What a way to end the year! I mean a year which started on a cautious note, then slowly waltzed up in a surprising momentum only to end up in a terrible anti-climax. Having been spared of the experience about this time last year, if we thought that the era of crippling fuel shortages was finally gone with the supposedmother-of-all reviews of the fuel-price template of May 2016, the grand return of that Nigerian nightmare on Christmas has shown how far the handlers of the sector have yet to master the intriguing dynamics of the sector under their watch.
As it appears, nothing truly has changed: not the pathetic blame game under which the culprit in chief would accuse others of precipitating the crisis when its own dereliction is so obvious to see; the perennial sideshow which comes by way of the routine hounding Depot and Petroleum Marketers Association of Nigeria (DAPMAN), the Independent Petroleum Marketers Association of Nigeria (IPMAN) and the legion of ubiquitous hoarders into Hades; and now top cap it all is the return of that toxic word – subsidy – into the nation’s fuel price template – yes, the old script – which underlies the federal government’s pathetic lack of will to address the economics of fuel importation under which the world’s leading oil producer are routinely subjected to the vagaries of crude oil price movements and foreign exchange fluctuations.
Forget the NNPC’s needless showmanship; neither the crippling scarcity nor the return of the subsidy is entirely surprising. Nigerians would readily recall that the best argument put forward when the current petrol price template was set was not so much about deregulation but cost recovery. Whereas the regime of cost recovery was understandably designed to foster competition, true deregulation would involve a constant review of the parameters on the fuel price template which in effect means that prices would also change as the dynamics change. That is the dilemma that the current administration has found itself – and which has now cast a dark shadow on its modest achievements.
It is a cross that the change administration must carry so long as oil prices continues to increase.
By and large, year 2017 seems to have surpassed expectations. Against all expectations, it exited the recession in the second quarter with a modest GDP growth of 0.55 percent. Inflation is down from 18 percent in 2016 to around 15 percent. The naira has of course gained strength; from N490 to the USD a year ago, it currently trades at N360. The same with the foreign reserves, it has improved dramatically from $23 billion in October 2016 to $38.2 billion a record 38-month. On the World Bank’s Ease of Doing Business Report for 2018, Nigeria ranks 145th position – 24 positions up from the 169th position in the 2017 report. There is also a fresh commitment to improve on revenue collection going by the unprecedented haul by the Nigerian Customs Service.
So what do we expect this year?
Whereas I wrote of a future hung on faith about this time last year, I must say that year 2018 is pregnant with possibilities. A lot depends on the fiscal discipline across the board. At a time of unprecedented infrastructure gaps, it seems inexplicable that the federal government will for whatever reasons, fail to implement its own budget.
Secondly, a lot would also depend on the extent on the abilities of revenue collecting agencies like the Federal Inland Revenue Service (FIRS) and the customs to sustain the current momentum. Thirdly, a lot will also depend on the extent to which the federal government is able to reduce or narrow the crippling infrastructure challenge. It is unfortunate that the Buhari administration appears to have done far less than would ordinarily been expected in the dire situation in which the economy has found itself. A sure proof of that is the perennial failure to implement the capital elements in the budget.
But even more important is the extent to which the federal government is able to enlist the support of the private sector in getting things done. How to reduce the near total dependence of our manufacturing companies on forex market almost without exception and the associated capital flows which goes on under various guises – all of which flow directly from the failure backward integration remains a big challenge. Just like the in the outgone year, the situation is expected to continue in 2018 and beyond.
Finally, I want to talk about two factors that continue to undermine the economy. The first is fuel import said to account for 40 percent of our forex earnings; and the second, the scandalous situation of youth unemployment. On the first, there is at least hope that the country will somehow exit the import cycle when hopefully Dangote refineries comes on stream.
But then, how do we begin to address the challenge of putting the nearly 50 percent of our idle youths to work? Only recently, the National Bureau of Statistics projected that “the unemployment rate, induced by a recession, typically peaks about 15-18 months after the beginning of a recession or 4-8 months after the end of a recession before it returns to its pre- recession trend”. That the unemployment situation will return to that terrible normal in 2018 can only be bad news for an economy with such a huge idle population. Has anyone thought of something of a Marshall plan to get our youths off the streets even for public works?
Or do we need a new economics to address this? Happy New Year to you, dear readers.