Economy: Many miles crossed, many miles lie ahead

On May 29, 2015, President Muhammadu Buhari rode into office waving sheaves of hope and change. Five years down the line and with a plethora of policies, the petro-dollar dependent economy is struggling to thrive. SULAIMON OLANREWAJU takes a panoramic view of the performance of the economy under the 77-year old leader.

Politics and economy are entangled. Politics determines the economic direction while the economy determines the strength of the polity. If the economy is ailing, so will be the polity and vice versa. But the interplay between politics and the economy is choreographed by politicians. Therefore, the economy is often at the mercy of politics.

The nation’s economy was not in its best state when President Muhammadu Buhari took over the reins of government on May 29, 2015. With the price of crude oil on a consistent slide, value of the currency plummeting and the foreign reserves going down, it was evident that the economy was in a dire strait. The bad situation inherited by the administration was worsened by the delay of the President in appointing cabinet members and his tardiness in taking critical economic decisions, which forced JP Morgan and other investors to exit the country. With all of that, the economy contracted quarter after quarter until it slipped into recession for the first time in 20 years in the second quarter of 2016.

In the first two years of the present administration, the absence of a clear-cut economic guideline left the Central Bank of Nigeria (CBN) with no other option than to deploy monetary policies to attempt a stemming of inflation, buoying local production, boosting Micro, Small and Medium Enterprises, encouraging agriculture and stimulating mining activities. While it is within the purview of the apex bank to target economic stability through the deployment of monetary instruments, the government is expected to counterbalance this with the use of fiscal and other economic policies. But the near absence of these in the first two years of the administration left the management of the economy at the precinct of the CBN.

To stabilize the economy and stem the pressure on the currency precipitated by the demand of dollars, the apex bank ruled out 41 items from accessing foreign exchange from the official quarters. The absence of a counterbalancing trade policy, which could increase local production to bridge the gap that the policy created, forced the prices of the items to skyrocket. The increase in the prices of those items had a multiplier effect on the prices of other commodities. In addition, importers of those items had to look beyond official quarters to source their foreign exchange with the effect that the value of dollars and foreign currencies snowballed in the parallel market, rising to as high as N520 to the dollar. The rising cost of accessing forex at the parallel market was enough motivation for those who got it at the official rate to divert same to the parallel market, a move that subjected naira to further plummeting.

Meanwhile, the gap between the official and unofficial rates of forex shot up the landing cost of Premium Motor Spirit (PMS) and forced importers to stop lifting fuel. This escalated the cost of fuel and to control this, the government increased the pump price of petrol from N87 to N145 per litre in 2016. However, despite this increase in pump price, the landing cost was still higher than the pump price. So, the government which had said that it would remove fuel subsidy introduced a new term, known as under-recovery, through which the Nigerian National Petroleum Corporation (NNPC) bore the difference in landing cost and the official pump price announced by the government.

It wasn’t until the price of crude oil started picking at the global market that the CBN was able to achieve N360 to a dollar exchange rate.

Meanwhile, the exclusion of the 41 items from access to forex from official quarters had a telling effect on the private sector operators many of who deploy a number of the items on the list for their manufacturing activities. The difficulty they encountered in sourcing foreign exchange forced many private companies to either scale down their operation or stop production forthwith. Many jobs were consequently lost with many Nigerians forced to live below $1.90 per day. The continuation of this resulted in the description of Nigeria as the global poverty headquarters by the Brookings Institution in 2018.

In April, 2017, the government eventually came up with the Economic Recovery and Growth Plan (ERGP), which is a medium-term developmental initiative focused on restoring growth, investing in people and building a globally competitive economy meant to be a paradigm shift in the nation’s economic management.

As a consequence of ERGP, the government introduced the Voluntary Asset and Income Declaration Scheme (VAIDS), which allowed tax defaulters a holiday and a window to pay their outstanding. This restored efficiency in the country’s tax system and increased tax revenue with the government recovering about N30billion within 11 months. There was also the introduction of Importers & Exporters (I&E) FX window, which lowered the pressure on the naira, and sustained recovery from recession and growth in GDP to 1.87 per cent in the first quarter of 2020.

Similarly, headline inflation has moderated largely from 18.33 per cent in October 2016 to 12.34 per cent as of April 2020. The foreign reserves also witnessed a rise, hitting a 5-year high of $46billion in the first quarter of 2018 before sliding to the current level of $37billion.

From 2017 when crude oil price resurged in the global market, the nation’s economy enjoyed some level of stability but since the advent of COVID-19, which resulted in most economies shutting down, demand for oil dwindling and the price of crude oil heading south, the economy has been gasping for breath. The decline in crude oil sales means a reduction in inflow of revenue to the country. Being an import-dependent country, this has put a huge pressure on the currency with the CBN being forced to adjust the value of the naira to N380 to a dollar, though the black market rate is about N460 to a dollar. But this has not brought much reprieve to the currency and the economy. This was evident in the performance of the economy in the first quarter of the current year. According to the National Bureau of Statistics (NBS), the Gross Domestic Product (GDP) grew by 1.87 per cent (year-on-year) in real terms in Q1 2020. The performance, the bureau said, represented a drop of 0.23 per cent points compared to Q1 2019 (2.10 per cent) and 0.68 per cent points decline compared to Q4 2019 (2.55 per cent), reflecting the earliest effects of disruption caused by COVID-19 pandemic and crash in oil price.

In its reaction to the GDP growth, the Nigerian Employers’ Consultative Association (NECA) called on the federal government to shield the economy from external shocks.

NECA, in a statement signed by its Director General, Dr Olawale Timothy, said “In our analysis of the country’s economy, we observed a strong correlation between global oil prices (Brent) and the country’s GDP between Q1 2014 and Q1 2020, indicating that the direction of growth is pretty much determined by the direction of oil prices. It can be adduced that a dollar increase in global oil prices corresponds with average 0.1 per cent rise in growth. A similar trend was witnessed in Q2 2017, when the country exited from recession, it was not buoyed by government policies, but rather rebound in oil prices. This calls for a more drastic management of the country’s economy from the global shock of oil prices. Creating enabling environment for the non-oil economy to be the major contributor to the revenue profile would salvage the economy from external shocks.”

Dr Olawale, when asked for a review of the performance of the economy under the current administration, lauded the government for its efforts at solving the many problems of the country, which had hindered past governments.

He, however, added, “It was expected that the present government would have been more prepared, given the many attempts by Mr. President to govern the nation.”

He added, “Taking a cursory appraisal of the impact of the various initiatives from the macroeconomic perspectives appear to signify that there are more hurdles to cross given the current state of the economy, particularly the inclement state of the environment to businesses, rising poverty and unemployment rates and its unpromising future prospects.”

Speaking on fiscal and monetary policies, the NECA DG said, “We note the closure of the borders, the attempts at encouraging backward integration, the CBN’s ban of forex for select items hitherto imported into the country. As much as these efforts were germane, they, nevertheless, cause a lot of contradiction and uncertainty in the polity. While the government signed the AfCFTA, we are at the same time championing the closure of borders without taking cognizance of the cost and benefit to the nation. As much as the fiscal policies tend to support development, the monetary policy leaves much to be desired.”

Speaking in this light, Professor Festus Epetimehin, Dean, Faculty of Business Administration, Joseph Ayo Babalola University, Ikeji-Arakeji, Osun State, said the greatest undoing of the administration is its seeming uncoordinated policies.

“These have made progress difficult as a country and have increased poverty and hardship in the land.”

Professor Oyedunni Arulogun’s view was not any different from the two.

Professor Arulogun, who is the Director, Centre for Entrepreneurship, University of Ibadan, said, “Policy makers do not take the texture of the terrain into the picture before making policies and when that is the case, the policy becomes dead on arrival. There is the need to assess the suitability of policies to our society.”

She added that to achieve implementable policies, the government needs to “involve technocrats who are experts in the various aspects not only because they have read that particular course in school but also who have added experience as well as current knowledge on issues.”



If there is an aspect of the economy where the Muhammadu Buhari administration has shone like a million stars in the last five years, it is the area of agriculture. Coming in when the country’s major revenue earner (crude oil) was facing serious challenge, President Buhari took steps to diversify the economy by promoting agriculture.

The first major step taken by the government to signify its seriousness about making agriculture its revenue-earning pivot was the launch of the Anchor Borrowers Programme (ABP), established by the Central Bank of Nigeria (CBN). The programme was designed to create a linkage between anchor companies involved in the processing and small holder farmers (SHFs) of the required key agricultural commodities. Through the ABP intervention, small holder farmers are able to assess farm inputs in kind and cash to boost their production.

According to the CBN, since the programme came on stream, it has supported more than 1.5 million farmers across the country’s 36 states with over N171billion in cultivating 16 different commodities in over 1.4 million hectares of farmland. The CBN governor, Mr Godwin Emefiele, once said that the programme had, within two years, contributed to the creation of an estimated 890,000 direct and 2.6 million indirect jobs.

The success recorded by the programme encouraged the government to halt its support for food importation with the president directing the CBN not to “give a cent to anybody to import food into the country.”

While explaining the rationale behind the directive, President Muhammadu Buhari said the nation’s foreign reserve would be used strictly for diversification of the economy and not for encouraging more dependence on foreign food. The president noted that some states such as Kebbi, Ogun, Lagos, Jigawa, Ebonyi and Kano had taken advantage of the Federal Government’s policy on agriculture with huge returns in rice farming and urged more states to join the agricultural revolution. The President has expressed hope that Nigeria would become a rice-exporting company.

Before the advent of the current administration, Nigeria was spending a huge fortune of food importation. According to Emefiele, as of 2015, Nigeria’s food import bill was $7.9 billion, but that has gone down considerably.

The government also came up with the Presidential Fertilizer Initiative, which is the outcome of a partnership between Nigeria and Morocco, and implemented as a Public-Private Partnership in Nigeria, led by the Nigerian Sovereign Investment Authority (NSIA) and the Fertilizer Producers and Suppliers Association of Nigeria with a view to making fertilizer available to Nigerian farmers all year round at affordable rate. The efforts of the initiative are already producing results with fertilizers being available to farmers at ₦5,500 per bag.

To coordinate all efforts by the administration at improving food production in the country, the government set up the Food Security Council, chaired by the president himself. The council which has governors, ministers and heads of government agencies as members has as its objectives the development of sustainable solutions to the farmers-herdsmen clashes, climate change and desertification and their impact on farmland, among others.

The government has recorded great feats with respect to agriculture but the albatross is insecurity. The gains that should have accrued to the country from the agric programme have been largely eroded by the advances recorded by insurgents and herders’ attack on farmers. With the persistent and unchecked attacks of herders and insurgents on farmers, farm produce will decline and food security might come under a serious threat despite all that the government has done.

Commenting on the government’s interventions in agriculture Dr Olawale said, “The government has actually fared well in the area of food security, the Anchor Borrowers Scheme for farmers, policy on rice importation and the inauguration of the NLTP can be said to have yielded result and guarantees food security for the nation, its impact however, needs to be felt more by the citizenry.  However, the continuous activities of herdsmen have limited the success story. Arguably, the efforts of government to curb the insecurity challenges faced by farmers have been trite and not encouraging. More efforts and attention could have been given to agriculture beyond the current uncoordinated efforts. Of what use will a loan be to a farmer whose farm is destroyed by herdsmen?”


Rising debt

With the recent approval of the $22.7 billion loan request by the government, the country’s total public debt rose to N33 trillion. This is over N20 trillion increase over the figure of N12,118,849,450,000 by the end of June 2015. The total debt stock is made up of both foreign and domestic debts of the federal and state governments.

The country’s rising debt profile has ceaselessly riled economists and financial experts who have consistently expressed perplexity over the Federal Government’s seeming uncontrollable appetite for loans.

According to Dr Vincent Nwani, a Lagos-based investment and business analyst, excessive borrowing is detrimental to the nation’s development.

He said, “These loans are not without implications. One of the implications is that given the current level of the nation’s external reserves, we will need twice the size of our external reserves to offset the debts. Another implication is that going by the total revenue earned by the country yearly, we will need our total revenue for between seven and nine years to pay off our debts. This shows how bad the situation is.”

Painting a more graphic illustration of the situation, Nwani said, “We are borrowing to maintain the current generation. We are borrowing to pay salaries, to pay pensions and to pay hospital bills. The implication of this is that any child born in Nigeria today will inherit about N100million debt due to no fault of his but because of how we have managed our economy. On the other hand, any child born in Norway today inherits $100million asset because of the reserve.”

On what the government should do to raise revenue, Nwani urged the government to be more creative with the management of the nation’s assets.

He said, “The model used for the NLNG (Nigerian Liquefied Natural Gas) should be replicated in managing other assets. That model fetches the nation over a billion dollars every year. Whenever I see the Federal Secretariat Complex, Ikoyi that has been abandoned since 1991, I wonder why the government would allow such asset to waste away. The asset should be put to good use to generate revenue. What are the prisons doing in the middle of the city? What are the barracks doing in the middle of the town? United Kingdom is relocating its barracks away from the city centre to create opportunity for real estate development. The government needs to bring creativity into the management of assets to create new wealth.”

Speaking in a similar vein, Professor Epetimehin questioned the government’s rationale for amassing debts. While noting that borrowing to build revenue-generating infrastructure is a good idea, he condemned the government’s attitude of borrowing for consumption.

His words, “We have seen in this country an unprecedented rise in debt without a corresponding increase in infrastructure.

“What has been accomplished with the over N20 trillion debt that has been amassed in about five years? Where are the new roads? Where are the new airports? Where are the new hospitals? Where are the projects that would generate funds with which the loans would be repaid?

“The government should work hard to reduce external and internal borrowings because these are some of the factors militating against the economy.

“Without the government reducing the debt profile, not only will Nigerians be poor now, they will also be poor in the future because future revenues are already pledged to debt repayment.”


Power generation

One dark spot for the current administration is the poor power supply. Ahead of its coming into office, the All Progressives Congress (APC) had boasted of fixing the power problem within six months but five years after, the situation is as bad as it has always been because Nigerians still long for stable power supply.

The poor power situation in the country has made the cost of doing business in the country extremely high because every company has to generate its own power. Apart from this resulting in the high cost of items produced in the country, it also hinders companies operating in the country from utilizing their installed production capacity. This means that the companies cannot operate optimally. It also means that they are unable to employ as many hands as they are supposed to. This has an effect on employment generation capacity of the country as well as the rate of poverty in the land.

According to those in the know, although the country has installed generation capacity of about 7,000MW, only about 3,000MW is distributed because of aged facilities.

To correct this problem and put the power of inadequate power supply behind the country, President Buhari, last year, signed a six-year power deal with Siemens AG, the German energy company, for the production of 25,000 megawatts of electricity by the year 2025. To facilitate this, the president directed the Transmission Company of Nigeria (TCN) to work with Siemens AG to achieve 7,000MW and 11,000MW of reliable power supply by 2021 and 2023 respectively and the ultimate 25,000MW by 2025.

Speaking at the deal-signing ceremony, President Buhari said, “We all know how critical electricity is to the development of any community or indeed any nation. And whilst we are blessed to have significant natural gas, hydro and solar resources for power generation, we are still on the journey to achieving reliable, adorable and quality electricity supply necessary for economic growth, industrialization and poverty alleviation.”

On Wednesday, through a series of tweets, the president instructed the Ministries of Power, Finance, and the Bureau of Public Enterprises (BPE) to conclude the nation’s engagement with Siemens AG over regular power supply.

The directive, it was gathered, was to start the pre-engineering and concessionary financing aspects of the Presidential Power Initiative (PPI), the vehicle for achieving the 25,000MW target.

Similarly, the government last year awarded the contract for the engineering work of the Mambilla Hydro Electric Power Plant in Taraba State for the sum of $5.792bn. The project, which was conceived over 40 years, is meant to increase power generation by 3.05GW of electricity and will be raised on the Dongo River at Gembu village, becoming one of the largest water reservoirs in West Africa.



On assumption of office, President Buhari made clear his intention to improve on the country’s poor infrastructure. To achieve this dream, right from his first budget, he had been allocating a huge portion to infrastructure development.

During the presentation of the 2019 budget proposal to the National Assembly, President Buhari said the budget was intended to place the economy on the path of inclusive, diversified and sustainable growth in order to lift a significant number of citizens out of poverty.

The president, in a rare demonstration of chest-thumping, listed the projects executed by his administration.

According to the president, “We completed and commissioned the Abuja – Kaduna rail line and the Abuja metro-rail project. Similarly, the previously abandoned Itakpe-Ajaokuta-Warri rail line is undergoing test runs and will soon be commissioned.

“We are also on track for the Lagos – Kano rail line as significant progress has been made on the Lagos to Ibadan segment of the project.

“We remain committed to rebuilding and expanding our road network. In 2018, an additional 1,531 kilometers of roads have been constructed and 1,008 kilometers rehabilitated across the country.

“Priority projects such as the Abuja – Kaduna – Kano highway as well as the Second Niger Bridge are well underway through the Presidential Infrastructure Development Fund.”

Other listed projects include the construction of the Oju/Loko-Oweto bridge over River Benue, dualisation of section of Abuja-Abaji-Lokoja road, dualisation of section of Suleja – Minna road, dualisation of section of Lokoja-Benin road (Obajana – Okene), Dualisation of section of Kano – Maiduguri road linking Kano – Jigawa – Bauchi – Yobe.

The president also mentioned the dualisation of section of Kano – Katsina road, Dualisation of section of Kano Western By-Pass, Construction of Kaduna Eastern By-Pass, Rehabilitation of outstanding section of Onitsha-Enugu Expressway, Rehabilitation of Enugu-Port Harcourt road and dualisation of section of Yenegoa road junction.

The president, who disclosed that his administration had at least a major road project in every state, also mentioned some ongoing or commissioned water projects such as Central Ogbia Regional Water Project in Bayelsa State; Northern Ishan Regional Water Supply Project, Edo; Sabke Water Supply Project, Katsina State and Takum Water Supply Project in Taraba, Ogwashi – Uku Dam in Delta; Shagari Irrigation Project in Sokoto State, Galma Dam, Kaduna State; Mangu Water Supply Project, Plateau State as well as the Federal University of Agriculture and Makurdi Water Supply Project in Benue.


Going forward

Both Professor Arulogun and Dr Olawale agreed on the need to address poor infrastructure to grow the economy.

Arulogun said the government needs to strengthen the system and scale up infrastructure development if it wants to see real economic development.

She also called on the government to do all within its power to provide an enabling environment for businesses to thrive.

She said, “What we have currently is underemployment with poor enabling environment (such as poor power supply, poor road networks, lack of access to financial support and high interest rate, high taxation, non-control of prices) for businesses to thrive.”

She added, “There is the need to strengthen the Public-Private Partnership as it should be not the pseudo PPP as we have it right now.”

Dr Olawale said the country needs to take the issue of human capital development seriously to facilitate economic growth.

He said, “While Nigeria has made significant progress in socio-economic terms in recent years, its human capital development remains weak due to under-investment and the country ranked 152 of 157 countries in the World Bank’s 2018 Human Capital Index.

“Furthermore, the country continues to face massive developmental challenges, which include the need to reduce the dependency on oil and diversify the economy, address insufficient infrastructure, and build strong and effective institutions, as well as governance issues and public financial management systems.”

Olawale also called on the government to address the issue to address inequality in terms of income and opportunities.

He said, “While a lot of effort has been put into making the country work again, much has not been achieved in terms of results. We urge government to refocus its efforts and review its strategies to enable it achieve the desired change that the country desperately needs.”



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