Who has the back of the economy?, by Uddin Ifeanyi
Last week's publication by the Ministry of Finance of the "Public Consultation on the Draft MTEF/FSP 2023-2025" confirmed what most critics of the Buhari administration had long feared. Through acts of omission ― half-hearted attempts to reform the economy ultimately frustrated by the government's dirigiste view of business and economic issues ― the incumbent government has failed in its two terms to stimulate economic activity interior. Through acts of commission ― in particular a reliance on borrowing money ― the Buhari government returned the economy to a state which, in the early 1980s, was described as a "debt peonage". p>
Beyond these observations, the document is an instructive read. National echo chambers are making much of the deep economic contraction of 2020 as the pandemic ravaged the global economy. But often this reading of the pandemic crisis only serves to mask another unpleasant fact. Long before SARS-CoV-2 hit in the second quarter of 2020, the Nigerian economy was already treading deep waters. Growth of 2.55% year-on-year in the last quarter of 2019, before falling to 1.87% in the first quarter of 2020.
This weakness evident long before covid makes it worrying that after emerging from the deep end of 2020, domestic output growth has been trending lower since the second quarter of last year. Few of the major contributors to the well-being of the economy have done well. Crude oil prices are rising globally. But somehow, Nigeria has managed to produce less than its installed capacity for the past five years and, surprisingly, less than its quota allocated by the Organization of the Petroleum Exporting Countries (OPEC) since then. the beginning of this year. I don't quite know what to think of this. But it is important that the government be comfortable with the explanation that "the NNPC attributes the fall in oil production to the high incidence (of) crude oil theft and vandalism of pipelines". Unfortunately, the report offers no similar explanation for why domestic prices have risen relentlessly, even as the external price of the naira hits new highs.
Unsurprisingly, the report highlights the economy's dismal performance, preferring instead to see the economy as now "recovering from the recession for the fifth straight quarter, growing 3.11% in real terms in the first quarter of 2022". The Wailers might point out that an annual growth rate of 3.11% is suboptimal for an economy with a potential trend growth rate of around 7%. The crudest among them might add that the demographics of the economy — large cohorts of unemployed youth, high birth rate, etc. ― is not helped by a growth rate of less than 10% per year.
The biggest concern, however, is the question, "At what cost, this paltry growth rate?" If we look at the first four months of this year, we have spent more on the economy than we have managed to get out of it. The Minister of Finance reports that “revenues continued to underperform in the four months to April 2022. Largely due to the crisis in the upstream oil and gas industry. But again because non-oil taxes also fell short of targets.” At 49% of the N3.32 trillion prorated target for the period, the N1.63 trillion the Federal Government earned as revenue roughly reflected the omission of the government's mismanagement. administration in place. While the low levels of income indicate the difficulties faced by the Buhari administration in reviving this economy, the expenditure figures graphically underline the burdens it has placed on the economy in the process.
At the start of the year, the plan was for the federal government to spend N17.32 trillion this year. In the end, it managed to spend N4.72 trillion out of the N5.77 trillion target for the first four months of this year. In light of revenue underperformance and spending close to target, in other words, much of the federal government's spending in the first four months of this year went unfunded. So much so that we have spent 1.94 trillion naira just to pay the interest due on this loan in the four months to the end of April 2022. And the 773.63 trillion naira spent on capital expenditure during of the period? Obviously, not enough to boost the economy. Most likely spent on items whose costs were not covered by their benefits. In other words, even this positive could be a key part of the problem with the economy.
Uddin Ifeanyi, a failed journalist and retired civil servant, can be contacted @IfeanyiUddin.
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Last week's publication by the Ministry of Finance of the "Public Consultation on the Draft MTEF/FSP 2023-2025" confirmed what most critics of the Buhari administration had long feared. Through acts of omission ― half-hearted attempts to reform the economy ultimately frustrated by the government's dirigiste view of business and economic issues ― the incumbent government has failed in its two terms to stimulate economic activity interior. Through acts of commission ― in particular a reliance on borrowing money ― the Buhari government returned the economy to a state which, in the early 1980s, was described as a "debt peonage". p>
Beyond these observations, the document is an instructive read. National echo chambers are making much of the deep economic contraction of 2020 as the pandemic ravaged the global economy. But often this reading of the pandemic crisis only serves to mask another unpleasant fact. Long before SARS-CoV-2 hit in the second quarter of 2020, the Nigerian economy was already treading deep waters. Growth of 2.55% year-on-year in the last quarter of 2019, before falling to 1.87% in the first quarter of 2020.
This weakness evident long before covid makes it worrying that after emerging from the deep end of 2020, domestic output growth has been trending lower since the second quarter of last year. Few of the major contributors to the well-being of the economy have done well. Crude oil prices are rising globally. But somehow, Nigeria has managed to produce less than its installed capacity for the past five years and, surprisingly, less than its quota allocated by the Organization of the Petroleum Exporting Countries (OPEC) since then. the beginning of this year. I don't quite know what to think of this. But it is important that the government be comfortable with the explanation that "the NNPC attributes the fall in oil production to the high incidence (of) crude oil theft and vandalism of pipelines". Unfortunately, the report offers no similar explanation for why domestic prices have risen relentlessly, even as the external price of the naira hits new highs.
Unsurprisingly, the report highlights the economy's dismal performance, preferring instead to see the economy as now "recovering from the recession for the fifth straight quarter, growing 3.11% in real terms in the first quarter of 2022". The Wailers might point out that an annual growth rate of 3.11% is suboptimal for an economy with a potential trend growth rate of around 7%. The crudest among them might add that the demographics of the economy — large cohorts of unemployed youth, high birth rate, etc. ― is not helped by a growth rate of less than 10% per year.
The biggest concern, however, is the question, "At what cost, this paltry growth rate?" If we look at the first four months of this year, we have spent more on the economy than we have managed to get out of it. The Minister of Finance reports that “revenues continued to underperform in the four months to April 2022. Largely due to the crisis in the upstream oil and gas industry. But again because non-oil taxes also fell short of targets.” At 49% of the N3.32 trillion prorated target for the period, the N1.63 trillion the Federal Government earned as revenue roughly reflected the omission of the government's mismanagement. administration in place. While the low levels of income indicate the difficulties faced by the Buhari administration in reviving this economy, the expenditure figures graphically underline the burdens it has placed on the economy in the process.
At the start of the year, the plan was for the federal government to spend N17.32 trillion this year. In the end, it managed to spend N4.72 trillion out of the N5.77 trillion target for the first four months of this year. In light of revenue underperformance and spending close to target, in other words, much of the federal government's spending in the first four months of this year went unfunded. So much so that we have spent 1.94 trillion naira just to pay the interest due on this loan in the four months to the end of April 2022. And the 773.63 trillion naira spent on capital expenditure during of the period? Obviously, not enough to boost the economy. Most likely spent on items whose costs were not covered by their benefits. In other words, even this positive could be a key part of the problem with the economy.
Uddin Ifeanyi, a failed journalist and retired civil servant, can be contacted @IfeanyiUddin.
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