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THE NIGERIAN ECONOMY IN DISTRESS: POLICY CHOICES FOR BUHARI’S ADMINISTRATION + By Akpan H. Ekpo++ + ++ Inaugural lecture organized by the Centre for Financial Journalism at the Civic Centre, Lagos, March 17, 2016 Professor of Economics and Director General, West African Institute for Financial and Economic Management (WAIFEM), Lagos. Email: [email protected] Web page: www.akpanhekpo.com The views expressed herein are mine; the usual disclaimer applies. This lecture is dedicated to one of the world’s best Revolutionary Marxist Scholar Comrade (Professor) Eskor Toyo who passed away on December 7, 2015 1 OUTLINE • INTRODUCTION • PROGNOSIS OF THE NIGERIAN ECONOMY: - Morphology of Growth - Performance of the Economy - Social Indices • CONCEPTUAL AND THEORETICAL DISCOURSE - Role of the Poblic Sector - Measuring Economic Performance - Role of Private Sector - Policy Choices For Buhari’s Administration • CONCLUSION 2 1. INTRODUCTION • Nigeria’s neo-colonial status. • Macroeconomic and Social Indices compared with similar countries in 1960. • Reason for under-development and poverty. • Policies of Various regimes (1999 – 2015). • 16 years of neo-liberal economics and the PDP. • APC and the Change Mantra. • Objective of the lecture. 3 2. PROGNOSIS OF THE NIGERIAN ECONOMY Morphology of Growth • Table 1: Nigeria: Sectoral Contribution to Real GDP at 1990 Constant Prices, 2012 – 2013 (Q1 – Q2) in % Item Agriculture Solid Mineral Crude Petroleum & Natural Gas Manufacturing Telecommunication & Post Finance & Insurance Wholesale & Retail Trade Building & Construction Hotel & Restaurants Real Estate Business & Other Services Q1 34.47 0.33 15.80 Q2 40.69 0.38 13.86 1.12 7.29 3.96 7.28 4.07 23.39 Others 2013 Q2 40.06 0.40 12.90 Q4 38.20 0.37 12.59 Total 39.21 0.38 13.76 Q1 33.69 0.34 14.75 3.53 6.73 7.12 7.01 4.20 7.05 1.14 8.53 3.98 8.37 3.98 17.12 2.92 18.81 2.83 20.66 3.37 19.92 3.96 23.75 3.95 17.32 3.01 0.69 2.03 1.07 2.21 0.56 2.03 1.12 1.68 0.53 1.73 0.84 2.09 0.47 1.70 0.83 2.19 0.55 1.85 0.95 3.27 0.74 2.10 1.09 2.39 0.60 2.12 0.60 6.74 6.81 6.76 6.13 6.58 6.66 6.74 Source: National Bureau of Statistics, Abuja. 4 2012 Q3 42.62 0.43 13.42 2. PROGNOSIS OF THE NIGERIAN ECONOMY (CONT’D) Table 2. Nigeria: Sectoral Growth of GDP (1990 Constant Prices) 2012 – 2013 (Q1 – Q2) in % 2012 2013 Item Agriculture Solid Mineral Crude Petroleum & Natural Gas Manufacturing Telecommunication & Post Q1 4.37 11.65 -2.32 Q2 4.21 11.72 -0.73 Q3 3.89 12.61 0.08 Q4 3.62 13.59 -0.79 Total 3.97 12.52 -0.91 Q1 4.14 12.00 -0.54 Q2 4.52 11.84 -1.15 5.17 34.06 7.59 29.38 7.78 31.57 7.70 32.44 7.55 31.83 8.41 24.53 6.81 22.12 Finance & Insurance 3.57 5.01 4.08 3.48 4.05 3.61 5.18 Wholesale & Retail Trade 8.42 8.65 9.62 11.19 9.61 8.22 7.44 Building & Construction 13.28 12.73 11.52 12.55 12.58 15.66 14.87 Hotel & Restaurants 11.45 12.30 12.33 12.54 12.15 13.61 13.69 Real Estate Business & Other Services 9.34 7.67 10.81 11.26 10.24 9.11 11.09 10.46 10.44 9.69 10.06 8.63 10.88 11.33 Others Real Growth at Basic Prices Non.oil Growth 4.97 6.34 4.84 6.39 5.25 6.48 5.57 6.99 5.18 6.58 5.37 6.56 5.06 6.18 8.14 7.63 7.55 8.21 7.88 7.89 7.36 5 Source: National Bureau of Statistics, Abuja. 2. PROGNOSIS OF THE NIGERIAN ECONOMY (CONT’D) Table 3: Nigeria: GDP at 2010 Constant Prices: (%) Distribution, 2014 – 2015 2014 2015 Item Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Agriculture 19.65 20.89 26.63 23.86 22.90 19.79 21.12 26.79 Industries 27.36 25.96 24.20 22.66 24.93 25.65 24.52 23.51 Services 52.95 53.15 49.16 53.48 52.15 54.56 54.36 49.70 Source: National Bureau of Statistics, Abuja. 6 2. PROGNOSIS OF THE NIGERIAN ECONOMY (CONT’D) Table 4: Nigeria: Real Growth of GDP by Sector, Year–on–Year, 2014–2015 (%) 2014 2015 Item Q1 Q2 Q3 Q4 Total Q1 Q2 Q3 Agriculture 5.53 3.68 4.47 3.64 4.27 4.70 3.49 3.46 Industries 4.84 8.97 5.43 7.96 6.76 -2.53 -3.31 -0.13 Services 7.20 6.54 7.61 6.15 6.85 7.04 4.67 3.97 Real Growth Rate 6.21 6.54 6.23 5.94 6.22 3.96 2.35 2.84 Non-oil Growth Rate 8.21 6.71 7.51 6.44 7.18 5.59 3.46 3.05 Source: National Bureau of Statistics, Abuja. 7 PROGNOSIS OF THE NIGERIAN ECONOMY (CONT’D) Before the rebasing exercise, agriculture contributed more to GDP (almost 40%) followed by wholesale and retail trade (20%); manufacturing almost 4%; all sectors grew positively during the period. The economy remained at the primary stage of production. After rebasing, the contribution of agriculture to GDP which stood at 26.6 per cent in the 3rd quarter of 2014 increase slightly to 26.8% in the 3rd quarter of 2015. The growth of the agricultural sector dropped from 4.47% in the 3rd quarter of 2014 to 3.46% in the same quarter of 2015. • • • • 8 The industrial sector’s contribution to GDP declined from 24.2% in the 3rd quarter of 2014 to 23.5% in the same quarter of 2015. Through out the 3rd quarter of 2015, industrial sector’s growth was negative . An unhealthy situation given the importance of manufacturing in driving growth and development. The services sector now dominates in terms of its contribution to GDP. At almost 53% in the 1st quarter of 2014, it increased to almost 55% in the same quarter of 2015. The sector now contributes more to GDP than any other sector of the economy. Does this imply structural transformation? No. This phenomenon in an economy like Nigeria is known as tertiarization. Poor quality of services and the complexity of the new 2008 Social National Accounts. After rebasing at 2010 constant prices, the structure of the economy was not transformed; data revealed that agriculture remained dominant while manufacturing contributed less than 10% to GDP. The rebasing made Nigeria a middle-income country with implications. No longer entitled to IDA loans which attracts concessionary rates and longer period of payment. Also largest economy in African and among the top 20 in the world. • • • • • • • • 9 • • • • • • The morphology of growth shows positive growth trajectories averaging about 5% for the period 2000-2014. Growth reduced in the last 2 quarters of 2015 to an average of 2.5% due to falling oil prices and the adverse global environment. Within this context, policy-makers warned of an impending recession if certain measures were not taken hence the unorthodox monetary and exchange rate policies of the CBN. Growth has not resulted in economic development as all other macroeconomic and social indicators are moving in the wrong direction. Growth is only a necessary condition for development. It may not translate to development without government intervention. Growth needs to be double-digit and sustained for at least 15 years to have a dent on poverty reduction. 10 • • • • From 1970 inflation has been fluctuating between double and singledigits. What is important is for an economy to know its inflationary threshold. There are economies with double-digit inflation but growing such as Brazil. The rising rate of unemployment makes mockery of the positive growth trajectory during the period 2000-15. The rates of unemployment and underemployment now stands at almost 30% and rising among youths and as more school leavers are thrown into the labour market. The high rate of unemployment, declining productivity in the last 3 quarters of 2015 and inflation nearing double-digit show that the economy is in the phase of stagflation – a preclude to a recession if urgent measures are not taken. Based on the low score of the EPI, rising misery and discomfort indices, the performance of the Nigerian economy has been unsatisfactory for the period 2006-2015. 11 2. PROGNOSIS OF THE NIGERIAN ECONOMY (CONT’D) Table 5, Nigeria: Real Sectoral GDP Growth after Rebasing, 2010 – 2013 (%) Item 2010 2011 2012 2013 Agriculture 2.92 6.70 2.94 2.9 Mining & Quarrying 2.41 -4.78 -12.81 -12.8 Manufacturing 17.82 13.46 21.80 21.7 Construction 15.71 9.44 14.22 14.2 Trade 7.21 2.21 6.64 6.6 Arts, Entertainment & Recreation 48.3 27.36 14.93 14.9 Finance & Insurance -26.93 21.02 8.63 8.6 Real Estate 0.43 5.65 11.98 11.9 GDP Growth 5.31 4.21 5.49 5.5 Source: National Bureau of Statistics, Abuja. 12 Performance of the Economy Table 6: Nigerian Growth of Selected Macroeconomic Variables, 1970 – 2014 Year 1970 1975 1980 1985 1990 1995 2000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Un 1.3 43.5 16.1 1.0 3.6 51.6 14.5 11.6 8.6 6.6 15.1 12.1 11.8 10.3 12.0 8.4 8.1 25.01 -5.20 4.2 8.3 12.8 -0.3 5.3 3.4 8.2 6.8 6.3 6.9 7.8 4.9 4.3 5.4 6.5 3.1 4.1 6.4 6.1 3.5 1.8 13.1 11.9 12.3 12.7 14.9 19.7 21.1 23.9 25.7 29.5 28.0 Sources: (i) Central Bank of Nigeria Statistical Year book. (ii) National Bureau of Statistics (ii) World Bank 13 44.2 91.9 51.9 11.0 49.0 18.9 62.2 29.6 32.1 36.6 55.8 8.5 -5.4 33.8 -42.8 10.0 -6.2 48.1 80.3 47.6 12.4 45.9 19.4 48.1 24.3 43.0 44.0 57.8 17.5 8.0 10.3 -40.1 6.3 0.8 31.0 40.2 46.9 27.6 58.1 88.2 63.9 68.9 56.4 59.5 62.3 56.0 35.7 39.4 32.8 33.8 30.6 • Performance of the Economy (CONT’D) Table 6: Nigerian Growth of Selected Macroeconomic Variables, 1970 – 2014 14 • Performance of the Economy (CONT’D) Table 7: Nigeria; Selected Financial Deepening and Other Performance Indicators, 1999 – 2014 (in %) Year M2/ GDP CPS/ GDP 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 13.4 13.1 18.4 19.3 19.7 18.7 18.1 20.5 24.8 33.0 38.0 20.2 19.3 19.4 18.9 19.9 9.2 7.9 11.1 11.9 11.1 12.5 12.6 12.3 17.8 28.6 36.9 18.6 16.9 20.4 19.7 19.2 Savings GDP 5.93 5.74 7.08 7.60 6.61 6.99 9.01 9.37 13.04 16.95 23.25 10.90 10.37 11.24 10.81 13.49 Inv./ GDP Def/ GDP CU 24.0 22.2 23.5 27.6 23.3 31.8 25.9 22.5 22.4 24.6 20.5 6.09 1.55 3.21 3.87 2.04 -1.51 -1.10 -0.55 -0.51 -0.20 -3.27 -2.04 -1.83 -1.37 0.00 -1.10 34.6 36.1 42.7 54.9 56.5 55.7 54.8 53.3 53.3 53.8 55.1 56.2 - Sources: (i) Statistical Bulletin, Central Bank of Nigeria, Abuja (ii) Regional Economic Outlet: Sub-Saharan Africa Fostering Durable and Inclusive Growth, IMF April 2014 Notes: CPS = Credit to the Private Sector; Inv. = Investment; Def. = Deficit; CU = average capacity utilization. 15 • Performance of the Economy (CONT’D) 16 • Performance of the Economy (CONT’D) Figure 2: GDP growth and Inflation rate (1970-2015) 17 • Performance of the Economy (CONT’D) Figure 4: GDP growth and Unemployment rate (%) 1970-2015 Source: World Bank national account, OECD national account, CBN and NBS Gdp growth data for 2014 and 2015 represented July 2014 and July 2015 respectively. 18 • Performance of the Economy (CONT’D) Figure 5: 19 Table 8: Nigeria Economic Performance Indicator, Misery and Discomfort Indices, 2006 – 2015 (%) Year EPI MI DI 2006 76.1 34.8 29.7 2010 68.2 30.3 34.8 2013 67.6 50.8 37.2 2014 73.8 55.08 33.4 2015 68.0 57.27 36.7 Source: Calculated by Author 20 21 • Social Indices • We consider Nigeria’s human development index (HDI) as measured by the United Nations Development Programme (UNDP). HDI is “a summary measure for assessing long-term progress in three basic dimensions of human development: a long and healthy life, access to knowledge and a decent standard of living” (UNDP, 2013). Nigeria’s HDI value for 2012 is 0.471 which is in the low human development category. • Nigeria is positioned 153 out of 187 countries and territories. Between 2005 and 2012, Nigeria’s HDI value increased from 0.434 to 0.471, an increase of 9 per cent or an average annual increase of about 1.2 per cent. Table 9 below reviews Nigeria’s progress in the HDI indicators. 22 • Social Indices Between 1980 and 2012, Nigeria’s life expectancy at birth increased by 6.8 years, mean years of schooling increased by 0.2 years and expected years of schooling increased by 2.4 years. Nigeria GNI per capita increased by about 34 per cent between 1980 and 2012. When Nigeria’s HDI ranking is compared to ‘similar’ countries, the results are mixed. 23 A survey (NBS, 2013) on the performance of the Millennium Development Goals (MDGs) shows mixed results. The tracking of the MDGs performance is utilized as a proxy for achievements or otherwise regarding social indicators. • The economy has done well in the areas of Grade 6 completion rate, under-five mortality rate (per 1000 live births), infant mortality rate (per 1000,000 live birth) and maternal mortality rate (per 1000,000 live birth) over the period 2004 – 2012 (see Table 11). • However, the country has not performed satisfactorily in the following areas: -Proportion of population using improved drinking water. -Proportion of population using improved sanitation facility. -Improved drinking water piped into dwelling, plot or yard. • 24 Table 9: Nigeria: HDI Trends Based on Consistent Time Series Data, New Component Indicator and New Methodology Year Life Expectancy At Birth Expected Years of Schooling Mean Years of Schooling GNI per capita (2005 ppp ) HDI Value 1980 45.5 6.6 - 1,571 - 1985 45.9 8.4 - 1,202 - 1990 45.6 6.5 - 1,274 - 1995 45.1 6.5 - 1,303 - 2000 46.3 7.2 - 1,285 - 2005 49.0 79.0 5 1,540 0.434 2010 51.4 9.0 5.2 1,928 0.462 2011 51.4 9.0 5.2 2,017 0.467 2012 52.3 9.0 5.2 2,102 0.471 Source UNDP. Human Development Report 2013 25 Table 11: Nigeria: Selected Social Indicators as Per the Millennium Development Goals (MDS) Tracking 2004 – 2012 (in %) MDG Indicator 2004 2008 2012 2015 Proportion of Population Using Improved Sanitation Factory 38 53.8 33.7 70 Proportion of Population Using an Improved Drinking Water 57 55.8 57.4 77 Maternal Mortality Rate (Per 100,000 live births) 800 545 350 250 Proportion of Birth Attendant by Skilled Health Personnel 36.3 38.9 53.6 100 One year Olds Fully Immunized against Measles 50.0 41.4 55.8 100 Infant Mortality (per 1000 live Births) 100 75.0 61.0 30.3 Under – Five Mortality Rate (per 1000 Live Births) 201 157 94.0 63.7 Grade 6 Completion Rate 82 - 87.7 100 Literacy Rate of 15 – 24 Years Old, Women 60.4 80 66.0 100 Notes: *2015 as benchmark Source: NBS, Abuja 26 3. CONCEPTUAL AND THEORETICAL DISCOURSE • There is need to briefly examine salient conceptual and theoretical issues in order to better locate the structure and performance of the Nigeria economy. In economics, it is broadly stated the total output of an economy can be represented by an aggregate production function: 27 Role of Government ………………….. (1) Where: Y = aggregate output K = capital input L = labour input T = technology R = Other Resources The arguments (inputs) in equation (1) can come from economic agents such as the households and their families, private sector and government. In the long-run as the inputs change, the economy, all things being equal will move to a higher production possibility frontier. Let us manipulate equation (1) by indicating that: 28 Where G = government or state. In equation (2), government has been endogenized as an input with the assumption that capital and labour are provided by the private sector (Ip) thus: ……………………………………………………… (3) In growth terms, we state that: ………………………………………………… Where: 29 (4) ……………………………………………… (5) y/p = income per capita which is a proxy for economic development + indicates that an increase in the input would increase growth in GDP and income per capita. Let us decompose G. into: , y g 5 (Gcap, Gcur , I p ).................................(6) y p 30 g 6 (Gcap , Gcur , I p )................................(7) 3.1 Measuring Economic Performance The trend of selected macroeconomic variables such as the rates of inflation and unemployment, the lending rates, the growth in GDP as well as its per capita components would give indication as to whether an economy is performing well or not. Scholars have suggested ways of measuring economic performance. follows that a consistent and transparent indicator of overall economic performance would help guide all stakeholders particularly citizens, politicians and policy-makers to make more informed decisions by viewing the big picture of the economy. 31 The Economic Performance Index (EPI) is a simple but powerful macro indicator which measures the performance of an economy’s three primary segments namely: households, firms and governments. The EPI consists of variables that impact on all three sectors simultaneously: -the inflation rate as a measure of the economy’s monetary stance; -the unemployment rate as a measure of the economy’s production stance; -the budget deficit as a percentage of total GDP as a measure of the economy’s fiscal stance; and -The change in real GDP as a measure of the aggregate performance of the entire economy (Khramor and Lee, 2013, p.3). • 32 The score can be calculated annually, quarterly or monthly by taking a total score of 100 per cent subtracting the inflation rate, the unemployment rate, the budget deficit as a percentage of GDP and finally adding back the percentage change in real GDP – all weighted and calculated as deviations from their desired values. • Another measure of economic performance is the misery index (MI). The MI is simply the sum of the unemployment, inflation and bank lending rates less the percentage change in real GDP per capita. “A higher misery index score reflects higher levels of “misery” (Hank, 2014). • Another simple measure of economic performance is the Discomfort index (DI) which adds the rates of 33 inflation and unemployment. • 3.2 ROLE OF THE PRIVATE SECTOR • There is no doubt that the private sector is one of the engines of growth. The sector takes and/or gauges its risk before venturing into any kind of investment. In the Nigeria context, the private sector is still emerging hence it is yet to fully maximize the opportunities provided by government. • Nonetheless, the organized private sector as one of the economic agents attempt to predict government. Whether it has succeeded in doing so empirical manner. The Nigerian private sector is not so much manufacturing semi-and finished goods. The sector concentrates in selling, assemblage and packaging. • It is necessary to state that the private sector is not in business to promote economic development. For the private sector, the bottom line is profit – development is either a second or third best for the most part. In other words, if development occurs through growth, then the economy can reproduce itself thus guaranteeing more profit. • Nevertheless, the Nigerian private sector has come from a chequered history. The large firms seldom patronize the capital markets for investible funds. It is, still therefore, not surprising that the stock market is still dominated by banks and other financial institutions. 34 must always or not is an involved in buying and 4. POLICY CHOICES FOR THE BUHARI’S ADMINISTRATION • By policy is meant government intervention in the economy. Based on government failure in Nigeria over the years, is policy still relevant? In a series of published technical papers, the relevance of policy was established (Ekpo, 2011; Ekpo, 2012). This confirms the importance of not just government but also the essence of planning. Planning does not negate the role of the market. “It is not a question of the state versus the market, but how best the state can use the market to fundamentally transform the economy and improve the living standard of Nigerians “(Ekpo, 2011, p. 316). • To address this issue, it is important to understand the nature of the state. There are various notions of the state but the one that concerns us here is the developmental state defined as one that sets economic development as the top priority of government policy and designs effective instruments to promote that goal. According to UNECA (2011) “The emerging consensus is that a developmental state is central to the process of accelerated growth and social transformation of any country”. Variants of a developmental state exist in Malaysia, Japan, Singapore, India, China, Brazil, and so on. • A developmental state looks for the right mix between the state and the market, powering and controlling the market and market forces to prevent market failure, and supporting private agents and entrepreneurs to realize their full potential and to contribute to economic development (UNECA, 2011, p.111). 35 POLICY CHOICES FOR THE BUHARI’S ADMINISTRATION (Cont’d) • President Buhari’s political party, the APC, came into power with the mantra of change. The party had a manifesto with imputed economic blue print. The APC is a social democratic party hence it aims to improve the living standards of Nigerians through the development of state capitalism by collaborating with the private sector. Therefore, the change is not systemic. • Consequently, the government must be strategic if it wants to fast – track Nigerian’s development. From the previous analysis, it is clear that the Nigerian economy is in distress. The economy is on a tip of a recession. While no economic blue-print has been made available but based on the party’s manifesto, pronouncements by government as well as the draft 2016 budget, President Buhari has several policy choices both in the short and medium terms: 36 POLICY CHOICES FOR THE BUHARI’S ADMINISTRATION (Cont’d) Massive Investment in Hard Infrastructure. Investment in power particularly would enhance growth and generate employment. It would result in the establishment of new micro and small-scale industries as well as sustaining existing ones. The release of the funds for infrastructure in the 20116 budget would enhance liquidity in the system. Construction of both urban and rural roads; repairs of existing roads, construction of rural roads would generate jobs. Employment Generation – Unemployment has reached a crisis situation hence government must formulate policies and strategies to address the problem. The 2016 budget estimates provide for the recruitment of 500,000 teachers. The visible hand of government must recruit persons into all the security agencies such as the Police, Army, Air force, Navy, Immigration, Customs, etc. The multiplier effects of government employment would grow the economy and then check the pending recession. The new workers would earn wages, pay taxes to the government and 37 demand goods and services. POLICY CHOICES FOR THE BUHARI’S ADMINISTRATION (Cont’d) Investment in Housing Construction- The rebased GDP indicates the sluggish growth of the housing sub-sector. A revamp housing sector for all levels of income through the mortgage process would stimulate growth and generate employment. Employment in the housing sector would involve both skilled and unskilled labour. Changing the structure of the economy. Though this is long-term, the effort must begin as of yesterday. The economy despite the rebasing exercise still remains at the primary level of production. It is essential that agriculture be large–scale and mechanized so that its contribution to GDP would be less than that of industries but still enough to feed the domestic economy. Government should create the right environment for the economy to industrialize. It is through industrialization that a modern knowledge-based economy can be built. The economy must be diversified away from oil. The oil sector needs to be linked to agriculture, chemical and pharmaceutical industries. The Nigerian market is large enough to absorb whatever is produced in the economy. 38 POLICY CHOICES FOR THE BUHARI’S ADMINISTRATION (Cont’d) Provision of Social Services. The provision of running water, health services, sanitation etc is nothing to write home about. The provision of basic social services even with user charges would go a long way in improving the living standard of Nigerians. Rebuilding the Public School System. It is only the public system that can produce the mass of literate Nigerians who would aspire to acquire various skills at the tertiary level. For now, the public school system at all levels has collapsed. No country grows faster than its manpower training institutions. Build Strong Institutions. around personalities. The existing institutions are not only weak but built It is necessary for government to ensure that rules and regulations are obeyed. It is strong institutions that would encourage both domestic and foreign investment because issues of legal framework and property rights would be domiciled in strong institutions. 39 POLICY CHOICES FOR THE BUHARI’S ADMINISTRATION (Cont’d) Growing the Real Sector. The modernization of agriculture and industrialization of the economy would generate employment as the economy grows. A vibrant real sector would result in the diversification of the economy with multiplier effects to the economy. To ensure the growth of the real sector, lending rates must decrease to single-digit. Government has the power to break the oligopolistic structure of banks by forcing ‘competition’ in the sub-sector. Aggressive Monetary and Fiscal Policy. The Central Banks ought to pursue aggressive monetary policy that would reduce to near single – digit lending rates in order to revitalize the real sector. If inflation is not a major challenge in the near future then the MPR should be reduced drastically to force its impact on lending rates. On the fiscal side, government must reflate the economy by spending hugely on infrastructure and creating jobs. monetary and fiscal policy is essential. 40 The co-ordination of POLICY CHOICES FOR THE BUHARI’S ADMINISTRATION (Cont’d) Economic Distress and Nigeria’s Federalism The thirty-six state economies must play their role in putting the Nigerian economy on the path of growth and development. States must also design strategies and programmes that would attract investors as well as generate employment. Nigerian states should operate under competitive federalism so as to help the wider economy to grow and develop. For now, the states depend heavily on the centre. • The above narrative provides two main options for the Buhari administration – Economic Nationalism and fine-tuning - the existing framework. Economic nationalism connotes the need to strategically depend on domestic resources with selective engagement with the outside world would result in some element of change. Fine-tuning the existing framework would maintain the status quo. Economic Nationalism would incorporate elements of a developmental state economic philosophy. It is that philosophy that would address the following questions: 41 POLICY CHOICES FOR THE BUHARI’S ADMINISTRATION (Cont’d) What is happening to education? -What is happening to health? -What is happening to employment? -What is happening to the provision of other basic needs such as running water? -What is happening to infrastructure such as power? -What is happening to poverty and inequality? • Sustained growth (even if it is inclusive) is only a necessary condition for development. Hence, it is best for our leadership, policy-makers and technocrats to search and work towards inclusive development within the context of a developmental state economic blue-print. Anything else would be a return to the status quo implying the continuation of the development of underdevelopment – increased poverty, backwardness and misery. 42 5.0 CONCLUSION • Relevant macroeconomic and social indices show that the Nigerian economy is in distress. The morphology of growth indicates an economy with positive growth trajectories but no development. The high rates of unemployment combined with reduced output in two quarters of 2015 suggest an economy in the sphere of stagflation – a prelude to a recession. The global environment such as the slow growth in China and the sluggish recovery in Europe further worsens the situation. • However, it must be noted that market capitalist economies are subject to periodic recessions no matter how best they are managed. Consequently, if the global economy is in a recession, the Nigerian economy would experience same at least as a client. However, certain policies could cushion the effect of such a recession. 43 Conclusion (cont’d) • The Buhari administration has several policy choices; a few have been discussed in this lecture, that is, economic nationalism within the context of a developmental state economic blue-print and fine-tuning the existing neoliberal framework. Economic nationalism would bring about some changes since it involves massive investment in hard and soft infrastructure, the provision of basic amenities to Nigerians, the building of strong institutions, among others. • Fine-tuning the existing system would be maintaining the status quo. It is expected that President Buhari has a committed team that would put the economy on the path of sustained growth and inclusive development. If not, the county’s permanent work-in-progress would continue. 44 Table A1. Nigeria: Rates of Unemployment And Underemployment Year Old (1) New (2) ILO (3) Underemployment(4) (2)+(4) 2010 21.4 5.1 1.9 16.3 21.4 2011 23.9 6.0 2.2 17.9 23.9 2012 27.4 10.6 7.6 16.8 27.4 2013 24.7 10.0 7.1 14.8 24.8 2014 25.4 7.8 4.8 17.5 25.4 2015 Q1 24.3 6.4 2.1 17.9 24.3 2015 Q2 26.5 8.2 4.0 18.3 26.5 Source: National Bureau of Statistics, Lagos. 45 Table A2: Nigeria: Domestic And External Debt 1999 – 2014 (N’Billion) Year Domestic Debt External Debt 1999 794.81 2577.37 2000 898.25 3097.38 2001 1016.97 3176.29 2002 1166.00 3932.88 2003 1329.68 4478.33 2004 1370.33 4890.27 2005 1525.91 2695.07 2006 1753.26 451.46 2007 2169.64 438.89 2008 2320.31 523.25 2009 3228.03 590.44 2010 4551.82 689.84 2011 5622.84 896.85 2012 6537.54 1,026.90 2013 7118.98 1,373.58 2014 7904.02 1,631.52 Source: Central Bank of Nigeria, Statistical Bulletin, vol.25, December, 2014 46 Thank you for your attention. [email protected] 47