In 2019, the global economy witnessed a significant downturn; growing by an average of 3.3 per cent during the year, down from 3.7 per cent in 2018. Average Brent crude prices fell from an average of US$71.0 per barrel in 2018 to US64.0 per barrel in 2019. The fall in oil prices reflects not only slow growth in the global economy and demand but also more aggressive production of shale by the United States. American shale production rose from 36.4 million barrels in July 2010 to 5.6 million barrels in January 2019. Europe accounts for 46 per cent of the Nigerian oil market while India accounts for 18 per cent of that market. American shale exports have expanded considerably into the European market, with all that this implies for Nigeria.
The trade war between the two biggest economies, the US and China, continued unabated. The Trump administration continued its sabre-rattling in the Persian Gulf while maintaining its indifference if not hostility towards multilateralism, global governance and international policy coordination. In the UK, Boris Johnson and the conservatives won the elections by an overwhelming majority in the end-of-year elections. Brexit is therefore a foregone conclusion. Both Europe and Britain will be competing to enter into trade deals with Nigeria to ensure they have a place in our lucrative market.
For us in Nigeria, the year 2019 featured the decline of the Boko Haram insurgency. Unfortunately, it has been obviated by the rising menace of murderous herdsmen militias, rural banditry and criminal activities by kidnappers, armed robbers and highway gangsters. Nigeria continues to exhibit the symptoms of a failed state, with government showing itself to be either incompetent or incapable of addressing those security challenges.
The year was yet another landmark in the electoral-political cycle, in which the ruling APC “won” with an overwhelming majority in parliament. It was one of the worst elections in the history of our fledgling Fourth Republic, if judged by the level of thuggery, violence and voter apathy. On this occasion, the electoral umpire did not convince us, that, like Caesar’s wife, he was beyond reproach. Such failings could lead to what political scientists would term “a crisis of legitimacy” in the emerging political order. The overwhelming preponderance of the APC lawmakers in the National Assembly has however meant that we can expect a smoother
The geopolitical uncertainty accompanying the elections led to some capital flight which led to a downward spiral on the stock exchange. During the course of the year, the Nigerian Stock Exchange All Share Index fell by 14 per cent, to 27,002.15. Inflation fell from 11.44 per cent in December 2018 to 11.31 per cent in February 2019. Average inflation for the year stood at 11.3 per cent, no doubt a marked improvement, although short of the single-digit target.
During the 2019, the MPC cut the Monetary Policy Rate in July by 50 basis points from 14.00% to 13.5 per cent, as a means to bolster growth and enhance lending to the real sector. The Central Bank of Nigeria continued to reposition itself as a “developmental central bank” with a more aggressive interventionist policy in the economy; intervening robustly in the forex market to stabilise the exchange rate. It has also reaffirmed its commitment to enforcing rigorous adherence to the list of items banned from access to the official forex window. It also raised the Loan to Deposit ratio (LDR) from 60% to 65%, all in the effort to release more liquid cash in the commercial banks for the purpose of lending to the SMEs and to the retail and mortgage industry.
The 2020 budget was passed in record time on December 5, 2019. This would be salutary for budget implementation and for public investments in infrastructure. The budget of N10.49tn (US$35bn) has a deficit of N2.18tn (US$7.2bn) which is to be financed by internal and external borrowing. Towards year end, the Federal Government wrote to the National Assembly for permission to borrow a staggering US$29.96bn ostensibly to finance infrastructure. Some of us have warned that such a hefty loan without effective fiscal expenditure controls would only compound the debt-repayment challenge which already swallows up 50 per cent of all government revenues.
The year also saw two telecoms giants, MTN Nigeria and Airtel, being listed on the stock exchange. But the NSE has remained in the doldrums, registering a -3.5%in the second to a -12.1 per cent fall in the second and third quarters of the year.
The year also witnessed the decision by the Federal Government to increase the national minimum wage from N18,000 to N30,000. Several states have, however, complained that they do not have enough resources to implement it. When fully implemented, the national minimum wage can be expected to provide a boost to consumer spending while at least cushioning some of the worst effects of poverty on those on the lowest rung of the income bracket.
In July 2019, Nigeria signed up to the AfCFTA which is expected to boost regional trade. In August, however, we also we went ahead and closed down our land borders. It has been estimated that this singular decision has led to a contraction of -1.45% cent in our external trade volume. It has also had an inflationary impact on such local staples as rice and stockfish. The impact on neighbouring countries has been considerable, particularly Benin Republic, Togo, Ghana and Niger Republic. There has been a palpable increase in hostility against Nigeria and Nigerians among our neighbouring countries. It has been estimated that more than 50 per cent of the Beninois economy depend on illicit trade across the border with Nigeria. The local economies of border communities on the Nigerian side have also taken a big hit. Nigeria’s customs authorities have claimed that ever since the decision was taken to close the borders, they have been making a monthly average of between N4.7bn and N5.8bn more than in previous years. The border closure has also meant that Nigerian rice farmers will breathe a sigh of relief while local industries will enjoy a respite from smuggling and other illicit trade activities that hamper the local industrial sector.
In reaction to these events, President Emmanuel Macron of France and Alassane Ouattara of Côte d’Ivoire announced that the CFA will be transformed into a new eco for West Africa. This is likely to prove divisive in West Africa. Nigeria will have to be prepared to go it alone if need be.
The World Bank reports that Nigeria’s growth rate stood at 2.1 per cent for 2019, on account of a defective macroeconomic framework that was not “conducive to confidence”. It forecasts the same figure of 2.1 per cent for 2020 leading up to 2023.
Unless we take bold steps to improve the business climate, bolster national competitiveness and deepen institutional reforms, poverty inevitably will worsen. The year 2020 may prove to be a difficult one geopolitically for our country. The divisions within the ruling party will come to the fore, as ambitious politicians jostle to succeed the President, Major General Muhammadu Buhari (retd.) in 2023. The opposition PDP is an old whore that is likely to become irrelevant. A situation where the government operates a system of exclusion and sinister under-handed agenda can only lead to a deepening crisis of legitimacy. We also hear that well-armed radical Islamists are trying to break through a cordon sanitaire in southern Mali to gain entry into northwestern Nigeria. This can only intensify geopolitical tensions while forcing local communities to arm themselves in self-defence in imitation of Amotekun in the South-West Nigeria.
The omens are bad. To echo the German sociologist, Max Weber, ahead of us is not the bliss of summer but a dark and icy winter. We must sharpen our swords and wait.
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