NIGERIAN ECONOMY IN CRISIS, YET WHO WILL TELL THE PRESIDENT?

 

By Dele Sobowale
As far as I am concerned, the 2019 elections are over. The so-called inconclusive elections announced by Professor Mahmood Yakubu are just smokescreens for arriving at conclusions already decided. At the very least, Professor Yakubu, who at various times was asked to resign by various groups and individuals, should quickly release the results he likes and then just as quickly resign. He will never go down in history as having conducted a free and fair election. Perhaps the next Chairman of the Independent National Electoral Commission, INEC, should not be another professor. Increasingly, one is getting the impression that most of our professors are intelligent, but not wise. Yakubu is one such. But, why cry over spilled milk or palm wine when there is a lot of things about to happen in the near future about which to shed tears?
President Buhari was elected; that I accept. And, in a way, it might be Allah’s wish that Atiku would not have to confront the economic debacle facing Nigeria in 2019. Nigerians are going to suffer in a manner last experienced in 1984/5. It would have amounted to Divine injustice if anybody else had been elected president only to face the inevitable. Buhari should carry his load.
Ordinarily, an article like this should have appeared on Monday on the BUSINESS and ECONOMIC pages of our paper. But, our records have shown that the SUNDAY paper outsells the daily papers. Since this is a message for all Nigerians, the decision was made to publish it today.
Before you scoff at the forecast of economic distress this year, please open your mind sufficiently to go over some of the prophecies made on this page and in the Monday VANGUARD and ask yourself how many of them have failed to come true. I am not a “Man of God” – whatever that means. In fact, I am probably closer to the Devil.
Several friends have asked me how has it been possible for me to make such accurate predictions most of the time. The matter is simple. I was partly trained for it. Econometrics is a branch of study in economics in which practitioners use mathematical models to forecast the outcome of events. It was a tedious task before the advent of computers; it is still difficult, but much easier with modern computers and applications. I build my own and adapt them, using information and data available to predict outcomes. I don’t run a church; just a computer. And, it has delivered most of the time.
There is nothing like certainty when talking about the future because the variables put into consideration might change suddenly. Indeed, only one major factor has to change significantly and suddenly the projections are all wrong. With that caveat provided, let me proceed to explain why I am crying for the President, for Governors and for Nigerians. Incidentally, the declaration that we are heading for very difficult time this year is based on information generally available in the local media, especially press, but which the average Nigerian cannot interpret and which economists without a forecasting model cannot use to make projections. Three reports will form the basis for the conclusion; although, in the model, more are brought in.
First, according to the Central Bank of Nigeria, CBN, the Federal Government spent N7.3tn aggregate last year against a budget of N9.1tn. That was twenty per cent less than the budget of N9.1tn. Based on the budget, the Federal Government, projected Gross Domestic Product, GDP, growth of 3.2 per cent. Throughout the year, FG officials kept assuring Nigerians that their economic programmes are working. Collecting the budgeted revenue is always part of the economic programme. Now, Nigerians know it was not working as well as they were made to believe. The failure to generate and deploy the funds budgeted invariably has a negative effect on GDP growth. That is elementary economics. It was easy to predict that the GDP growth for 2018 would never be 3.2 per cent; but something less. It was 1.8 per cent.
Consequently, we started 2019 with a smaller GDP than what we were promised at the beginning of 2018. Meanwhile we suffered more setbacks. We borrowed more than was planned and now have a heavier debt burden to carry in 2019. The 2019 budget is less than that of 2018. What are the chances that we will generate the revenue projected in the budget? The answer is none. We generated N7.3tn in 2018 and we will most likely earn a lot less in 2019; as low as N6tn in fact. There in lies our problem in 2019 and another reason for us to get our handkerchiefs out now.
Second, despite the higher price of crude oil this year compared to 2018, Nigeria’s crude is now facing tough competition and we are now struggling to sell one million barrels a day as opposed to the 2.3 million barrels per day we budgeted. Nigeria is not alone in this predicament. All the members of the Organisation of Petroleum Exporting Countries, OPEC face a difficult year for two reasons. One, global economic slow down is reducing daily oil demand. Two, the higher price of crude which OPEC induced by introducing production cuts has boomeranged. The high crude price has made it possible for US shale producers to expand their production. As a result, the US has slashed its import of Nigerian crude by about 40 per cent. No other country can absorb that volume. Furthermore, India, which was our biggest customer in the last five years has also turned more to the US for oil supplies in order to please President Trump.
Third, a phone call to the US has revealed that none of the American customers lost by Nigeria is likely to return soon; certainly not this year. Already, OPEC is feeling the unintended consequences of their production cut. Any attempt to cut more in order to shore up crude prices will only leave more room for American producers to grab more market share for years to come. Thus, we might have turned a disastrous corner in our history when the crude oil revenue will drop so sharply that Nigeria might not generate up to 70 per cent of the budgeted revenue and a higher percentage will go into debt servicing.
Meanwhile, non-oil revenue sources also performed badly in 2018. When the Dr Ben Akabueze, the Director-General of the Budget Office raised alarm in the fourth quarter of last year that the Ministries, Departments and Agencies, MDAs of the FG had collected less than half of the budgeted revenue expected of them, none of the leaders of government expressed concern. They could not understand the implications of the announcement. Unfortunately, it was not only in 2018 that the MDAs failed miserably. That has been the pattern since Buhari became President. Unless a miracle occurs, the performance in 2019 will not be different. Income generated will only increase once the President fires three or four officers – especially those with the largest potentials for generating funds.
That then is the economic forecast which makes me to tremble. At the moment, Buhari and his Ministers and advisers are still celebrating their victory. They will most likely start the second term as the most severe cash crunch in the nation’s history hits us like a Mack 35-ton truck. The severe downturn will occur when we are least prepared to weather the blistering storm.
The impact will be felt in every community in Nigeria, no matter how small or remote. But, next to the Federal Government, the state governments will be next in line for economic devastation. Here, the Governors fall into two classes – those going for the second term and those newly-elected. Both have my sympathies. There is no Governor, including Sanwo-Olu and the Governors of the major oil producing states, who will not feel the lash this year as Federally allocated revenue will drop to the basement. Virtually all the Governors will find it difficult to fund their budgets this year. Irrespective of whether returning or newly elected, Governors can brace up for strikes and political unrest in their states. But, it is the new Governors who deserve the most sympathy. Unless the outgoing Governors turn out to be a different breed of politicians from the “slum and gutter dweller” types we have known since 1999, the new helmsmen will arrive in the Governor’s Office and Lodge find everything carted away. Although the budgeted revenue were meant to cover the entire year, the outgoing Governors would have committed almost the entire year’s budget to contracts – paid up front – before their departure.
Governor-elect Makinde in Oyo State has already raised alarm; he will soon be joined by all the others. All the others better join him in yelling “thief!” because this is a year unlike no other year. In the past, especially when crude sold for $100 per barrel and Nigeria exported 1.8 million barrels per day, the new Governors finding empty purses would present Supplementary Budgets which the States’ Houses of Assembly passed routinely. States incurred loans to fund the Supplementary Budget. Given the dent burden of all the states now, it would be easier for ten camels to pass through the eye of a needle than for the Governors to raise substantial sums to save their states from disruption by September of this year. All are destined to appear worse than their immediate predecessors before long. Many will almost curse the day they decided to enter the race for Governor.
“For every folly of their [political leaders] [Nigerians] feel the lash.”Horace, 65-8 BC.
I was in the village when the results of the Presidential Elections were being collated and announced. There, I literally shut out the world until two days after the results were known. But, the vendor continues to drop my papers in Lagos. One thing striking about the last Presidential Election was the lukewarm reception which trailed the result. I saw the turnout in 1979 even in Lagos when Shagari was declared winner; in 1993 when partial results suggested that Abiola was the President-elect; in 1999 when Obasanjo won. In 2019, the sense of joy was not there. Even my friends in the APC were not particularly enthusiastic. No attempt will be made to hazard a guess why. But, it is in many respects the right mood for what will follow for Nigerians.
“It requires wisdom to understand wisdom; the music is nothing if the audience is deaf.” Walter Lippmann, 1899-1974.
Generally, when difficulties are imminent, followers take a good look at their leaders to determine if they can rise to the occasion. The most immediate danger Nigeria faces is economic distress; or to put another way, economic war. Buhari is the wrong General for that battle. To make matters worse, he is surrounded by the most incorrigible liars managing the economy. They either don’t know there is danger ahead (incompetence) or they are aware and are not telling Buhari (sabotage). Knowing very little about economics himself, Buhari finds it difficult to determine what is good economic policy. In fact, Buhari is an aberration among elected leaders in the world today. He outlined no economic policy programme throughout the campaign – because he has none. He is blissfully unaware of the gathering storm on oil revenue. He will be just as surprised as most of those who voted for him when the storm breaks. That is not pro-active leadership. Nigerians will pay dearly for it later this year.
Forget about Minimum wage; they will have enough difficulty paying the existing wages by June this year.

Mark my Words.

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