NIGERIA’S ECONOMY: Is The Worst behind Us Yet?

By Peluola Adewale

It was a chest-thumping President Muhammadu Buhari at the February 27 NEC meeting of the All Progressives Congress (APC) boasting that his government has “slowly and steadily managed to stabilize the country and redirect the ship of the state”. To justify this claim, he gleefully listed what he considered impressive economic indices such as exit from recession, increase in foreign reserve, stabilization of naira and slowing down of inflation rate.

Apparently trying to take a dig at Buhari, Bismarck Rewane a popular bourgeois economist likened the celebration of Buhari to having “scored an own goal, equalized and then took credit for a draw” (Financial Times, London, February 27, 2018)”. In other words, to Rewane, Buhari is repairing the damage he himself inflicted.

On the surface, this analogy appears apt, but it is really specious. First, Buhari has not been able to repair the damage he inflicted on the working masses with his economic policies. Yes, there are some improvements on paper; but to the working masses it is like a hungry person watching a buffet on their television screen. The daily reality of the working people and the poor is the drastic erosion of their quality of life in the last three years of Buhari government including the rising rate of poverty and unemployment. What Buhari’s policies have done is an irreversible damage given that prices of goods and services remain high despite the celebrated slowing down of inflation.

Secondly, to bourgeois economists like Rewane and international organs of capitalism like the IMF and Financial Times, it was the initial hesitation of Buhari to unleash the policies of devaluation of naira and deregulation of fuel shortly on assumption office and what was considered as half-hearted way it was eventually done that damaged the economy. This is false.

On the contrary, it was the implementation of the policies of devaluation and hike in fuel price by Buhari government, touted as solution or corrective measures, which actually worsened the impact of the global crisis of capitalism on workers and poor masses in Nigeria.

It was true that Buhari, apparently because of how he emerged as President with a huge illusion by the masses, initially opposed the devaluation of naira but he did not have any alternative programme or measure to it. Although, mass pressure from below could have won at least a few, probably temporary, reforms from the government, the absence of a serious struggle meant that there was no challenge to Buhari’s programme which kept within the confines of capitalism in a neo-colonial economy. So it was like doing nothing while economic crisis kept deteriorating as inflation was hitting a multiple year high and high unemployment was worsened by increasing job losses and collapse of businesses. But rather than ameliorating the problem the situation got worse with devaluation of naira by about 55 percent.

What has recently helped improve the economic indicators is not the economic policies of Buhari encapsulated in ERGP or any other set of measures advanced by any section of bourgeois economists and institutions like IMF but the rebound of prices of oil which accounts for over 95 percent of foreign earning and over 70 percent of the government revenue. So, it is not hurrah as any disruption in oil prices and production can set the economy back on tailspin.

Already, the International Energy Agency (IEA) in its February Oil Market Report has warned that global oil market could slip into deeper oversupply on the back of non-OPEC production. The main factor,” the IEA said, “is US oil production. In just three months to November, crude output increased by a colossal 846 kb/d, and will soon overtake that of Saudi Arabia. By the end of this year, it might also overtake Russia to become the global leader.” (Oilprice.com).

Besides, it cannot also be ruled out that there could be politically motivated disruption of oil production in the Niger Delta in the coming period. However, it seems that the political leaders in the region have realized that any stoppage of oil production disproportionally affects the state where it occurs more than the entire country not only in term of environmental destruction but also the share of oil income. This is because the 13 percent derivation benefitted by oil producing states is worked out on the basis of volume of oil produced in the respective states. In any case, if the government is able to secure peace in Niger Delta even beyond 2019 elections, it cannot control the volume of oil it can sell or the prices of oil. In other words, the health of Nigerian economy at present, on the basis of capitalism, is largely beyond any measure of the government.

While Buhari government has apparently learnt from the failure of Jonathan administration by building an external buffer against oil price shock in form of foreign reserve that recently reached a 5-year high of $46bn, the logic of capitalism means that burden of any deepening crisis in case of slump in oil prices will be disproportionately loaded on the shoulder of the poor masses.

Already, even the current relatively high oil prices have proved to be a mixed grill of both blessing and curse with the masses sharing little from the from the former but sharing most of the latter. The failure of the successive capitalist governments to build adequate local refineries in observance of the doctrine of market fundamentalism means that high oil prices translate into high landing cost of imported fuel. Indeed, Nigeria, world’s 6th largest exporter of oil, has an unenviable status of the biggest importer of petrol in the world, according to the state oil company, NNPC.

The official cancellation of subsidy means that marketers have totally stopped importation because of high price leaving only the NNPC, which is opaquely subsidizing the product under the guise of under recovery, as the sole importer. This largely accounts for scarcity of petrol and pump prices higher than the official price across the country with exception of Lagos. From all indications, it is the fear of a grievous backlash ahead of 2019 general elections that has held Buhari government down from officially increasing the price of petrol.

The misfortune of the poor masses in Nigeria is that whether oil prices are high or low they are in the soup. Whenever oil prices are high they pay higher for fuel, and whenever oil prices are low they pay higher for goods including petroleum products as a result of imported price inflation caused by illiquidity of the foreign exchange market.

Similarly, when the prices were low, Buhari government argued that it had to borrow to finance the budget because of low oil revenue and the failure of the previous administration to prepare for rainy day despite huge oil wealth. Now that oil prices are relatively high and it is accordingly easy to borrow at the international market, Buhari government is raking up foreign debt under the guise of trying to rebalance the domestic and foreign debt profiles. In other words, the foreign debt will be used to refinance part of domestic debt in order to change the ratio of foreign debt to domestic debt from 20:80 to 40:60 and thereby doubling the foreign debt portfolio. This, according to the Minister of Finance Kemi Adeosun, will help reduce the presence and influence of the government at the domestic debt market and forced the banks to lend money to the real sector of the economy. In reality, the inevitable consequence of the new debt strategy of Buhari government is a journey back to external debt crisis that was eased off with the gifting of $12bn to the Paris Club in 2005.

Thinking that any technical manoeuvring will force banks to lend money to small businesses and manufacturing is day dreaming. Banks on the basis of capitalism are not agents of development but in existence primarily for super profit. They will rather adjust to the new government debt arrangement and keep the unused fund in their vault knowing that the Central Bank will come to pay for them with lucrative interest under the guise of mopping up excess liquidity. In other words, the same government will pay for the money which banks have refused to lend businesses – capitalism is a madhouse. Banks have to be nationalized under a democratic control of workers and customers in order to ensure cheap credit and making them to finance development. This is only possible under a working people’s government on a socialist programme.

By and large, the capitalist economic philosophy of Buhari means that masses who were made to sweep the mess at the period of slump in oil revenue are benefitting little or nothing at the present that the economy has shown signs of recovery. Yet, the intractable crisis of capitalist cycle of boom and bust means that the current relative recovery of the economy spurred by oil revenue may not last long. It is only socialist planning of the economy including nationalization of the commanding heights of economy such as oil and gas, banking industry, etc. under democratic management and control that will not only end the cycle of boom and bust but also ensure the needs of the vast majority form the basis of governance and production.

The rapid erosion of the mass illusion in Buhari and the growing mass discontent against the capitalist ruling elite as well as the entrenching doubt in their capacity to govern in the interest of the people will help more and more change seeking elements to come to the conclusion of the imperative of enthroning of working people government on socialist program to rescue Nigeria and build a better country.