As Nigeria’s economic malaise worsens

Recently, the Nigerian Bureau of Statistics stated in its Nigerian Capital Importation report released last week that investment inflows into Nigeria in 2015 slumped 53.53 percent to $9.643 billion from $20.750 billion in 2014.  “The total for 2015 was recorded at $9, 643.01 million. This represents a 53.53% fall on the previous year, when the total was $20, 750.76 million.” The NBC figures show that for the whole of 2015, Portfolio investment recorded the biggest decrease of 59.74 percent, but remained the largest investment component, accounting for 62.28 percent of investments, compared to 15 percent for Foreign Direct Investments and 22.72 percent for Other Investments.  This is as economic growth slowed to 2.84 percent in the third quarter of 2015, almost three times lower than the rate of 2014. The report rightly noted that the drop may not be unconnected to external factors such as the delisting of Nigeria from JP Morgan emerging markets bond index and globally low interest rates that triggered a search for higher yields from investors over this period.

However, these external factors were compounded by some woeful internal decisions and indecisions of the government.  It is an open fact that the Nigerian economy has been on a precipitate decline in the last seven months apparently due to absence of a clear-cut fiscal policy direction and a vibrant economic team to deal with the domestic and global challenges facing the nation especially the rapid fall in oil prices and decline in federally collected revenues on which the entire Nigerian federation depends.

The naira, the country’s beleaguered currency, has lost more than 70 percent of its value against the dollar in the past year. The Central Bank devalued the currency in November and February 2014 and 2015 respectively and has introduced capital controls, spending billions of scares dollars to prop up the naira and avoid a third devaluation in a country that imports almost all of its needs. Unfortunately, the Central Bank is fighting an almost lost battle as the country no longer has external reserves to continue to protect a weak naira even as the naira has technically devalued itself, trading at between N320 to a dollar at the black market while the government continues to maintain an arbitrary N199 exchange rate to a dollar, fuelling corruption and arbitrage opportunities for dubious officials and businesses that can penetrate the system.

Obviously, the government’s choices and actions have led to run-away inflation and is causing real and untold hardship to the poor people he promised to protect. Consequently, prices of goods and services, whether imported or locally produced, have hit the rooftop? For instance, a 25 litre King’s vegetable oil that sold for N6100 last year now sells for N9500. A 50 kg bag of rice that costs about N10, 000 last year now costs N14, 000. Also, a basket of fresh tomatoes that previously costs N5,000 now costs N17, 000. Nigerians have never really had it as tough as they are having it now and the postulation of the president that he isn’t devaluing the naira because it will cause hardship runs hallow.

We urge the government of President Muhammadu Buhari to prioritise the economy and come up with a clear economic policy direction to enable international investors take investment decisions on Nigeria. As most analysts have averred, “a great vision is the strength of an economy.” The current lack of direction is seriously hurting the economy and the many investment opportunities Nigeria stands to gain. We need to remind the government that Nigeria isn’t the only investment destination. There are many country’s very attractive and competing for the same investments Nigeria is hoping to benefit from.

We also urge the President and his handlers to learn to respect the independence of the Central Bank and the Monetary Policy Committee to make monetary policy decisions for the country. The current situation where the President makes pronouncements on whether the country will devalue its currency or not at international events is unhelpful and may further heighten the uncertainty with which the country is viewed. Not a few analysts and watchers of the Nigerian economic space have attributed the decision of the Monetary Policy Committee not to raise interest rate nor devalue the naira even when it was apparent the decision is ultimately inevitable to the presidency, which is thought to be pulling the strings and instructing the CBN and the Committee on what decisions to take. This is not positive for the country as the market and investors tend to react negatively to perceptions or appearances of political interferences with the Central Bank’s independence.