Nobel Laureate professor Wole Soyinka recently called for an emergency national conference on the Nigerian economy. This suggests that the economy is not only in dire straits, but headed toward a cataclysmic cliff. For an artistic and creative intellectual titan like Soyinka to dabble in the “dismal science” of economics portrays an urgency that can’t easily be ignored.
But how bad, really, is the Nigerian economy? And would a conference help?
On the first question it is worth noting that economic downturns neither surprise nor alarm economists. We believe that every economy that reaches the peak of the business cycle must eventually slow down. Sometimes they reach what is referred to as a “trough”, or the very bottom of the cycle.
Some economies are more resilient than others. They are able to minimise the impact of an inevitable downturn, as well as rebound quickly, mainly through sound economic management.
On the second, I do not recall any country that has solved its economic problems via an emergency national confab. There is nothing wrong with discussing a nation’s economic problems, but seeking solutions through a conference will be at best far-fetched, and at worst illusory.
How bad is it?
The Nigerian economy is indeed under severe strain. But not everything is as bad as it seems.
The country’s currency has suffered a steep slide, depreciating by over 25% in the past year. But analysts should be circumspect when they generalise about the impact of Naira depreciation.
Subsistence farmers across Nigerian villages who receive remittances from relatives abroad will find themselves unexpectedly awash with stacks of Naira.
Nor do subsistence farmers have to fret about the inflationary implications of a depreciating currency since they produce nearly all of their daily needs. Farmers who sell exported products like cocoa, palm oil, palm kernel, and groundnuts might even see a spike in the demand for their products, following changes in relative prices induced by a depreciating Naira.
Ordinary folks don’t shop at mega supermarkets and malls like Shoprite. This means that they don’t need to worry about a spike in the prices of imported goods. This, in turn, will be a boon to local manufacturers who source their production inputs locally. This would be good for jobs and for government revenue. Don’t forget that China boosted its exports of manufactured goods by deliberately undervaluing the Yuan.
I’m also not perturbed by the inexorable decline in Nigeria’s GDP growth rate, from an average of 9% between 2000 and 2010, to the current 4%. Stellar economic growth in Nigeria occurred when a barrel of crude oil sold for more than US$100. Now that a barrel barely sells for $30, the country’s growth rate is expected to shave a percentage point or so from the current level.
The country’s anaemic growth rate isn’t my main concern. A major concern is the fact that Nigeria’s economic growth has never been inclusive and equitable.
When the country’s growth rate peaked in the 2000s, a 2014 report by the McKinsey Global Institute showed that only one-quarter of Nigerians benefited. The rest wallowed in abject poverty, which now stands at an alarming rate of 70% of the country’s population of almost 200 million.
And what about the country’s rapidly disappearing foreign reserves? Should I worry about that as well? No. Reserves in Nigeria have often been used to supply cheap foreign currencies to the Nigerian elite. They have used these for various unproductive activities and illicit financial transactions.
These include money laundering, medical tourism, acquisition of choice real estate in Dubai and other expensive cities, and lavish vacations.
There may be a silver lining to the depletion of Nigeria’s oil-driven foreign reserves from $54 billion in 2008 to the current level of roughly $28 billion. It has the potential of forcing the country to explore broader sources of foreign exchange, including the neglected agricultural sector, agro-processing and resource-based industrialisation.
Nigerian President Muhammadu Buhari has said he is worried that a depreciating Naira and a rapidly depleting foreign reserves will have a negative impact on unemployment. Economists estimate that joblessness is more than 50% – a more credible figure than the National Bureau of Statistics’ 9.9%.
I believe that many Nigerian youths have in fact given up looking for jobs. They have come to the bitter realisation that looking for a job in Nigeria an exercise in futility. They have become what labour economists refer to as “discouraged workers” – that is, unemployed people who have looked for jobs for years and have given up doing so.
How sound economic polices are made
Countries solve their economic problems when citizens willingly elect leaders that credibly promise economic renaissance, and then hold them accountable. When elected leaders fail to deliver they ought to be voted out of power, as the previous administration in Nigeria learnt.
When US President Barack Obama assumed office in 2009 he inherited an economy that was more distressed than Nigeria’s. He was saddled with a whopping $10 trillion in debt (or 72% of the GDP), and an unemployment rate of 10%.
But Obama did not call for an emergency national conference. He assembled an economic team and proposed an economic blueprint for extricating the economy from the doldrums. His massive economic stimulus program worked. Four years later he cruised into re-election.
Buhari and his administration have pledged to turn the Nigerian economy around. They have also undertaken to provide economic succour to millions of Nigerians trapped in extreme poverty.
Let us give them a chance to articulate and implement their economic policies. There will be plenty of time and talking heads ready to dissect the administration’s economic performance come 2019.
Rather than call for an emergency conference on the economy, Soyinka should do what he does best: galvanise like-minded Nigerians and demand that all those who looted Nigeria’s treasury (especially the over $2 billion designated for arms purchase to fight Boko Haram) return their ill-gotten wealth.
Getting those stolen funds back and investing them productively in developing the agricultural sector, supporting small businesses, as well as providing microcredit to informal sector workers, would help cushion the effects of the slowdown in the economy, and perhaps lay the foundation for a diversified economy.
Steve Onyeiwu is author of Emerging Issues in Contemporary African Economies (Palgrave/Macmillan, 2015).