Economy Gets a Battering under Buhari

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Crusoe Osagie reports that the nation’s economy is in its worst state in three decades

The current administration led by President Muhammadu Buhari came to power on the mantra of change and indeed Nigeria and her economy has not been the same since he took office.

Perhaps, Nigerians should have asked the All Progressives Party (APC), during the campaign for the election that brought them to power to clearly define the nature of change they were promising to bring to the country-positive or negative change.

The outcome of the review of the first one year of the Buhari administration from May 2015 to May 2016 has shown significant changes in the economic indices of the nation, however all these changes have been negative, signifying a slide of the economy into the doldrums.

Oye says situation is worrisome
Although the Vice President of the Nigerian Association of Chambers of Commerce and Industry Mines and Agriculture (NACCIMA), Mr. Dele Oye, refused to right off the current government, he agreed that the nation’s economy is in the worst state since three decades.

Oye said investment flow into the country has been near zero while existing investors are pulling out of the country due to the extremely difficult operating environment and shrinking purchasing power.
He explained that what is worse about the current crisis is that it has taken a toll on the prices of the most basic physiological needs such as food, healthcare and shelter.

“Remember that one of the major causes of the French revolution in 1789 was the increase in the price of bread and general food insecurity, so it is extremely worrisome that the price of food in the country has risen to such unprecedented levels,” Oye said.

A survey of the average prices of essential commodities in the country showed that a 50kg bag of rice, which was sold for around N7,000 in May 2015 now sells for N19,000.

Petrol increased from N87 per litre to N145 per litre; a basket of tomato rose from N5000 to N42,000; a loaf of bread rose from N200 to N250; and a bag of garri rose from N3,500 to N8,500.

With all these happening at a time when both employers in the public and private sectors are neither able to pay salaries as and when due, nor increase wages, it portends the possibility of a harsh response from the populace, unless there is succour in the shortest possible time.

LCCI paints gloomy picture
Also commenting on the deplorable state of the economy in the past one year, the Lagos Chamber of Commerce and Industry (LCCI) declared that the Nigerian economy suffered severe decline in the past one year of the administration of the current President.

The LCCI in a report titled: ‘The Economy After One Year of Buhari’s Administration’ released at the weekend, explained that the woeful outcome of the nation’s economic performance was the result of “the absence of well structured, broad-based and synergised economic blueprint with clearly stated goals, plans, policies and strategies to drive the economy.”

The Chamber stressed that the economic policy space remained unclear, adding that the policy conception is faulty, hence, policy coordination and implementation has suffer serious setback.

“There is, therefore, urgent need for central policy strategy with detailed and well-designed policy direction. This is critical to effective and efficient coordination and implementation of policy.

“While the policy goal of eliminating corruption is laudable, the need for concerted effort on the side of the government with respect to policy, legal and regulatory environments in order to boost private sector participation is highly desirable.

“Improving the ease of doing business through efficient business environment vis-à-vis effective infrastructure in all facets of the economy.

“It is imperative to make very strong moves to resolve the weakening oil revenue and find creative ways of incentivising forex inflow to Nigeria so as to boost liquidity and ease access to forex through alternative sources such as FDI in critical sectors of the economy and diaspora remittances, LCCI stated in its report.

Analysing the various declining indices that left the overall economy in shambles in the last one year, the organised private sector body noted that the Gross Domestic Product (GDP) of the country, which stood at 2.35 per cent in May 2015 when the current administration took office, has now crashed to -0.4 per cent (negative growth) in May 2016.

As for the official exchange rate of the dollar to the naira, in May 2015, $1 exchanged for N197.9, while in 2016 a dollar is N199, but in the parallel market, according to the Chamber, a dollar was N219 in May 2015 but depreciated to about N330 in May 2016.

Other indices analysed were the rate of inflation, which according to LCCI, jumped from 8.7 per cent in May 2015 to 13.9 per cent in May 2016. The crude oil output in the country was also found to have dipped significantly, dropping from 2.05 million barrels per day(bpd) in May 2015, to 1.4 million bpd in 2016.
For the nation’s external reserves, there was also a decline of $1.25 billion in Buhari’s one year, falling from $29.1 billion to $27.86billion.

The Federation Accounts Allocation Committee (FAAC) also had its revenue markedly depleted from N409 billion in May 2015, to N299 billion in May 2016.

The stock market capitalisation followed suit in the decline with capitalisation dropping from N11.42 trillion in May 2015, to N8.7 trillion in May 2016.

Unemployment figures soared higher during the period, rising from 24.1 per cent in 2015, to 29.2 per cent in 2016.
Other statistics analysed by the LCCI included the Business Confidence Index, which tumbled from 7.3 per cent to -8 per cent (negative); Industrial Capacity Utilisation, which fell from 54.9 to 53.7; Ease of Doing Business fell from 170 units to 169 units; Agricultural sector growth fell from 4.7 per cent to 3.09 per cent; Industrial sector growth fell from -2.53 per cent to -5.4 per cent; Services sector growth fell from 7.04 per cent to 0.80 per cent; Aviation passenger traffic dropped from 4.2 million to 3.8 million people; Real estate vacancies index rose from 100 units to 143 units; Power output dropped from 3,205 mw to 2,500 mw; Power available per day dropped from 13 hours to 5 hours and Banks’ bad loans rose from N25.3 billion in May 2015 to N41.5 billion in May 2016.

Making recommendations on how to stem the drift, the LCCI stated: “We observed remarkable success in containing Boko Haram insurgency by pushing them from taking territories and local councils to the fringes of Sambisa Forest. As the final clearing of Boko Haram continues, we urge the government to extend its attention to the growing security breaches coming from groups such as the armed herdsmen and the Niger Delta militants. Businesses and the private sector can only thrive in a peaceful and secure environment.

“Anti-corruption war of the present administration should continue unabated and we are happy that emphasis is being placed on recovering looted funds both from within and outside the country. It is our wish that government reviews its processes and put in place reforms including frameworks that would inherently curb corruption.

“We welcome Government’s recent removal of subsidy on kerosene and PMS. However, we call for full deregulation of the downstream petroleum sector. This will reduce distortions in the downstream oil industry; eliminate corruption that has marred the sector over the years; increase government revenue whilst empowering the government to fund infrastructure and other social interventions.

“We welcome the decision of the Central Bank of Nigeria (CBN) to adopt a flexible exchange rate regime which is desirable in the light of prevailing economic realities. There is however, a need for clarity on what the CBN describes as a special window for critical transactions for which preferential rates will apply. We would like to caution against possible abuse and distortions that such a window could create. On the immediate, relaxing the impediments that will allow liquidity to flow into the autonomous forex market is desirable.

“The Budget has been signed into law after about four months of delay. We expect marginal recovery in economic activities as soon as disbursement of capital projects and social intervention programmes start. The 2016 budget assent and implementation should give rise to positive macro environment. However, inflationary impact remains a concern as the presidency will become more practical in its quest to deliver on some critical electoral promises.”