President Muhammadu Buhari is cut out for fixing an economy with a truncated history.
This is the second time he is having a go at in Nigeria’s 55 years of independence.
“The change became necessary in order to put an end to the serious economic predicament and the crisis of confidence now afflicting our nation,” he said on January 1, 1984 in explaining his overthrow of President Shehu Shagari the previous day.
Marking first 100 days in office on April 7, 1984, the then Major General added that “we took over from the defunct civilian administration at the federal and state levels a financial situation of vast indebtedness.
“In fact, the depth and seriousness of the financial predicament of the state governments and, by implication, of the nation, has become clearer and clearer, day by day.
“The federal government had to assist state governments recently with a sum of over N600 million as loan to enable them pay all arrears of wages and salaries before the end of April 1984.”
Like when Buhari took over power as military head of state on December 31, 1983 he inherited huge economic conditions as president on May 29, 2015.
He recently approved a bailout for states to offset the backlog of salaries, the same thing he did over 30 years ago.
But the economy he inherited from President Goodluck Jonathan this year seems worse.
History of truncations
Between 1960 and 1970, Nigeria’s Gross Domestic Product (GDP) recorded 3.1 per cent growth annually. Between 1970 and 1978, the growth was 6.2 per cent annually.
However, GDP was on a reverse trajectory from the 1980s. The period between 1988 and 1997 saw an average growth rate of 4.0 per cent.
From independence in 1960, the economy recorded positive growth until the 1980s when industry and manufacturing sectors started to decline. Between 1980 and 1988, industry declined to -3.2 per cent and manufacturing -2.9 per cent.
Agriculture contributed 65%
Agriculture enjoyed a boom in the 1960s. Even with low commodity prices, the sector contributed about 65 per cent to GDP.
But between 1970 and 1978 agriculture declined as attention shifted to the oil boom. By 1988, its contribution to GDP dropped to 34 per cent.
Agriculture had a negative growth in the 1970s, thus Nigeria became a net importer of basic food items.
The increase in industry and manufacturing from 1978 to 1988 relied on the mining sub-sector, especially petroleum.
Exports, commercial activities in the 60s
Prior to independence in 1960, there was no viable industrial sector though the economy was characterised by exports and commercial activities.
Agriculture was the mainstay of the economy after independence, representing almost 70 per cent of total exports and providing foreign exchange (forex) for importing raw materials and capital goods.
From the South East, comprising present day South East and South South, where palm oil was the major income earner; through the Midwest where rubber plantations held sway; to the South West where cocoa flourished, and the North with groundnut pyramids, peasant farmers produced enough to feed the entire population.
Raw materials, comprising agricultural produce and minerals, were exported to the industrialised nations. Import Substitution Industrialisation (ISI) was adopted to manufacture locally consumer items imported.
Protective measures like tariffs and quotas ensured the growth of domestic industries. Jobs were created.
Oil boom distraction
In 1971, the contribution of agriculture to GDP was 48.23 per cent. By 1977, it had declined to almost 21 per cent. Agricultural exports, as a percentage of total exports, which was 20.7 per cent in 1971, reduced to 5.71 per cent in 1977.
No thanks to the discovery of oil in commercial quantity in 1958, coupled with the oil boom resulting from the Arab oil embargo on the United States in 1973.
The economy became heavily dependent on oil. Oil revenue accounted for almost 90 per cent of forex earnings and about 85 per cent of total exports.
The boom provided revenue for the government but also created serious structural problems in the economy. Agricultural was most hit. Rural urban migration increased, as people sought greener pastures from oil windfall.
Production of agricultural commodities for export declined. Food production became a problem. Starting from 1974, the economy became a net importer of basic foods. Huge forex earnings went into importing food despite Operation Feed the Nation (OFN) and other government food programmes.
Primitive accumulation of wealth intensified. Corruption, theft, real estate speculation, treasury looting, and other fraudulent practices prevailed.
The state intensified the creation of a business class that depended solely on government contracts rather than on production. The gap between the rich and the poor widened. Badly conceived government policies exacerbated the problem.
The 100 per cent salary increase of 1975, tagged the Udoji Salary Award, was disastrous for the economy as prices increased by more than 100 per cent. The payment of a year’s arrears of the increase in salary worsened it.
Thus, despite the oil boom, the private sector remained weak. Macroeconomic policies continued to encourage consumption rather than production. The economy consumed what it did not produce.
The austerity measures introduced by successive military regimes did not help matters because structural problems were not addressed.
GDP, which grew 10.5 per cent in 1976, declined 5.7 per cent in 1978, and grew only 5.9 per cent in 1979.
The economy entered the recessionary phase, requiring stabilisation measures to reverse the gloom without success.
This was the scenario when Buhari took over power in 1983 to restore sanity to the system and save the economy from collapse.
Economic recession threatens
The economy is on the brink again in 2015, with most of the 170 million citizens living on less than $300 per capita income and the country rated among the 30 poorest in the world.
The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) held a meeting in Abuja on Tuesday, September 22 after which CBN Governor, Godwin Emefiele, warned that the economy may relapse into recession next year.
Economic crisis seems inevitable around the world, especially for countries dependent on oil, as crude prices, notching the longest losing streak since 1986, threaten to dip further below $40 per barrel (pb) for the first time since the financial crisis of 2008.
Fund managers and foreign investors are calling for a third devaluation of the naira. But the government, the CBN, MPC, and others are opposed to it.
They favour a managed exchange rate despite the widening gap between parallel market (N225/dollar) and inter-bank (N199/dollar) by Wednesday, September 30.
The previous two devaluations have eroded consumer spending, impoverished Nigerians more and increased the cost of production.
This has started to have adverse effects on the economy. Figures released by the National Bureau of Statistics (NBS) on September 24 attest to this.
Frightening economic data
NBS data showed that the economy is going down the slope and if corrective measures are not applied soon, it will enter into recession by the end of the year.
GDP grew 2.35 per cent in real terms in the second quarter of 2015 (Q2), but was 1.61 per cent lower than the figure for Q1, and 4.19 per cent lower than that of Q1 2014.
In Q2 2015, aggregate GDP stood at N22.859 trillion at basic prices. Compared with Q2 2014 value of N21.7348 trillion, nominal GDP was 5.17 per cent higher.
Nominal GDP growth was also higher relative to growth in Q1 2015 by 0.85 per cent.
In Q2 2015, oil production stood at 2.05 million barrels per day (mbpd), 5.9 per cent lower than in Q1 2015.
Oil production was also lower relative to Q2 2014 by 7.3 per cent when output was 2.21 mbpd.
Non-oil sector growth was driven by trade, crop production, construction, and telecommunications.
It grew 3.46 per cent in real terms in Q2 2015, but was 2.13 per cent lower than the growth in Q1 2015, and 3.26 per cent lower than that of Q2 2014.
In real terms, the non-oil sector contributed 90.20 per cent to GDP, marginally higher than the figure for Q1 2015 (89.55 per cent) and for Q2 2014 (89.24 per cent).
Those who understand trends and cross data analysis say the economy needs appropriate policy measures to fix it.
Hope of revival
Buhari’s military regime was ousted by Ibrahim Babangida in August 1985.
Thirty years later, he returned as a civilian president with a popular mandate to midwife change and fix an economy thoroughly battered once again by years of misgovernance.
Now, the economy is on the brink of total collapse with the majority of the 170 million citizens living on less than $300 per capita income and the country rated as among the 30 poorest in the world.
This fiscal year, a modest economic growth of about 3.5 percent is expected after years of gradual decline made worse by the sharp fall in crude oil price in 2014.
The major cause of economic decline is bad governance by the military and their civilian accomplices.
It is hoped that Buhari, generally believed as not corrupt, will arrest the decline and initiate a wide range of programmes and policies for economic revival.