Wednesday, December 28, 2011

An assessment of Nigerian economy in 2011

2011 started with a lot of promises. Nigerians were hoping and praying for a better year. However, for many, it was an unfulfilled dream.

Even though the 2011 budget was presented to the National Assembly in December 2010, controversies trailed the budget passed by the legislature in March 2011 and had to be amended before the President signed it in May 2011. As at December 2011 only about 70 per cent of the budget has been implemented thus the jinx of budget debacle is yet to be broken.

The financial sector, particularly the banking and insurance sub-sectors witnessed further reform in 2011. Three banks, Bank PHB, Afribank and Spring Bank were nationalised in August while bridge banks were created to take over from the nationalised banks. It would be recalled that under the new arrangement, MainStreet Bank Limited takes over the assets and liabilities of Afribank; Keystone Bank Limited acquires the assets and liabilities of Bank PHB, while Enterprise Bank Limited takes over that of Spring Bank. Also in 2011, banks asked their customers to update their account details and also issued their customers 10 digit National Unified Bank Account Number (NUBAN). On Thursday, April 28, 2011, Central Bank of Nigeria issued a circular titled “Industry Policy on Retail Cash Collection and Lodgement”. In the circular the CBN put a cap on the amount an individual can withdraw from his or her account at N150, 000 while corporate organisations can only withdraw maximum of N1 million in a day. This is to take effect in June 2012.

In 2011, National Minimum Wage Act was signed into law by the Federal Government pegging the lowest minimum wage at N18,000. Unfortunately, this new wage structure has been dogged with controversies as Federal and State Governments foot-drags on its implementation. Several meetings were held with labour unions before federal government pledged to commence implementation by August 2011. Many States are still recalcitrant as they claimed not to have the resources to pay the new minimum wage except the fuel subsidy is removed and /or new revenue allocation formula in favour of State is instituted.

Senate probe of the privatisation programme of the federal government in the August 2011 revealed a lot of sharp-practices and malpractices in the implementation of the privatisation and commercialisation programme. The probe panel headed by Senator Ahmad Lawan (ANPP, Yobe North) whose panel recommendation was adopted on December 20, 2011 shows undervaluation of government assets, non-respect of share purchase agreement by some of the buyers of the ailing government corporations; lack of due process in the sales of some of the corporations; political interference; incompetence of some of the Bureau of Public Enterprises officials, etc. Under the Nigerian privatisation programme, the nation lost assets, revenue, jobs and values.

In spite of the much touted Power sector reform, Nigeria is closing the year with a paltry 4,000 megawatts of electricity. The closure of Egbin Thermal Station in the first week of December 2011 even led to a loss of over 1,000 out of that number. Thus the Nigeria’s power situation remained deplorable in 2011 with attendant negative impact on socio-economic life of the people. Nigeria’s economy continues to be powered by electricity generating machines procured by individuals and companies. This has significantly increased the cost of doing business in Nigeria.

Not much diversification of the non-oil sector viz. Tax, Solid minerals, Manufacturing and Agriculture take place in 2011. Rather, the country continues her over dependence on oil exports as its mainstay of the economy. This is unhealthy. Nigeria is richly blessed with scores of solid minerals which could be explored to augment income from oil earnings but not much has been done in this regard. Manufacturing sector remains comatose.

A newspaper editorial put the issue more succinctly, “The nation’s economy today is in a mess, featuring the collapse of businesses owing to the poor operating environment. Companies are shutting down and others relocating to neighbouring nations. The Manufacturers Association of Nigeria revealed that, in 2009, 834 member-companies shut down while half of those still in operation were ailing. Invariably, over 83,000 persons were said to have been rendered jobless by the closures.

The Central Bank of Nigeria in July put the rate of youth unemployment at 41.6 per cent. Former Finance Minister, Olusegun Aganga, said in December 2010 that 49 per cent of Nigeria’s urban youths and 39.7 per cent of the nation’s rural youths were unemployed. The Ministry of Labour and Productivity had put the figure of graduate unemployment at 41 per cent.”

In the 2011 budget a seed funding of N50 billion was earmarked for National Job Creation Scheme. Even though the president in his budget speech on December 13 said the implementation of this scheme has commenced, there are no statistical data of how much of this money has been spent and how many persons has been employed under the scheme in 2011. In October 2011, President Jonathan launched a Youth Enterprise with Innovations in Nigeria (YOUWIN) with the hope that the initiative will generate about 100,000 jobs in three years. This is a far cry from what the country needs to drastically address the unemployment explosion.

One of the good measures taken to speed up business at the nation’s seaports is the reduction in the number of agencies operating at the port. In October 2011, Minister of Finance and Co-ordinating Minister for the Economy, Dr. Ngozi Okonjo-Iweala, disclosed during the inspection of APM Terminals Apapa Limited in Lagos that the Federal Government has ordered the withdrawal of eight agencies operating in the nation’s ports, saying that the number should be reduced from 14 to six with immediate effect.

In the same vein, the Federal Government in collaboration with the top management of Nigeria Customs Service (NCS) disbanded the Customs Task Force and abolished the cargo tracking note (CTN), saying that operations at the nation’s ports must be streamlined to enhance efficiency and reduce the cost as obtainable in developed economies.

The inauguration of Economic Management Team by the Federal Government and the recommencement of publication of monthly allocations to Federal, States and LGAs are other noble efforts of government in 2011.

Unfortunately, the war against corruption is still far from being won. In the 2011 Corruption Perception Index (CPI), released by Transparency International (TI), Nigeria dropped nine places from her ranking of 134 out of 178 countries in 2010, to 143rd out of 183 countries in 2011. Nigeria maintained a score of 2.4 points out of 10, while New Zealand was ranked first with 9.5 points. This poor record could have been part of the reason behind the sack of Farida Waziri, chairperson of Economic and Financial Crimes Commission in November 2011. Nigeria currently languishes in 156th place out of 187 countries in the UN's Human Development Index. This is an indication that standard of living of majority of Nigerians is still very poor while cost of living soars.

Agenda for the economy in 2012

1. Budget for 2012 should be passed by the federal and state legislatures promptly and implemented faithfully by the government at all levels.
2. The removal of fuel subsidy, if it must happen, should be done in phases. This is to cushion the negative effect a total deregulation will cause to majority of Nigerians. Nigeria’s refineries also need to be revamped as a matter of urgency.
3. Human capital development should be given priority in 2012.
4. Power sector should be fixed with significant increase in power generation, distribution and consumption. This is the best way to stimulate the economy, re-industrialise Nigeria; fight unemployment and reduce poverty.
5. Government at all levels should sincerely wage war against wastes, leakages and corruption. Even if fuel subsidy is removed and lip service is paid to anti-corruption war, Nigeria will be worse off. There should be no sacred cow in the fight against corruption as that is one of the ways to deter people from indulging in corrupt practices.
6. Government should embark on pro-poor policies that will make life meaningful for the less privileged. These include subsidized Medicare, mass and affordable housing schemes; qualitative and affordable education; mass transit programmes including rail, road and water transportation.
7. Security of lives and property should also be paramount on government list of priorities. Throwing money at security problem will not solve it. Security personnel need to be well trained and patriotic. Security chiefs that fail to perform should be sacked.