Lekan Sote
The drama of the disrobing of the Lagos State Governor, Akinwunmi Ambode, by his political godfather, Asiwaju Bola Tinubu, Jagaban of Borgu, and the frenzy of the direct and indirect primaries of political parties are still swirling. They have caused nearly everyone to disregard negative hints that the Central Bank of Nigeria’s Governor Godwin Emefiele recently dropped about the nation’s economy.
He said that Nigeria’s economy was not looking too good: Emefiele reported that Nigeria’s economy had started showing signs of weakness, and might soon relapse into a recession. The economy recorded 1.95 per cent and 1.5 per cent respectively in the first and second quarters of 2018. This, in everyday language, means that productivity is slowing down.
For this, he blamed the slowdown in the oil and gas sector, late implementation of the 2018 Budget, negative impact of flooding on agriculture, weakening effective demand and low consumer spending caused by low wages, security challenges in the North-East and North-Central, and — wait for this —America is attracting investments with higher interest rate.
Emefiele’s CBN reported a steady drop in the foreign reserves of the nation: From $23 billion in October 2016, it rose to $34 billion in October 2017, further rose to $47.11 billion in July 2018. It started to drop, to $46.128 billion in August 2018, and further dropped to $44.38 billion in September 2018. With this trend, you wonder why the CBN predicted that foreign reserves will exceed $50 billion by the end of 2018.
To arrest the dipping of the foreign reserves, the Monetary Policy Committee has suggested that the CBN should further restrict importation of consumer goods. This means that very soon, Nigerians will be paying even higher prices for smuggled goods.
The stock market too is going through its own blues. In its third quarter of a losing streak, the stock market, whose value at the end of June 2018 was N13.63 trillion, lost N1.7 trillion to settle at N11.96 at the end of September 2018.
The Nigerian National Petroleum Corporation has been experiencing its own share of lows. On January 25, 2018, the NNPC reported that its total crude oil and gas sale for November 2017 was $239.10 million, a whopping 25.68 per cent lower than about $321.72 million sales figure for the preceding month of October 2017.
The report also showed a lower contribution of $113.97 million of dollar transactions by the Federal Government, or 47.7 per cent, for November 2017, when compared to the $227.83 million figure of the previous month of October 2017.
The report further disclosed that between November 2016 and November 2017, export crude and gas receipt was $3.73 billion. Also, total receipt from net domestic crude oil and gas sales for the same period was N865.59 billion.
Despite reports that the price of crude oil was steadily rising in the international market, coupled with the relative calm in the Niger Delta region in recent times, all have not quite resulted in higher revenue. Crude oil production that was in excess of two million barrels per day in 2014 and 2015, dropped below 1.8 BPD between 2016 and early 2017.
It however, went up again half way into 2017. By May 2018, when the snag resumed, crude oil production started to drop somewhere below 1.9 million BPD. The next report that is due in October 2018 should tell if things have improved or not.
The World Bank recently cut its 2018 economic growth forecast for sub-Saharan Africa, which includes Nigeria, from 3.1 to 2.7 per cent. This is because of the slower than expected rate of recovery that has been lassoing an economic noose around the necks of sub-Saharan Africa countries.
High debt servicing, weakening currencies, and rising interest rates, have substantially reduced the capacity of these economies to grow. Nigeria’s N9.12 trillion 2018 Budget has N1.95 trillion deficit, and N2.2 trillion allocation, or 21 per cent, to service debt.
You may want to know that even the N2.87 trillion allocated to capital expenditure has some short-term debt elements payable to contractors. This further compounds the debt overhang, and diverts money away from acquiring the much-needed infrastructure.
When you consider the high Non-Performing Loans that the CBN has reported lately, you begin to wonder how the same CBN could claim that the manufacturing sector was able to maintain a steady growth in the last 18 consecutive months.
Maybe the CBN has started “sexing up” its statistics, even as its debt-gobbling pac-man, the Assets Management Company of Nigeria, recently acquired the toxic-debt ridden Skye Bank that it warehoused in half-way house Polaris Bank.
Earlier in 2018, the CBN directed commercial banks and discount houses with high NPLs to refrain from paying dividends to their Ordinary Shareholders. Earlier in 2015, the CBN had required the banks to publish the names of their debtors in national newspapers.
Defaulting banks were supposed to be blacklisted from the CBN’s foreign exchange window and the securities market. It’s not too clear if these sanctions were followed through. As you can see, things are increasingly getting worse.
Observers had wondered why the managers of these banks — some of whom have interlocking directorships with some of the debtor companies — were not sanctioned. But happily, the new Minister of Finance, Zainab Ahmed, has found the spunk to ask the CBN and the Nigeria Deposit Insurance Corporation to prosecute those who mismanaged and sank Skye Bank and other banks.
The wobbly scores of the ratio of the NPLs to Gross Loans in Nigeria should convince you that it is not enough for these bankers to just walk the plank: It dropped from a high of 20.14 per cent in 2010; to a low 5.77 per cent in 2011; lower 3.70 in 2012, 3.39 in 2013, and 2.95 per cent in 2014; a relative high of 4.86 in 2015; a sudden jump to 12.80 per cent in 2016; and a higher 15.10 per cent in 2017. You can guess what it will be by year end 2018.
Because the oil and gas sector is the mainstay of the Nigerian economy, it is no surprise that loans granted to that sector were about 150 per cent of bank shareholders’ funds. Everybody played the only game in town. Government’s claim of rising growth in manufacturing is untrue.
The oil and gas sector that is significantly responsible for exports, and imports, thrives because it is an essentially offshore business. You will observe that Nigeria’s profitable companies have access to cheaper overseas funds, large-scale procurement deals by their home offices, and the stronger currencies of their home economies.
The business desks of Nigeria’s media houses should be asking the motley crowd of presidential, governorship, and legislative candidates how they intend to check this dangerous reversal of the growth of Nigeria’s economy.
None, including the not-too-young-to-runs, have adequately engaged this crucial matter. They skirt around it. And one gets the impression that they have no clue about the issues, and therefore have no solutions.
What do you make of a candidate who promised to dance into the Government House of a state whose senior civil servants are being owed many years’ salaries? Some people actually think that governance is a song.
Talk must go beyond glib remarks about infrastructure; candidates must bring concrete economic deals to the people.
Twitter @lekansote1
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