Since the global economy witnessed a recession in 2007, Nigeria’s economy has been surrounded by a distressing cloud of uncertainty, although it was not directly hit by the causative factors. Various steps taken to check the rampaging effects were ineffective. Even after President Goodluck Jonathan became president, this overhanging uncertainty has remained the most obvious and definitive characteristic of the nation’s economy. Hopes arising from the initial positive steps of the president after his impressive engagement of United States government officials, media and business community have dimmed. Equally, high expectations of economic recovery in the aftermath of what is regarded as a decisive banking reform agenda are gradually fizzling out one year after the no-nonsense intervention of Lamido Sanusi, the current Central Bank governor. As at now, it has become business as usual on the economic scene with mediocrity, lack of creativity and the characteristic absence of proactive commitment holding sway among leaders. The result has been a crippling lack of confidence among local and foreign investors coupled with seeming confused and uncoordinated economic policies that have kept economy watchers perplexed.
The stifling illiquidity that has persisted in the Nigerian economy and which has defied all the calculations and efforts of the Central Bank has slowed down economic activities considerably, thus increasing uncertainty about the future of the economy. Added to this is the credit squeeze that has refused to go. As a result of banking reforms that are expected to improve regulatory oversight and corporate governance practices in the banking industry, bank credit to businesses has shrunk severely with many companies closing shop or losing businesses. Nothing exemplifies this more aptly than the recent loss of the lucrative English Premier League broadcast rights by HITV, a Nigerian company to South African company, DSTV. The reason HITV lost the lucrative deal was because it was unable to source funds from Nigerian banks that have developed a legendary shyness to advance loans to businesses. In the process, HITV lost the $30 million deposit it had paid. Thousands of firms are groaning under the same yoke. Economic indicators do not show any bright prospects in the nearest future. The result is a lingering uncertainty.
The banking reforms that are considered strategic to the nation’s economic re-engineering are still far from following any clear cut direction. There have been far reaching steps to instil probity and sanity in the industry but so far, the reforms have proven to be uncoordinated and characterised by doubletalk. The fate of banks rescued by the apex bank is still hanging in the balance. From the Central Bank come conflicting signals and policy statements. Just three weeks ago, Sanusi calmed agitated shareholders when he said shareholders would be allowed to determine how to recapitalise the rescued banks. But last week, his now famous doublespeak again played itself out when he announced that four banks were ready for sale as arrangements had almost been concluded for their acquisition by foreign investors and their local allies. Shareholders are already in court to stop the Central Bank from selling the financial institutions. If the courts overrule the apex bank as is likely, the reforms would have been rubbished and the stage set for confusion. Again, it is difficult to say what the future looks like for the banks and by implication, the entire economy. Indeed, for now, there is high uncertainty.
This is more so that the Asset Management Company of Nigeria (AMCON), on which much hope is placed to rescue banks from the stranglehold of toxic assets, is surrounded by many uncertainties. The effective take-off date is unsure; its source of funding undecided and the pricing of assets still the subject of debate. It has no chief executive, staff or office. While all of these are not strange, the authorities are still moving sluggishly.
The current high unemployment rate in the country has also exacerbated the problems in the economy as purchasing power has been dealt a huge blow and a drastic reduction caused in disposable income. The government and its advisers do not appear disturbed by this scenario. Perhaps, they underestimate the effects of unemployment and its causes. Not surprising, economic activities are further slowing down.
Seemingly oblivious of the fragile economic situation, the government has embarked on frivolous spending despite dwindling income resulting from plummeting international oil prices. It has, for example, budgeted N13 billion to celebrate the country’s 50th Independence anniversary in defiance of the public outcry against expenditure, given our lean purse. The Presidency has, in the same vein, ordered for three new planes to boost the presidential fleet in one fell swoop. There are other cases of wastefulness while critical sectors of the economy such as infrastructure are begging for attention. Take into consideration the fact that the budget for the year has yet to be sorted out almost eight months into the year, it becomes glaring that the country’s leaders are short-sighted and care less about its future prosperity.
Continued neglect of real sector has not helped matters. Though the government pays lip service to the development of the sector, it does very little that is significant in that direction. For that reason, the nation will continue to be dependent on industrialised countries for most of its needs.
Half-hearted commitment to infrastructure has made nonsense of pledges made by various governments in their avowed determination to improve energy and other sectors. The poor state of infrastructure causes continued agony among the populace and the business community.
In the capital market, which is a veritable gauge of the health of the economy, uncertainty has reached legendary proportions as the unrelenting down market has persisted as a result of the lack of commitment and patriotism among our economy managers. Various experts have, therefore, predicted a prolonged down market that may last for as long as the next five years as a result of the barren or inconsistent policies of government and regulatory authorities. This may appear harsh and unreasonable but it is the measure of uncertainty in the economy and the fact remains that as long as the political elite decides to sacrifice economic development on the altar of political expediency, selfishness and mediocrity, for so long should we expect the clouds of uncertainty to continue hovering over our economy.