Wednesday, December 29, 2010

How Nigeria’s Economy fared in 2010

2010 will go down as a year of mixed fortunes for Nigeria. The budget was proposed to stimulate the economy but the majority of Nigerians are yet to feel positive impact of the stimulus package. A number of positive developments in 2010 for me are the passage and signing into law of the Asset Management Company of Nigeria as well as the inauguration of the board. The other is the tsunami that swept away the board of the Nigerian Stock Exchange in August. There was also the sustained reform of the banking sector with the classification of the banks into four groups with different capital bases viz. International, specialised , regional, and national banks; the CBN also initiate idea of having a 10-year reform for the Nigeria banking industry which the CBN Governor at a pre-convocation lecture at Bayero Univeristy, Kano in February 2010 said is aimed at "enhancing the quality of banks, establishing financial stability, enabling healthy financial sector evolution and ensuring that financial sector contributes to the real economy”. The CBN also set limit of maximum of 2 terms of 5 years each for bank chief executive officers (CEOs)

In September 2010 CBN withdrew the licence of 224 microfinance banks and thereafter restored the licence of 37 of them. There was also the reported crackdown on the bank debtors as 4 non-executive directors of Fin Bank were suspended for 90 days by Central Bank of Nigeria on September 27 for failure to pay their debts totalling N20 billion. The year has also witnessed crusade against corruption by the anti-corruption agencies. The Federal Ministry of Justice and the Economic and Financial Crimes Commission used plea bargain mechanism to mete out punishment to some erring companies and individuals. This was adopted in the handling of the Halliburton bribe scandal as well as the case of the former Managing Director of Oceanic Bank. News report has it that $170.8 million has so far been recovered as penal fines by multinational companies involved in the $180 million Halliburton bribe scandals while assets and cash recovered from Mrs. Cecilia Ibru, former Managing Director of Oceanic Bank was estimated at N191 billion.

However, in spite of the over N5 trillion annual and supplementary budget for 2010, not much has been achieved in terms of infrastructure development. Many of the power, road and other basic infrastructural projects are yet to be completed. While work is progressing on some, others have been abandoned due to paucity of funds. According to the Minister of Finance, Nigeria’s domestic debts stood at about $28.5billion as at last September, while the external was about $4.8billion, yet government is planning to borrow more funds. Plans are afoot by the current administration to obtain $900 million loan from the export-import (EXIM) bank for the implementation of the $500 million Abuja-Kaduna Railway project and the $400 million National Public Security Communications project. This penchant for accumulating more debts is worrisome more so as we approach the next general elections in April 2011. It is on record that the current government from 2007 is master of policy inconsistency. What guarantee is there that these loans will be well utilised and what happens if there is a change of government in May 2011 after the April polls?

Nigeria with Index of 0. 478 currently occupies 113 position on the Worldwide Trends in the Human Development Index, 1970 – 2010. This is unenviable. On the 2010 Corruption Perception Index, Nigeria ranks 134 out of 178 countries. This also shows that the fight against corruption is far from being won. The recent lift of ban on some imported goods like toothpick, matches, energy and health drinks, furniture, textile fabrics, cassava and vehicles which are 15 years old and below leaves a sour taste in the mouth. Nigeria is still largely import dependent; the manufacturing sector remains moribund even as Bank of Industry is being provided with some intervention fund to revive some of them. One of such is the N100 billion Cotton, Textile, Garment Revival Fund.

The major distortion in the economy is the disproportionate ratio of capital expenditure vis -a -vis the recurrent. Even the 2011 budget presented to national assembly on 15 December has barely N1. 05 trillion out of N4.2 trillion budget for capital expenditure. This is a queer way to grow the economy. More so, Nigeria continues to run a deficit budget while failing to block the leakages in the system. Are we still dreaming of Vision 20: 2020? It’s indeed long way to economic freedom for Nigerians given the soaring unemployment and poverty despite the multi trillion naira budget which has remained largely an annual ritual, a mere hollow promissory note without concrete achievements. The most unfortunate thing is that our parliamentarian has refused to pass most of the anti-corruption bills such as the anti- money laundering, anti-terrorism and the freedom of information bills.