Minister of information and culture, Lai Mohammed, on Monday presented President Muhammadu Buhari’s main achievements in the outgoing year 2019 to set the record straight and counter naysayers, he said.
Mohammed praised Buhari for his fight against corruption, insecurity, border drill, critical infrastructure investment, the amended Deep Offshore Act and the economy.
We look at the evaluation of the economy to show what is true and worth celebrating and what is not true so the government can improve upon it in 2020.
On the economy
“The economy continues to witness a strong performance, building on the steady recovery seen since the last recession,” Mohammed said.
He said in 2019 the Nigerian economy grew at an average rate of 2.2 percent over the first three quarters, compared to 1.7 percent over the same period in 2018.
Both the oil and non-oil sectors performed considerably better in 2019 than in 2018. The oil sector grew at an average of 4 percent over the three quarters, compared to 2.4 percent in 2018, while the non-oil sector grew by 2 percent, compared to 1.7 percent in 2018.
The average daily oil production level rose to its highest in the last three years, reaching 2 million barrels per day (mbpd) in 2019, compared to 1.8 mbpd in 2016, and 1.9 mbpd in both 2017 and 2018.
Mohammed also said that in particular, in the third quarter of 2019, the major growth drivers were information and communications, agriculture, mining & quarrying, transportation & storage as well as manufacturing, all of which have seen considerable focus by government. In the third quarter of 2019, a total of 34 economic activities witnessed positive expansion, same as in 2018.
Verdict: The economy in the third quarter of 2019 saw its fastest expansion since the fourth quarter of 2018, with each quarter in 2019 exceeding corresponding quarters of the prior year. However, growth is not strong because it is still lower than pre-recession levels (above 3 percent) and slower than population expansion of 2.6 percent.
On inflation
Mohammed said trends indicate that overall macroeconomic stability is being achieved, with inflation rate steadily trending downwards.
He said year-on-year headline inflation rate declined steadily from 15.1 percent in January 2018 to 11.9 percent in November 2019.
Year-on-year core inflation rate slowed from 12.1 percent to 9 percent between January last year and November this year while year-on-year food inflation rate decreased from 18.9 percent in January 2018 to 14.5 percent in November 2019, he said.
Verdict: Headline inflation is currently at 19-month high and will close 2019 higher than it was at the beginning of the year. Rate of increase in food prices is also at a 19-month high while core inflation is highest since May.
Price level had generally trended downwards in the earlier part of the year (except from March to May) until September when the closure of the border pushed the price of goods and services up.
Combined with seasonal factors, inflation is expected to close at least 12 percent this year.
On foreign trade performance
Mohammed said strong performance in the external sector suggests increasing diversification of exports and export revenue.
The value of imports in 2019, as at the third quarter, stood at N11.6trn, compared to N9.6trn as at third quarter of 2018. This represented an annual growth rate of 21 percent between 2018 and 2019.
Other than refined petroleum products, major imports have been machinery and vehicles.
He also said the value of exports grew by 2.5 percent between 2018 and 2019 as at the third quarter, rising from N14trn to N14.4trn. This resulted in stronger overall performance and an increase in the value of total trade by 10 percent between 2018 and 2019.
While the value of crude oil exports decreased by 3.78 percent, non-crude oil exports rose by over 30 percent in value between 2018 and 2019. Non-oil exports also doubled from about N1trn to N2trn over this period, Mohammed said.
Verdict: Non-crude oil export rose more than 200 percent in the third quarter which gave the illusion of increased diversification.
The jump in non-oil exports was due to the re-exports of high value cable sheaths of iron, as well as submersible drilling platform, vessels and other floating structures. This export was mostly to Ghana which accounted for N908.6bn or 17.18 percent of Nigeria’s total export in the period and was the biggest export destination.
In the third quarter, agricultural exports decreased by 42.69 percent on a quarter-on-quarter basis and 7.30 percent from the same period last year, while re-exports as a percentage of manufacturing exports rose to 95 percent from 65 percent in the previous quarter.
On Nigeria’s public debt stock
Mohammed said recently, there have been concerns in certain circles about the country’s growing debt, both domestic and external. In the process, there have been some misrepresentations and scare-mongering.
Put things in the right perspective so citizens will be well informed, he said:
(i.) The public debt stock is actually a cumulative figure of borrowings by successive governments over many years. It is therefore not appropriate to attribute the public debt stock to one administration.
(ii.) Nigeria’s total public debt stock in 2015 was $63.80 billion, comprising $10.31 billion of external debt and $53.49 billion domestic debt. By June 2019, the total debt stock was $83.883 billion, made up of $27.163 billion of external debt and $56.720 billion domestic debt. It is therefore not correct to say that Nigeria’s external debt alone is $81.274 billion.
(iii.) There is yet no cause for alarm. This is because Nigeria has a debt ceiling of 25 percent in the total public debt stock to Gross Domestic Product (Debt/GDP), which it has operated within. The ratio for Dec. 31, 2018 and June 30, 2019 were 19.09 percent and 18.99 percent, respectively.
(iv.) The debt service to revenue ratio has, however, been higher than desirable, hence the push by the government to diversify the economy and increase oil and non-oil revenues significantly. The government is also widening the tax base to capture more tax-paying citizens.
(v.) In the face of massive infrastructural decay, no responsible government will sit by and do nothing. This administration’s borrowing, therefore, is aimed at revamping our infrastructure, including roads, bridges, railways, waterways and power, to help unleash the potential of the nation’s economy. The loans for the educational sector will contribute to the development of our human capital while the loans for the agricultural sector will help the move to diversify the economy.
Verdict: Nigeria’s debt stock has grown by 31 percent or $20bn in the last five years to June 2019, yet not much result can be shown for the borrowings that cost Nigeria more than half of the government’s revenue just to service. Moody’s recently downgraded Nigeria’s sovereign rating and said debt affordability will remain weak for Nigeria with general government interest payments at around 25 percent of revenues in the next few years.
Zainab Ahmed, minister of finance, budget and national planning, recently said debt service will gulp N2.452trn or 29 percent of total revenue in 2020. Meanwhile, capital expenditure for 2020 is N2.78trn.
On the monetary sector
Mohammed said capital importation comprises mainly foreign direct investment, portfolio investment and other investment flowing into the country. As at the third quarter of 2019, total capital importation had reached nearly $20bn, which was 34 percent higher than the $15bn recorded for the first three quarters of 2018.
While the inflow of foreign direct investment declined over the period by 39 percent from $1bn to $700m, portfolio investment and other investments both rose significantly by 39 percent and 42 percent, respectively.
He said apart from banking and shares, some of the major sectors that witnessed high volume of capital inflows in 2019 were telecommunications, production and services. Nearly all of the total capital importation as at Q3 2019 flowed to Lagos and Abuja, as is typical.
Verdict: FDI which is patient capital has been declining since the second quarter of the year and still remains much lower than FPI which is hot money.
Also, investment remains concentrated by geography as Mohammed pointed out, which is worrisome.
SEGUN ADAMS
