Nigeria’s economy is bleak, says World Bank

Given the challenging economic backdrop, the report suggests that certain key policy reforms would be important to support macroeconomic resilience for Nigeria.

The World Bank has said that Nigeria’s Gross Domestic Product (GDP) growth is expected to hover slightly below two per cent in 2018, largely driven by non-oil industry and services.

Its “Economic Update” issued in Abuja yesterday indicates that Nigeria, like many other countries, has underinvested in human capital and remains very low compared to others.

Titled “Investing in Human Capital for Nigeria’s Future”, the report urges stakeholders to join government in addressing the country’s alarming human capital outcomes, noting: “As a member of the Human Capital Working Group, the World Bank stands ready to support the Nigerian government in its bold steps to improve the lives of its citizens.”

Given the challenging economic backdrop, the report suggests that certain key policy reforms would be important to support macroeconomic resilience for Nigeria.

“In the second quarter of 2018, the oil sector contracted by 4.0 per cent. The usually resilient agricultural growth slowed significantly to 1.2 per cent, impacted by the security challenges in the northeast and Middle Belt regions.

“The non-oil industry and services, which constitute over half of Nigeria’s economy, picked up to 3.1 per cent and 2.1 per cent, driven by growth in construction, transport and ICT,” it said.

Also, the report notes that the Nigerian economy remains dependent on the small oil sector (under 10 per cent of GDP) for the bulk of its fiscal revenues and foreign exchange earnings.

“Although oil revenues are increasing with recovering oil prices in 2018, distributions to the three tiers of government are constrained by the petrol subsidy and other prior deductions. In the first half of 2018, the current account surplus surpassed 4 per cent of GDP, driven largely by higher oil exports, while non-oil revenue collections have come in lower than envisaged.”

Furthermore, political intrigues ahead of next year’s general elections may negatively affect the full implementation of the over $2.8 billion Eurobond.

The nation’s fragile economic recovery, with current oil price volatility, fiscal challenges and speculated post-election “blues” could also return the country to another round of growth crisis.

In 2015, insecurity and politics overshadowed governance, leading to a reduced capital expenditure provision at below N600 billion. This was worsened by alleged lack of implementation proofs.

Just one year after the polls, the economy went into a recession pushed by a combination of issues such as post-election challenges and policy inaction.

Minister of Budget and National Planning Udoma Udoma had said President Muhammadu Buhari advised his cabinet to pay particular attention to the economy and not be distracted by politics. Some key government officials however are already steeped in politics.

Key implementation ministries such as Finance and Budget and National Planning have also kept mum on the particular projects (and their locations) that proceeds of the Eurobond would finance in the 2018 budget.

The budget implementation for the various quarters in the 2018 fiscal year has remained under wraps and bogus figures on budget implementations could soon be released.

Cyprus-based FXTM’s Research Analyst Lukman Otunuga said what the country needs is real change coming from the leadership and focus on development and the economy.

He stressed that attention is especially needed because while electioneering goes on, investors would be calculating their risk premiums by the level of pre-election jitters.

He warned that while inflation eased marginally in October, with the impending rate hike by the U.S. Federal Reserve, Nigeria, like many other emerging markets, would likely experience an acceleration of capital outflows, hence everybody should be at work now.

With the economy having faced obstacles for long, and now renewed pressure from oil prices, sliding reserves, geopolitical risk factors and an appreciating dollar, it is better to act wisely and avoid post-election crisis.

The Lead Director of Centre for Social Justice (CSJ) Eze Onyekpere said it is obvious that as politics and campaigns take a front seat, governance, especially economic and fiscal governance, will occupy the back row.

“Budget implementation will be the most hit, as officials who are mandated to implement budgets, exercise oversight and guarantee due process, will be otherwise engaged.

“For instance, the pulling out of HSBC, one of the largest banking consortiums in the world from Nigeria, and GE’s withdrawal from the railway concession, have been dismissed by government officials, who otherwise should have read the sign that economic policies and governance structures need to be rejigged.

“When they are now stressed by day to day campaigns, it would be asking for too much to expect them to come up with ideas and strategies for diversification of the economy,” Onyekpere said.

Development consultant and public affairs analyst, Jide Ojo, said, as usual, the economy has taken a back seat, citing the Senate’s inability to form a quorum on November 13 and consequent adjournment for a week.

“As things stand, the presentation of the budget for 2019 has been delayed. The 2018 budget was presented to the National Assembly on November 7, 2017. We are already approaching the end of November, with the 2019–2021 Medium Term Expenditure Framework and Fiscal Strategy Paper just being sent to the NASS on November 6, 2018.

“As politicians canvass for votes, there will be more pressure on the naira and there might be spike in inflation due to the envisaged spending by those seeking to contest in the election,” said Ojo.