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ideas have consequences

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Thursday, 01 November 2018 15:20

The Decline and Fall of Nigeria’s Economy

Nigeria at one point was becoming the land of optimism; there was this euphoria in the air that made Nigerians giddy and idealistic about Naija.  The economy had a renew life from investors and market sanguinity, gross domestic product growing over seven percent.  The presidencies of Obasanjo,  Yar'Adua and Jonathan were talking about the dividends of democracy.  There were also jobs and revenues via the springing up of Nollywood and neo-Naija afro beats  propelled by energetic and talented youths including Davido, Wizkid, Tekno, Flavour, Genevieve Nnaji and many others.





The government of President Obasanjo, led by Dr. Ngozi Okonjo-Iweala  made the arrangement and secured  $18billion debt relief for Nigeria from the Paris Club of Creditors, which became the inducement for the country to pay off her $36 billion foreign debt. Nigeria’s total foreign debt stood at $35.916billion as of June 2005. The largest chunk of the debt $31billion was owed to 15 of the 19 creditor-countries of the Paris Club. Nigeria paid off $12.4 billion in arrears and debts as was stipulated to fulfill arrangement and concord reached with the Paris club in June 2006. Nigeria also paid off the last batch of outstanding debts owed to the London Club amounting to $2.15 billion





There was also the 2020 vision project to formulate policies to make Nigeria to join club of the world's 20 biggest economies by the year 2020. And during the inauguration of the President Yar'Adua in 2007, he echoed that Nigeria was ready to emerge from shambles of corruption and hyper-mismanagement to take her rightful place in the comity of nations. Then there was a MINT nation , MINT an acronym  to denote  an association of four major emerging nations of Mexico, Indonesia, Nigeria and turkey.





So what is happening now?
Nigeria is not only waning from its high horse of idealism, it is economically falling apart.  The decelerating Nigeria’s socio-economic Pathways and index are quite alarming, thus buttressing the slow but steady decline and fall of country’s economy.





Nigeria is in a dire economic strait. Nigeria’s economic growth is anemic and in some cases decelerating with runaway inflation and high interest rate. Unemployment is becoming the sinkhole of the nation. The annual population growth rate iat 2.6 percent is out pacing  the weak economic growth of less than 1 percent .This debacle scenario is an explosive catastrophic that will eventually threaten peace and stability of a nation.




Nigeria’s economy contracted  in 2016 with total annual negative growth  that  became the worst annual slump in 25 years.  The economy went into recession due to two consecutive quarters of negative growths in 2016.  Finally, the country came out from recession with anemic growth of less than 1 percent. To be precise the recorded GDP growth was 0.83 percent in 2017 according to indices that came from National Bureau of Statistics (NBS).





Nigeria’s Negative economic growth of 2016


When Nigeria’s economy was rebased in 2014, the country’s Gross domestic Product (GDP) stood at USD 510 billion by the end of fourth quarter the gdp rose to USD 568.5 billion  making Nigeria the largest economy in Africa.  The economic development engineered by monetary and fiscal policy was pro-growth was principally driving the economy.  The gdp was rising and growing up to 7-8 percent was realized. With the containing and out rightly taming of inflation rate at less than ten percent, coupled with the speaking up of Nigeria’s brand, the country was a steady growth. I guess good thing never last forever especially in Nigeria.  Then in 2016 the negative growth stepped in and devastated the economy until early quarter of 2017.





Central Bank of Nigeria employed monetary policy tool to mop up liquidity at monetary base due to high inflationary trends. CBN did maintained already jacked up interest at 14 percent  to tame the rising inflation rate which was exceeding 11percent. This scenario triggered illiquidity and credit crunch in the market because borrowing became very expensive.





From 2014 to 2017 Nigeria’s economy growth has contracted to negative twenty eight  ( -28) percent which  made the GDP to depressed from USD 568.5 billion to  USD 375.77 billion. Between 2016 to the third quarter of 2017 the economy was decelerating and shrinking, there were accumulative negative growths of -7.14.





To add salt to injury there was capital and investment flight in Nigeria due weak naira, inability to transfer revenue generated by investors and poor financial landscape.






“Financial sector constraints can lead to capital flight. It is well known that narrowness of the capital and money markets is a feature of developing economies. These markets therefore provide only a limited variety of financial instruments in which wealth can be held. There is also in many developing countries the lack of full or credible deposit insurance on assets that are held in the domestic banking sector. As a result of CAPITAL FLIGHT AND EXTERNAL DEBT IN NIGERIA 17 these constraints, residence of developing countries look abroad to invest their wealth.” (S. IBIAJAYI)

Nigeria GDP Annual Growth Rate




The level of unemployment is alarming especially among the youths.  Job Statistics published in 2017 by “Nigeria's National Bureau of Statistics (NBS) pegs the unemployment rate at 14.2% in the last quarter of 2016, up from 13.9% in the preceding quarter. It's the ninth consecutive quarter that the unemployment rate in Nigeria has increased.”  And it is not getting better with the latest recorded unemployment of 18.8 percent. If we must be frank with each other, the true unemployment rate is way bigger than the official rate.


The poverty in Nigeria is exploding and poverty stricken Nigerians are now in millions.  Nigeria has the largest numbers of poor people in the world.  





Based on the findings and compilation by Brookings Institute and World Poverty Clock, “Nigeria has overtaken India as the country with the largest number of people living in extreme poverty, with an estimated 87 million Nigerians, or around half of the country's population, thought to be living on less than $1.90 a day.”

 

Image result for Brookings Institute projection showed that Africa accounted for about two-thirds of world extreme poverty of more than 643 million people.  “Nigeria has already overtaken India as the country with the largest number of extreme poor in early 2018, and the Democratic Republic of the Congo could soon take over the number 2 spot (Figure 1 below). At the end of May 2018, our trajectories suggest that Nigeria had about 87 million people in extreme poverty, compared with India’s 73 million. What is more, extreme poverty in Nigeria is growing by six people every minute, while poverty in India continues to fall. In fact, by the end of 2018 in Africa as a whole, there will probably be about 3.2 million more people living in extreme poverty than there are today.”


Brookings Institute projection showed that Africa accounted for about two-thirds of world extreme poverty of more than 643 million people.  “Nigeria has already overtaken India as the country with the largest number of extreme poor in early 2018, and the Democratic Republic of the Congo could soon take over the number 2 spot (Figure 1 above). At the end of May 2018, our trajectories suggest that Nigeria had about 87 million people in extreme poverty, compared with India’s 73 million. What is more, extreme poverty in Nigeria is growing by six people every minute, while poverty in India continues to fall. In fact, by the end of 2018 in Africa as a whole, there will probably be about 3.2 million more people living in extreme poverty than there are today.”



The Nigeria’s naira was once a thriving currency but  at the interim, it has lost its splendor and luster.  Naira was referred as a “junk currency” by world renowned economist, Professor Hank.  According to the applied economic guru:  




"Nigeria is in trouble. Amid double-digit inflation, Nigeria's foreign reserves are dwindling as the government races to shore up a swooning currency, the naira.”

And then Hank made the devastating “J” statement,



“The currency (naira) is junk and the government is incompetent and corrupt. The only sure-fire way to solve all these problems is for Nigeria to officially replace its junk currency."



The Nigerian budget is incoherently ridden with large deficit.  Nigeria for 2018 budget needs to borrow N1.643 trillion to finance the deficit, therefore Nigeria is  borrowing N793 billion and N849 billion from both domestic and foreign sources respectively.   Nigeria’s foreign debt at the moment is $22.08 billion while domestic debt stood  at N3.48 trillion. This resort of management  is the end of economy.





Emeka  Chiakwelu, Principal Policy Strategist at AFRIPOL. His works have appeared in Wall Street Journal, Huffington Post, Forbes and many other important journals around the world. His writings have also been cited in many economic books, publications and many institutions of higher learning including Harvard Education and Oxford University. Africa Political & Economic Strategic Center (AFRIPOL) is foremost a public policy center whose fundamental objective is to broaden the parameters of public policy debates in Africa. To advocate, promote and encourage free enterprise, democracy, sustainable green environment, human rights, conflict resolutions, transparency and probity in Africa. This e-mail address is being protected from spambots. You need JavaScript enabled to view it

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