In
an explosive article written by David Pilling, the Financial Times of
London says President Muhammadu Buhari has practically done nothing to
grow Nigeria's economy, stating that the country has let a crisis go to
waste.
President Buhari
The term “dead cat bounce” derives from the fact that even a dead
cat will bounce if it falls from a great height. If you imagine a dead
cat soaked in crude oil and dropped from a 50-storey building, you get a
rough picture of how Nigeria’s economy is performing these days.
Nigeria is expected to grow 2.5 per cent this year after
contracting 1.6 per cent in 2016. But the population is also growing at
2.5 per cent. So in per capita terms, things are going nowhere.
The reasons for the “recovery” are twofold. First, last year’s
performance was so dismal it would have been difficult for the economy
to fall further. Without doing anything at all — a reasonable
description of policy under Muhammadu Buhari, the country’s ailing
leader and frequent London resident — the baseline effect has worked its
magic. Second, the oil that makes up so much of government revenues is
flowing faster. In June, production was 1.7m barrels a day, 10 per cent
higher than a year ago.
One should, they say, never let a crisis go to waste. That advice
has clearly not reached Abuja, where the economic collapse brought on by
swooning oil prices was supposed to spur diversification. It has not
happened. The danger now is that, having apparently come through the
worst, Nigeria will simply go back to business as usual. If oil prices
recover, so will headline growth. But the structure and basic dynamics
of Africa’s largest economy will remain unchanged.
Nigeria frustrates because of its vast potential. It has 190m
people, among the sharpest, most driven and entrepreneurial on the
continent. But perverse incentives have diverted the energy of the best
and the brightest to mostly unproductive activities: making money
through political connections, speculation, round-tripping and
arbitration.
When President Buhari was elected three years ago, he promised to
end all this. The economy would be transformed. Manufacturing would be
re-energised. So would agriculture, which employs three-quarters of the
population but contributes only a fifth of output. The government would
wean itself off oil revenue. Mr Buhari — stern, principled,
incorruptible — was said to be the man to see this through.
Little has come to pass. Mr Buhari took six months to name a
cabinet and became embroiled in a necessary but distracting fight with
Boko Haram. He has spent much of the past year convalescing from a
mystery illness that has sapped his presidency of vigour and set off a
merry-go-round of political jockeying to succeed him. There has been
practically nothing in the way of coherent economic policy.
True, there have been attempts to punish individuals for
corruption. Yet, like weeds shorn of their leaves, graft will doubtless
spring back as lush as ever once the Buhari strimmer is back in its box.
An example of failure to cut corruption at the roots is the foreign
exchange policy. Mr Buhari was determined to defend the phoney official
rate. But the only way to do so was to ration dollars. Given the yawning
gap with the black market, this has delivered a delicious arbitrage
opportunity to anyone lucky — or connected — enough to get their hands
on precious foreign exchange at the official window.
Sadly for hopes of economic diversification, the lucky
beneficiaries of dollars did not include manufacturers. Most were
actually banned from receiving the foreign exchange they needed to buy
inputs or capital equipment. Far from expanding, manufacturing actually
shrank last year. The economy is back to square one, gasping for a
recovery in oil prices to breathe life back into the system.
There are some promising signs. Agriculture is getting more
attention, and there are tentative improvements in rice and other crops.
If all goes to plan, by 2019, the country will have a $12bn oil
refinery courtesy of Aliko Dangote, Nigeria’s richest man. This is an
installation that could save billions in unnecessary imports of refined
products.
Nigeria’s constitution is working. In Mr Buhari’s extended absence
with illness, the competent and dynamic Yemi Osinbajo has been running
the show. Foreign exchange policy has improved. In April, a “growth and
recovery plan” was published, laying out plans to cut red tape, improve
the tax take, reform state-owned enterprises and move towards a
market-determined exchange rate. Such policy prescriptions have been
discussed for 20 years. The danger is Nigeria will still be talking
about them 20 years hence.
The immediate prospect is for a vicious and enervating power
struggle to succeed Mr Buhari, whom few expect to contest the 2019
election. Whoever emerges victorious will doubtless promise to stamp out
corruption, diversify the economy and rationalise the oil sector. Cats
not only bounce. They also have nine lives.
Source: Financial Times
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