Two years after Nigeria rebased its GDP to claim the top spot as Africa’s biggest economy, the report last week, that South Africa has regained the title, is one more evidence; if at all another was needed, that the current APC administration was mismanaging the Nigerian economy. This speaks directly to the failure of Nigeria’s economic managers to diversify the economy, and kick-start industrialization. Nigeria has massive potential but the economy faces serious challenges from corruption, epileptic power, decrepit infrastructure, to general insecurity. The country is bleeding, and the palpable fear is that Nigerian leaders may have irretrievably betrayed the country’s high destiny. President Buhari has an historic opportunity to lead Nigeria into greatness. This requires bold and purposeful leadership.
Nigeria rebased its economy in 2014 to include previously uncounted sectors such as telecoms and mobile phone market- Africa’s largest, music, e-commerce, airlines and the film industry (Nollywood), estimated at $5.1 billion or 1.2% of GDP. Most countries do rebasing, updating the measure of the size of the economy, at least every five years, but Nigeria had not updated the components in its GDP base year since 1990. After the rebasing in 2014, the GDP estimate was $509.9 billion (N80.22 trillion) up from $285.56 billion. Nigeria automatically emerged as Africa’s largest economy and 26th in the world. South Africa with a GDP of $384.3 billion was second. The rebasing exercise, which received accolades from the IMF, World Bank and African Development Bank (AfDB), among others, also placed Nigeria ahead of countries like Austria ($394.7 bn), Venezuela ($381.26 bn), Columbia ($369.6 bn), Thailand ($365.96 bn), Denmark ($314.88 bn), Malaysia ($274.7 bn) and Singapore ($269.87 bn).
Two years on, the Nigerian economy has contracted almost 40% with GDP currently estimated at $296 billion, from $501 billion, while South Africa’s economy is worth around $301bn.Whereas the South African economy is more diverse, Nigeria is almost entirely dependent on oil exports. And as the price of oil slumps so does earnings from crude oil sales that accrue to the Federation Account (FA). After Nigeria knocked South Africa off the top spot two years ago, experts started describing South Africa as Africa’s most industrialized economy, rather than Africa’s second-largest economy. A recalculation using current exchange rates put South Africa on top because the rand has strengthened against the dollar. The naira has fallen sharply since a peg to the dollar was dropped, thanks in part to the pig-headed “go-for-before-for-back” fiscal and monetary policies of the administration, and the refusal by the CBN to end dollarization of the Nigerian economy. Any further contraction and the economy will be in recession.
The 2014 rebasing was greeted with loud ovation by Nigerian leaders who had hoped the statistical revamp will help them sell Africa’s most populous market to investors. Financial analysts have described the Nigerian economy as having a huge significant potential for growth and wealth creation. As Africa’s biggest economy, Nigeria was the destination of choice for foreign investors, owing to the size of its consumer market and growing capital markets. On per capita basis, Botswana, Mauritius and Seychelles are among Africa’s top five richest countries. But none has a population of more than 2 million, so they are admired but cannot claim heavyweight status when it comes to competing for foreign investors. Nigeria’s potential is predicated on its large population, because size matters. For a business, deciding where to invest, a market of 170 million beats the Seychelles’ 85,000. A high GDP therefore means foreign investors pay more attention. The US and Europe no longer look down on China and India.
But a high GDP also does nothing to address the fundamental challenges of decrepit infrastructure, widespread insecurity, epileptic power supply and stability that the present administration has failed woefully to address to make Nigeria investor-friendly. In all sincerity, the main features of the economy showed, and continue to clearly show Nigeria is a third world country. The UNDP Human Development Index ranks Nigeria deep among poor countries. While the major proportion of the labor force is engaged in agriculture, Nigeria is a major importer of food. Manufacturing’s share of GDP is under 4%- 80% of manufactured goods in Nigeria are imported while idle installed manufacturing capacity is over 50%. Despite the decrepit infrastructure, the federal government’s budget recurrent expenditure crowds out capital spending on infrastructure. The current padded budget is outrageous; it is, very shamefully, an ode to the wanton consumption attitude of the political class. The economy is actually at its nadir because unemployment stands at 23.9% and absolute poverty is a depressing 70%.
The Buhari administration had its work cut out. Security of life and property is completely prostrate; thousands of Nigerians have been killed; homes and places of worship razed and many villages have been sacked. Indeed, the entire Northeast has become a killing field for terrorists. Besides insecurity, the continuing spectacle of petrol scarcity is an embarrassment which is further compounded by oil theft. If anything, oil theft has become a sleazy industry just as lucrative for brigands as oil theft itself, with both feeding fat on each other. It has gone on for too long and this must now end as am imperative for national survival. Nigeria must also improve its telecommunications infrastructure. Against the public outcry over poor service delivery by telecommunications companies, making or receiving calls in Nigeria is a most frustrating experience. And other services using broadband are not better.
More importantly, the Buhari administration must improve Nigeria’s power supply to an acceptable level, badly needed for economic development. It is regrettable that despite the much-flaunted reforms in the electricity sector, little has changed and the entire country is in darkness, even as power discos continue to exploit helpless and hapless citizens with exorbitant rates. Nigerians are tired of excuses and now want solutions. Nigeria has a lot to learn from South Africa that has perfected running government largely on taxes. Nigeria needs a tax system well positioned to meet global standards. Nigeria must diversify its economy. The vagaries of the world economy and discovery of alternative energy sources in developed economies are enough reasons for resource-dependent countries to diversify, build a strong industry based one, create jobs and increase its taxable base.
Africa’s biggest economy or not; and the size of GDP notwithstanding, Nigerians remain largely poor; in fact, among the poorest in the world. Against this background, there are justifiable reasons to be cynical and incredulous over the rash of statistics extolling the Nigerian economy; since the curious inventory of positive macroeconomic success has hardly reflected the reality of Nigerian living conditions. As Africa’s most populated country, Nigeria must lead by example. Pretending that all is well when people cannot eat; when states are broke and cannot pay workers; when 134 children die every day in Borno amounts to an ostrich evasion that is a recipe for social cataclysm and possible violent implosion of the polity over a serious situation that has well gone past crisis point, and is a disaster waiting to happen.
