Despite Rising GDP, Hope of Better Living for Nigerians Remains Distant, Say Experts

Except the country’s GDP growth reaches at least double the estimated population growth rate of 3 per cent, and inflation reduces to single digit, the aspirations of Nigerians for a better living would remain a mirage, say analysts. Bamidele Famoofo reports

While it is not inappropriate for the citizenry of Africa’s most populous nation to celebrate its improving economic climate, it is certainly not time for them to begin to expect any immediate benefits from such.

“You cannot have a general wellbeing of the citizenry until the rate of inflation in the country attains single digit of below 10 per cent while the growth in GDP attains levels at least double the notional population growth of 3 per cent,” said Lagos-based economist and erstwhile banker, Dr. Boniface Chizea. 

Data released by the National Bureau of Statistics showed that the Gross Domestic Product of Nigeria grew by 1.95 per cent year-on-year as at the end of March 2018, compared to a revised 2.11 per cent growth recorded in the last quarter of 2017. In the first quarter of 2017, the economy was still in recession, with GDP figure in the negative threshold of -0.91 per cent.

Projection

The World Bank in its economic outlook said Nigeria’s economy was expected to expand by 2.1 per cent in 2018. The largest economy in Africa was initially billed to grow by 2.5 per cent, according to World Bank’s earlier estimations.  The International Monetary Fund, in its World Economic Outlook presentation in April 2018, also affirmed that Nigeria might not be so lucky, despite growth projections by analysts. It said Nigeria would only be able to grow by 2.1 per cent in 2018 and 1.9 per cent in 2019.

The basis for the IMF’s growth projection for Nigeria was that many commodity exporters will not be so lucky in 2018, despite some improvements in the outlook for commodity prices.

Generally, projections for growth for Nigeria by major international financial organisations, like PriceWaterHouseCoopers, did not exceed 2.6 per cent.

 Comments

Financial pundits are of the opinion that the growth projections for Nigeria by the World Bank and other multilateral and private organisations for 2018 remain a far cry from what is considered reasonable to deliver a better living to its citizenry.

Chief Executive Officer of Financial Derivatives Company Limited, Mr. Bismark Rewane, warned that the growth in the economy might not make a difference in the life of the average Nigerian.

“It is impracticable to talk about attaining an improvement in the quality of life if the economy does not record rates of GDP well above double the rate of population increase, which means growing at over six per cent,” Chizea argued. He added that the GDP as at the first quarter of 2018 was still far below the targeted growth of three per cent and could not even approximate the rate of population increase.

Managing Director, Laramitch Vigor Consults Limited, Mr. Michael Kelikume, also lamented that strong economic growth recorded in the past in Nigeria had not been beneficial to the ordinary people. “Economic growth in Nigeria has risen substantially, with annual average of 7.4 per cent in the last decade. But the growth has not been inclusive, broad-based and transformational,” Kelikume said.

He added, “The implication of this trend is that economic growth in Nigeria has not resulted in the desired structural changes that would make manufacturing the engine of growth, create employment, promote technological development, and induce poverty alleviation.”

Kelikume noted that the unemployment level in Nigeria had increased in recent times as a result of non-inclusiveness of economic growth in the past.

“Available data from the NBS has shown that national poverty level has increased.  Out of a total active labour force of 85.08 million people in Nigeria, about 16 million people were unemployed in the third quarter of 2017,” he said.

Labour Force Statistics in the third quarter of 2017 published by NBS in January also revealed that 18.02 million people were underemployed, as they worked for 20 to 39 hours a week, which is less than the 40 hours required to be classified among the workforce.

Concerns

PricewaterhouseCoopers, a multinational professional services firm, said despite its expectation of stronger growth in 2018, prolonged delay in implementing overdue reforms in the economy will continue to drag growth.

According to PwC, “These include slow progress with the power sector reforms, absence of full deregulation of the downstream petroleum sector, and the multiplicity of exchange rates, which constrains investments and makes the economy vulnerable to shocks in the oil sector.”

PwC predicted that growth would remain considerably below the long-term economic and population growth rates of 6.7 per cent and 2.7 per cent, respectively.

Chief Executive Officer of Proshare, Olufemi Awoyemi, was concerned that the same factors that led Nigeria to recession (factors of oil production and oil price) were driving the current economic growth. Awoyemi emphasised the need for coherence in government policy to drive the economy towards the path of sustainability.

On his part, Rewane believed the GDP growth in first quarter was good, but dangerous because it was predicated on oil, which meant that Nigeria was still an oil-dependent economy. He was of the view that Nigeria remained vulnerable to exogenous shocks, a position posited in a recent Moody report on the country.

Solution

Experts believed there was an urgent need for the diversification of the country’s revenue base through intensification of the drive to achieve massively improved revenue inflow from fiscal operations.  They proposed that in the case of tax revenue, the focus should be to broaden the tax net to capture those who hitherto were inadvertently excluded from paying taxes.

Both Rewane and Chizea said all components of government must desist from paying lip service to budget implementation. “We would, of course, most certainly be postponing the much desired robust recovery of the economy as we continue to play dirty politics with budget approval. Budget 2018, which was presented by the executive on November 7, 2017 to the National Assembly, was only recently approved by the lawmakers. After such delays, some of us in good conscience still expect record implementation of capital projects as contained therein, which has the key to unleash the much desired rapid growth of the economy to jumpstart the availability of massive employment opportunities,” Rewane stated.

Besides, the Financial Derivatives CEO made a strong case for policy sustainability, which he believed was germane. He called on monetary policy makers to do a review of the interest rate regime in the country.

Meanwhile, Chizea says the milestones so far achieved in returning the economy to the path of growth must be celebrated, despite the fact that the journey to the Promised Land appears long.

“The extant trend of consistent improvement in the fundamentals of the economy is most welcome and should be celebrated, as we are beginning to view the glimmer of light at the end of the proverbial tunnel,” he said. “But it is certainly not yet uhuru for the debut of the desired prosperity for the citizenry of the country. But we should remain merchants of hope, the audacity of hope really.”