Nigeria, an oil-dependent underdog in the world economy, has generated much curiosity among the international community in the recent times. It’s a story of sustained economic growth, potentially leading to two of the greatest turnarounds in the economic history of the world. Our dear country has achieved its sustained GDP growth over the past decade amidst the worst image crisis, man-made disasters and political instabilities. On the other hand, my fellow citizen’s story is that of starting from a low economic base and a tyrants’ backdrop to a position of respectability.
On the growth scale, both countries are moving neck-to-neck, with Nigeria having a slight edge. Nine years back in 2000, our GDP was US$47 billions we started with a smaller base and gradually closed the gap with higher growth rate. In 2005, Nigeria’s GDP stood at US$59 billions. During the period 1986 to this year 2000, the exchange rate between the US dollar and the Nigerian Naira changed from US$ 1 equals about 2 Naira to $1 = 145 N. Furthermore, its internal debt increased from N36.5 billion in 1986 ($0.36 billion in today’s dollars) to about N400 billion ($4 billion) today.
During this same period, Nigeria’s external debt increased from $11.5 billion in 1986 to $33.2 billion in 1990, $33.4 billion in 1991 and then fell to $29.5 billion in 1994. It rose to $32.6 billion in 1995. Currently, it is placed at about $30 billion dollars, or about 70% of its 1999 estimated Gross Domestic Product, and of which about $14 billion is payment on arrears. During this period it has, at an official level, tried everything to manage the debt: debt rescheduling, debt conversion, debt-buy back and curtailed new borrowing, yet it has seen little or no relief. The strategy is just not working and cannot work.
For the US, the dollar figures quoted above are not large, but for Nigeria, they are insurmountable, but go to accentuate the fact that Nigeria with its monoculture of oil and its 120 million populations is a poor country, even though it is oil-rich. In fact, the current 2000 National budget of Nigeria which the Executive and the legislature are still haggling over is roughly N600 billion (roughly $6 billion), which is what the District of Columbia is budgeting to spend on its schools in the coming year. But this Year 2000 budget means that 120 million Nigerians will have to starve for about 5 years if it is to use up all of its money to pay off its external debt if all interest payments were to be frozen today.
As a keeper of my African brothers and sisters, I should not, must not talk just about Nigeria alone without talking more generally about Africa’s debt burden as a whole owed by its governments to multilateral, bilateral and commercial donors, which currently stands at about $350 billion. Of the 41 nations identified by the World Bank as Heavily Indebted Poor Countries (HIPC), 33 are in Africa. The Cologne meeting of the G-7 promised relief and in 1999 the U.S. is to be commended for taking the first steps to meet its obligations. However, the United States must exercise greater political will and a serious commitment to find the funds to make deep debt relief a reality, and must appropriate, not just authorize, to raise the current level of funding in the foreign operations bill from a paltry $75 million to the needed $435 million for this year. The fact of the matter is that if the United States government contributes its fair share to the international debt plan, and you and your colleagues approve $810 million over the next 3 years, this will encourage all creditors to do their part, and $90 billion in debt can be written off for 33 of the world’s poorest countries. This is because due to US’s leadership, every dollar that you contribute to the HIPC trust fund will leverage more than $20 dollars from other international creditors and regional development banks. More than 17 countries have already made a contribution and several others have made pledges to the trust fund contingent on the U.S. contribution
One of the major contributing factors of the growth of the two economies is their robust export performance. Nigeria has significantly increased their exports in five years. In 2001, Nigeria’s exports was US$6.1 billions and in 2005, US$9.4. Export gap between Nigeria and Malaysia was USD 9 billion in 2001 whereas it reached USD 23 billion in 2005. While Nigeria was mostly dependent on ready-made garments, Malaysia had reaped the benefits of a more diversified export portfolio which included crude oil, garments, and footwear and fisheries products.
Robust export performance and increasing expatriate work-force remittances have considerably increased the external shock-absorption capacity of the two countries. Nigeria’s foreign currency reserves have more than doubled in the last five years while that of Malaysia showed a similar performance. In 2001, Nigeria and Malaysia’s foreign currency reserves were US$1.3 billions and US$3.7 billions and in 2005, they were US$2.8 billions and US$8.3 billions, respectively. Clearly, Malaysia has outpaced Nigeria in FX reserves formation through robust export performance and FDI inflows while Nigeria counted much on the increasing amount of remittances from expatriate workers.
Both the economies have commendably managed to keep inflation to a single digit. Nigeria’s inflation rate mostly varied between 2-7% during the 2001-05 while that of Malaysia from nil in 2001 to 8% in 2005. Inflationary pressure was somewhat higher in Malaysia, which can be attributed to the relatively higher economic growth. Let us now focus our attention on what these economies are doing in the political, international relations and fiscal/monetary policy fronts, which will set the pace of their future growth: Current political scene: Nigeria’s politics in 2006 will focus on preparations for the next general election. The Obasanjo regime will hand over power to a non-partisan INEC to oversee the general election. Controversy already surrounds the composition and responsibilities of the INEC. The election must be held within 90 days of the INEC appointment, and the historic anti-incumbency sentiment, which has been bolstered by a deteriorating security, price level and energy situation, and possibly puts the opposition parties in a favourable position. Meanwhile, the controversial role of the system has tarnished the credibility of the Election Commission.
Nigeria’s embattled economy, if not well-steered, may set a Herculean task of slashing four-digit inflation by two-thirds to ruin the economy back on track, since the 2009 budget is not up to expectations due to excessive deficit…..Presenting the budget for 2009, Mr. President forecast marginal growth of 0.5 to one per cent and added that the country’s astronomic inflation rate would fall to 350 per cent. The projected growth would result from ‘good weather, stabilizing of commodity prices, improved mineral deposits and growing number of tourist arrivals. But critics say the minister is far too optimistic in a country where the economy has shrunk by one third. The Niger Delta oil-hub now suffers from critical shortages of food and fuel. Can it be insurgency; if not unfavourable policy?
Nigeria’s agriculture sector is expected to grow by 6.4 per cent owing to bountiful rains in the current farming season, Agriculture, once the backbone of the economy, is in decline following a controversial land reform policy which saw the often violent decline of subsistence farms left for those Nigerians who often lacked expertise and equipment. The mining sector supposed to grow by 4.9 per cent on the back of strong global prices, but not at all. The budget is still very shy to deal with issues affecting the economy such high unemployment, foreign currency problems and inflation. It is that this government knows the problems affecting our country, and failed to offer solutions? Lacking in of strong growth of our Naira supply fuelled by decline in our foreign reserve boosts the fail
ure of this economy.
To ensure this trend of deficit reduction continues in the longer-term, President Yar’Adua should remain diligent in his efforts to keep our economy strong and restrain federal spending. Since 2009 budget deficit ‘will be one of the largest in history,’ and reflects a major deterioration since 2000, when the government recorded a N236-billion crude oil surplus; if security are excluded from the calculation, the deficit would be controlled. Though today’s estimates for 2009 are not as pessimistic as some earlier estimates, it is clear that the budget remains on the wrong track, with the FG Budget Office and even the Yar’Adua’s administration estimating that deficits will be even larger in the second quarter of the year.
A real growth rate of between 0.5 to one per cent in 2007 premised on the anticipated improved performance of the mining and agriculture sectors that year positioned our economy to global set-off which we may expect to grow by 9.4 per cent and 4.9 per cent in 2010 and beyond. It is interesting to note that the original projection for agriculture was 23 per cent and this has been revised substantially downwards to 6.4 per cent.
This country’s woes emanated from wrong leadership and the citizens’ mindset. It is no secret that Nigeria remains under siege, facing pendulum economy from the tyrants to party chief(s), characterized by lack of opportunity cost, frivolous projects, loots, and poor support to people in political power , others are lines of credit, foreign direct investment and deliberate efforts to undermine economic turnaround programs.