“IMF predicts Nigeria will be out of economic recession by 2017”, read an October 2016 headline on one of Nigeria’s most influential TV stations, predicting 0.6% growth by the middle of this year. Yet even an optimistic forecast now suggests that Nigeria’s GDP will keep shrinking beyond the second quarter of this year. Although Nigeria is Africa’s biggest economy, the value of her currency, the naira, is at an all-time low. With the crash in the global price of oil, Nigeria’s main export, the country is suffering a shortage of foreign exchange, prompting manufacturers to close up shop. The entire country’s current electricity generation capacity is a paltry 2,500 megawatts, less than the electricity consumption average of Edinburgh, to serve a population estimated at over 180 million. And worse still, insecurity – Boko Haram needs no introduction – is yet to fully abate.
The lack of a coordinated policy response to these problems continues to scare investors. Nigeria’s main challenge is the lack of political will to bring about the “change” (the campaign slogan of the ruling party) required for economic growth. Decisions on economic policy-making and implementation are subsumed under party politics and loyalty to the president, two key issues explored below. Nigeria is a classic case of the primacy of politics over economics.
Some have argued that more remote causes of Nigeria’s present economic predicament, especially corruption, can be traced to the country’s fourth transition from military rule to democracy in 1999. Olusegun Obasanjo, Nigeria’s president from 1999 to 2007, has been named the “grandfather of corruption in Nigeria”. A well-known case during his tenure was a $6 billion US dollar contract scandal involving KBR/Halliburton and Siemens, Saipem, Technip, Marubeni Corporation and a United States Congressman.
However, the immediate causes of today’s troubles date back to the 2015 elections which ushered in the current ruling party, the All Progressives Congress. The previous administration had been notorious for its depth of corruption, manifested by allegations of “missing” billions of US dollars. High optimism greeted the emergence of President Muhammadu Buhari as the winner of the 2015 elections, but it became obvious that the new government lacked policy direction. In the name of house cleaning, it took the president six months to constitute his cabinet. This period of waiting was characterised by uncertainty, and reduced investor confidence in the economy.
The “cabinet of saints” promised by the president was eventually made up of his associates, a number of whom had allegations of corruption hanging on their necks. The Nigerian economy would have benefited immensely from a cabinet of incorruptible ministers, since economic growth, especially investment, is all about perception. Some of the more active ministers have either gone quiet, or have had to leave – as in the case of the Minister of Environment, Amina Mohammed, who is now the Deputy Secretary General of the United Nations.
One of Buhari’s most important campaign promises was to tackle corruption, the longest standing bane of economic growth in Nigeria, with hundreds of millions of dollars ferried away annually to offshore accounts. However, by refusing to authorise the investigation of his loyalists who have been accused (with evidence) of corruption, President Buhari has given an Orwellian impression that “all animals are equal, but some are more equal than others”.
The politics of currency regulation is another example of the intricate link between economic policy-making and party politics in Nigeria. The value of the naira is tied to disruption in oil prices and fluctuation in foreign direct investments and remittances from abroad. Nigeria is an import-dependent country; it has no significant secondary (that is, industrial) export sector. The Minister of Science and Technology recently assured an audience that Nigeria will start producing pencils by 2018! In the wake of the falling commodity prices, the immediate consequence was the crash of the real value of the naira.
But the national economic team until recently objected to subjecting the naira to market forces, and held on to the official exchange rate. This was a bid to uphold a campaign promise of the ruling party to bolster the exchange rate, even when the rate had gone up by over one hundred percent in the parallel (unofficial) market. At its current parallel market rate of about 625 naira to one pound (or 520 naira to one US dollar), one “can earn more working as a cleaner in London than a director [of a government parastatal] in Nigeria”. Politicians and government appointees who have access to foreign exchange at the official rate of 310 naira to the US dollar (or sometimes ridiculous preferential rates as low as 3.19 naira to the dollar) have continued to make enormous “profit” from trading this difference in the parallel market.
For there to be growth in the Nigerian economy in the short run, the president must also allow his loyalists accused of corruption to face their charges. Given Nigeria’s strong and highly centralised presidential system of government, it is the president’s call. The president’s protection of his loyalists weakens the credibility of his clampdown on corruption. The executive arm of government must also allow economic pragmatism to prevail over the desire to fulfill campaign promises which, given the present conditions, are utopian. If the economic development of Nigeria – which warrants stronger institutions and economic pragmatism – is not placed above politics, the hope for economic prosperity is bleak in 2017.