Challenge of Rebuilding Nigeria’s Economy (Part 1)

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TELL Cover Page

A debate is ongoing concerning the state of the Nigerian economy. This has been intensified since the All Progressive Congress, APC, came to power on the mantra of change. The presidency has also made pronouncements alluding to the fact that the Nigerian economy has never performed so badly in recent times. More recently, President Muhammadu Buhari said the country was broke and he presented statistics to indicate how parlous the economy is.

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There are insinuations that the new government is working at a snail speed, with the critics citing the delay in putting together a cabinet as an example. The Central Bank of Nigeria, CBN, has been struggling to stabilise the domestic currency with import and capital restrictions while still maintaining a quasi-float of the naira. The bank cautioned that if the economy is not diversified, recession was imminent. Broadly, the state of the economy is like history repeating itself. It resembles the early 1980s with the sharp decline in oil revenues coupled with fiscal rascality. The leaders tinkered with austerity measures, then with stabilisation and finally came up with a fully blown Breton-Woods-type Structural Adjustment Programme, SAP, from 1986-1993.

The outcome of SAP, anchored on putting the economy on the path of sustainable growth with minimal inflation and based on marginal cost pricing, was disastrous for several reasons. The programme never considered the structure of the economy and applied de-regulation to all its sectors, including the financial sub-sector which was then and still underdeveloped. The consequence was a sharp rise in inflation, increased unemployment and worsening social conditions for most Nigerians.

Under SAP, all macroeconomic fundamentals were moving in the wrong direction. It was, therefore, not surprising when the then government of General Sani Abacha abandoned the programme and introduced a policy of guided-deregulation. The macroeconomic indices were better at the end of the Abacha regime than during the period of SAP. Buhari seized power in 1983 and he implemented austerity measures with a tough policy of War Against Indiscipline. General Ibrahim Babangida overthrew Buhari and introduced SAP to try grow the economy after the so-called national debate. Are we, in 2015, back to almost the same situation?

What really is the present state of the economy? The Nigerian economy is at the threshold of recession. The growth of GDP has declined in the last two quarters of 2015. The lending rate is averaging almost 27 per cent; the rate of unemployment and underemployment is about 26 per cent and is increasing for youths. Hence, the economy is producing below potential output, reflecting a large output loss. The misery index is rising. The poverty incidence is about 70 per cent. Electric power supply remains epileptic and the provision of qualitative and quantitative basic social needs to 85 per cent of Nigerians is nothing to write home about.

The apex bank is struggling to stabilise the exchange rate with unorthodox methods under a neo-liberal regime. The inflation rate has increased to almost 9 per cent…

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