National Construction and Household Support Programme to cover all geo-political zones. Under the plan, which will cost N1 trillion, the government will prioritise the construction of major projects such as the Lagos-Calabar, Lagos-Sokoto highways and the Port Harcourt-Maiduguri rail line as well as the Ibadan-Abuja section of the Lagos-Kano railway. The projects are touted to help the agricultural and agro-industrial zones, but funding plans are vague.

About 100,000 families from each of the 36 states will get cash handouts of N50,000 for three months to help with the cost-of-living woes. These are reactionary moves and the criteria for cash handouts are not clear. Previous disbursements have been smeared with corruption.

Revamping the country’s finances and economy requires firm and targeted measures such as improving security for any meaningful boost in agricultural production and stopping oil theft. Farming has become a dangerous occupation with thousands of farmers abandoning their farms due to banditry.

They are forced to pay up to N4 million to plant or harvest crops with the option of death, a huge disincentive to farmers. Nigeria loses about 400,000 barrels per day to theft. This is more than $12.7 billion or N19 trillion a year. Nigeria can no longer afford this.

Small and medium enterprises form the bedrock of any economy but have also been badly impacted by lower purchasing power, high cost of credit, high energy cost, infrastructure deficit, and multiple taxes. The N150 billion set aside for SMEs and manufacturers by this administration is highly inadequate.

More relief and incentives should come with tariffs and tax cuts to stimulate activity. The tax and fiscal reforms targeted at business growth have been unduly delayed. There seems to be too much focus on revenue drive rather than strengthening wealth creators who can be taxed.

The Chinese economic revolution was built on the back of SMEs driven by deliberate government policies and actions. In China, SMEs play a key role in maintaining economic dynamism and social stability and boosting innovation and entrepreneurship. SMEs contribute approximately 50 per cent of tax revenue, 60 per cent of GDP, 70 per cent of technological innovation, and 80 per cent of urban employment. SMEs created 75 per cent of incremental industrial output values in China since the 1990s and have dominated various industrial sectors ranging from food, paper making and printing, garment, wood and furniture, and the plastics industry.

For this and other sectors to thrive and create jobs, the Tinubu administration must address the power sector crisis by investing in and recalibrating the national grid. It is incongruous that Nigeria has an installed capacity of 14,000 megawatts and was only able to generate 5,000MW for the first time in three years in May due to a failure to upgrade transmission capacity resulting in frequent grid collapses. Dangote Industries and its subsidiaries alone generate 1,500MW for internal consumption.

The Federal Government can follow India’s example by driving massive investment in the telecoms sector due to its linkages across other sectors. This is vital for economic growth, innovation, and productivity. Experts have established that telecoms have forward and backward linkages with education, banking, manufacturing, transportation, retail and commerce, healthcare, aviation, and services, facilitating efficiency, product design and innovation, safety, and access to remote services.

The spillover effects of huge investments in telecoms have propelled India to the fastest growing large economy at 7.3 per cent, driven a 75 per cent rise in per capita income to $2,730 over the last 10 years, pushed IT exports to $178 billion and remittances to $109 billion.

Tinubu set a target to grow the economy to $1 trillion by 2030, with a projected average yearly growth rate of 7.0 and 8.0 per cent. Nigeria’s GDP growth slowed to 2.98 per cent in Q1 2024, down from 3.5 per cent in the previous quarter. This underperforms sub-Saharan African peers such as Ghana and Kenya. Huge investments in infrastructure, power, oil and gas, technology, and the service economy are required to make this a reality.

Nigerians deserve better as democratic governance marks 25 uninterrupted years. Tinubu should do more to build confidence and reverse the current atmosphere of despair.