RECENTLY, the global business and investment magazine, Forbes, gave a damning verdict on Nigeria, describing it as the choice destination for investors willing to lose their money. It backed its projection up with facts and figures on returns on investment and stock exchange decline, among others. According to the magazine, despite sitting on nearly 40 billion barrels of proven oil reserves and over $48 billion worth of investment opportunities in the oil and gas sector, Africa’s largest economy is mired in problems with big corporate investors. It added that Nigeria’s stock index is down by 0.4 per cent year-to-date, while emerging markets are up by 2.3 per cent and the MSCI Frontier Markets 100 is up 10.2 per cent. It noted that in five years, Nigeria’s exchange-traded fund (ETF) has blown up, now down by over 74.5 per cent. Worse still, while foreign direct investment inflows totalled $5.6 billion in 2013, it flattened to $2 billion in 2018. Forbes wrote: “Equity investment between 2013 and 2018 has fallen from around $2.9 billion in 2013 to just $139 million in 2018. In the last quarter of 2018, there was the first net pullout of equity capital since records began under the current accounting methodology in 2008, according to data compiled by The Economist Intelligence Unit (EIU).”
It is indeed saddening that in spite of its huge natural and human resources, Nigeria continues to tilt towards the economic precipice, hobbled by poor leadership. The statistics are benumbing: Nigeria’s GDP contracted by 13.8 per cent in the first quarter of 2019, wiping out last year’s economic gains, just as in Venezuela, a country embroiled in political crisis. Nigeria generates 4,000 megawatts of electricity daily despite the potential to generate over 12,000 megawatts. Nigeria has Africa’s largest gas reserves (190 trillion cubic feet) but its electrical grid is a charade. External debt increased from $10 billion in 2015 to $22 billion in 2018. Debt servicing eats up as much as 60 per cent of government revenue and as a matter of fact, government debt is expected to rise to 292 per cent of revenue. The debt-to-GDP is below 30 per cent, and interest payments on the debt owed to bondholders is estimated to be around 20 per cent of revenue.
We urge the Federal Government to take Forbe’s verdict very seriously. Over time, it has perfected the art of dismissing local and global concerns about Nigeria’s economy and security without providing concrete evidence to back up its dissent. Time and again, we have harped on the dangers of foreign loans obtained essentially to fund the lavish lifestyles of those in government and without any discernible impact on the lives of Nigerians. Indeed, in March this year, the recently winded-up Senate expressed concern about the rising level of Nigeria’s debt, describing it as alarming and unhealthy. It flayed the government’s borrowing plans to fund the N1.86trn budget deficit, which constitutes 1.3 per cent of the country’s Gross Domestic Product.
The point should never be forgotten that Nigeria was removed from the shackles of debt burden in 2006 through a US$18 billion debt buy back arrangement that saw the country pay over US$12 billion to the London and Paris clubs under the President Olusegun Obasanjo government. Under the debt burden, Nigeria was forced to adopt austerity measures culminating in a structural adjustment programme (SAP) that significantly weakened the capacity for service delivery and social protection. As we noted in previous editorials, in the event of cutting social spending central to SAP, state legitimacy was eroded even as the struggle over the shrinking resources of the state intensified, while ethnic and other divisions in the society deepened, leading to the outbreaks of intergroup violence which has characterised social and political life in Nigeria since then. Besides, last year, the Deputy Secretary-General of the United Nations, Amina Mohammed, raised alarm about the rising level of Nigeria’s debt, warning that Nigeria might return to the unhealthy debt situation of the 1980s and early 2000s. Earlier in 2017, a former Deputy Governor of the Central Bank of Nigeria, Professor Kingsley Moghalu, had admitted that history had shown that previous reliance on foreign loans failed to contribute to the economic growth and development of the country. Instead, the country became subject to creditor conditionality when it was unable to meet its obligations in times of recession or crisis.
Truth be told, Forbes has only amplified a warning repeatedly given by the International Monetary Fund (IMF) regarding the consequences of the high cost of servicing debts, which could consume substantial amounts of government revenue. It is saddening that Nigeria’s external debt grew by 114.05 per cent in three years, but it is even more disappointing that no plans are on the horizon to halt the slide in the economy. In case the government has not grasped the point, Forbes commands global influence and significantly impacts decisions by investors across the world; it is what investors listen to and if the government wants to attract foreign direct investment or even portfolio investment, it surely needs to take its (Forbes’) assessment with a measure of humility and work hard to reverse the current distressing situation. Frankly, the implication of this kind of publication is that even the little Nigeria has will be taken away.
The government has not inspired any confidence in the economy and indeed a recent article by the renowned economist, Professor Pat Utomi, presents an equally damning verdict on Internally Generated Poverty. A serious government will declare an emergency with a publication like this.