By Olu Fasan
Trust Bola Tinubu, Nigeria’s self-assured yet bumbling president. He will claw at any piece of seemingly good news. Recently, when the National Bureau of Statistics, NBS, reported that Nigeria’s Gross Domestic Product, GDP, grew to 3.19 per cent in the second quarter of this year, from 2.51 per cent at the same period last year, Tinubu was overly exultant.
His newspaper, The Nation, screamed on its front page: “Tinubu hails GDP surge, assures of stronger economic performance.” Surely, describing the anaemic and shallow GDP growth rate as a “surge” shows how Tinubu grasps at straws, denying reality. Interestingly, while Tinubu gloated about the GDP figure, Dr Ngozi Okonjo-Iweala, Nigeria’s two-time Finance Minister and current Director-General of the World Trade Organisation, WTO, lamented Nigeria’s perennially sluggish GDP growth rate at this year’s annual conference of the Nigerian Bar Association, NBA. So, who is right?
Well, for context, let’s start with why GDP matters. In the 1940s, the United States government asked the economist Simon Kuznets to develop a system of national accounts. Kuznets came up with the concept of GDP and made a profound statement: “Growth is a rising tide that lifts all boats”.
In other words, GDP, the sum of the value of all goods and services produced
within a country, and thus the metric a country’s economic size, is the route
to job-creation, poverty-reduction and better living standards. Some economists
argue that GDP is not a perfect determinant of well-being since it only measures
things with monetary value and not unpaid but valuable work, such as being a
housewife. Yet, GDP is the best available anti-poverty measure. And examples
from some countries show it.
Take China and India. Over the
past four decades, both countries, together, lifted an astonishing 1.1 billion
people out of poverty as they enjoyed a step-increase in GDP growth and the
superlative economic dynamism lifted all boats. As one writer put it,
growth-driven poverty reduction in China and India “must count as one of the
most dramatic improvements in human welfare in the history of the world.”
Sadly, not so in Nigeria. Even when the economy was growing at about 7 per cent average annual rate between 2004 and 2010, it was largely a jobless growth; it hardly created jobs or reduced poverty. The World Bank called it “the poverty/growth puzzle”. The problem is two-fold: one, the quantity of growth; two, its quality. Truth is, Nigeria’s economy must grow at an annual rate of over 10 per cent, given the country’s population.
Second, the growth must be in the right sectors, notably
labour-intensive sectors like agriculture and manufacturing rather than in the
oil and services sectors that employ few people. Finally, growth must be linked
to productivity, which is the ability to produce more things – food, goods,
services, name it – per hour of labour. It is productivity that leads to a
steady fall in prices and improvements in quality, and, thus, to better jobs
and living standards. But economic growth and productivity are a function of
the right policies and macroeconomic conditions.
Yet, the truth, often ignored, is that Nigeria has, over the past nine years, suffered from catastrophic economic policies under APC-led administrations, first under Muhammadu Buhari, now under Tinubu. All the “basic organs of the economy” that Dr Okonjo-Iweala listed in her NBA speech and said should be protected under a social contract have been blatantly violated and bastardised by the APC-led Federal Government since 2015.
Think about it: eroding CBN’s
independence and using it as a “fiscal agent” to print money recklessly;
interest-rate and exchange-rate manipulations; excessive budget deficits;
non-transparent extrabudgetary spending; excessive public debt, with
debt-to-GDP ratio now at well over 50 per cent instead of “well below 40 per
cent” for an economy at Nigeria’s level of development and vulnerability; and
excessive debt-servicing-to-revenue ratio, at nearly 80 per cent, which crowds
out operational and capital expenditures. All of these were the hallmarks of
the Buhari administration, and some of them, particularly excessive spending
and borrowing, are the hallmarks of the Tinubu administration.
And the consequences have been devastating for Nigeria. Compared with the period between 1999 and 2014, all elements of the Nigerian economy totally collapsed under the APC-led administration from 2015 to date. Take a few examples. Nigeria, under President Obasanjo and Dr Okonjo-Iweala, as Finance Minister, secured $18bn debt relief from its $30bn Paris Club debt in 2005, and cleared the remaining $12bn in 2006; today, Nigeria’s external debt is over $50bn. In 2005, Nigeria’s domestic debt was N4.14 trillion; today, it is N121.67 trillion.
In 2014, the exchange
rate was N147 to $1, even though the naira was floated; today, it is about
N1,600 to $1. In 2014, Nigeria was Africa’s largest economy by GDP; today, it
is the fourth largest, with a GDP per capita of $1,109, ranked 24th in Africa.
What about the decades-high unemployment, inflation and exchange rates? What
about the haemorrhaging of multinational companies due to harsh operating
conditions? It’s been nine years of absolute disaster!
Now, GDP growth itself. Buhari
inherited an economy that was still growing in 2015, despite the economic
crisis triggered by the collapse of world oil prices. However, due to his
misguided policies, the economy went into a recession in 2016, for the first
time in two decades, with a negative growth rate of -1.5 per cent. The economy
exited recession in 2017 but slipped back again in 2020. Since then, growth has
been anaemic, at 2/3 per cent, insufficient to tackle Nigeria’s deepening
unemployment and grinding poverty. That’s why describing the new 3.19 per cent
growth rate as a “surge” is both laughable and delusional.
In any case, what’s the quality of the GDP growth? Well, it was driven by the services sector, particularly financial services, which grew at 28.79 per cent, and by the oil sector, which grew by 10.15 per cent. Agriculture and manufacturing, the real sectors of the economy, only grew marginally. Yet, it is these sectors that can create jobs and reduce poverty.
Of course, with interest rates, that is, borrowing costs,
at 26.25 per cent and with very high input costs, thanks to the scarcity of foreign
exchange, manufacturing cannot grow. And agriculture will remain in the
doldrums because the improvements in agriculture that have revolutionised
farming worldwide have eluded Nigeria, which is still stuck in the primitive
age.
So, Okonjo-Iweala is right to lament Nigeria’s
anaemic growth rate. And Tinubu is wrong to give an appearance of solidity to
pure wind. His party, APC, has utterly misruled Nigeria over the past nine
years. He should own the failure and stop his chest-beating!
*Dr. Fasan is a commentator on public issues
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