Lolade Akinmurele Feb 22, 2021
At no point in its 60-year history has Nigeria’s economy expanded slower than its population for a longer period than between 2015 and 2020, an indictment on President Muhammadu Buhari who has led the country in that time.
With data from the National Bureau of Statistics (NBS) showing a 1.9-percent contraction in 2020, it means Africa’s largest economy has now failed to match its average population growth rate of 2.6 percent for six years. When economic growth fails to match population growth it means the economy is not creating new opportunities to accommodate a fast-rising population, and is a sign of worsening poverty levels.
When Buhari became president in 2015, he promised to reform an economy hooked on petrodollars, reduce poverty and create jobs, yet the numbers show he achieved the exact opposite.
Income per person, what economists call GDP per capita, is a better measure of the economic health of a country than the total amount of goods and services produced as it factors in the size of the country’s population into economic output.
Nigeria’s GDP per capita declined by 0.02 percent, 4.16 percent and 1.78 percent in 2015, 2016 and 2017, respectively. In 2018, 2019 and 2020, it declined by 0.68 percent, 0.38 percent and 4.57 percent, a painful squeeze for Nigerians whose average incomes are about $2000, less than half the $5000 of South Africans.
The consistent contraction in each Nigerians share of total output is why no one celebrated Nigeria’s exit from recession in 2017, and now in 2020. Both recoveries failed to resonate with many Nigerians whose living standards either worsened or stagnated after the economy exited recession.
Before now, the government of Shehu Shagari oversaw the longest streak of negative growth in GDP per capita between 1981 and 1984 and under Buhari in 1984.
Of the four presidents who have led Nigeria since it returned to democracy in 1999, Buhari holds the worst record in terms of economic growth.
While President Olusegun Obasanjo can boast of an average growth rate of 6.9 percent during his eight-year tenure, his immediate predecessor, Umaru Yar’Adua did even better in two years with an average growth rate of 7.6 percent while Goodluck Jonathan delivered 5 percent growth in his six-year term as president.
Under Buhari’s watch, however, the economy grew by 0.28 percent with per capita GDP growth contracting for six straight years.
President Buhari’s supporters point to the crash in oil prices in 2016 and the global pandemic in 2020 as the reasons for his poor economic record. His critics are however convinced it is a lot more than that.
“Buhari’s economic ideology has been largely socialist and so there is no surprise that the economy, which thrived with an influx of private capital under Obasanjo, Yar’Adua and Jonathan has struggled since Buhari came on the scene,” a business leader who did not want to be named said.
“You almost feel like private capital is not welcome under Buhari and that has contributed to his hard luck of being in charge when oil prices tumbled to a record low and an unprecedented health pandemic ravaged global economies,” the person said.
Oil prices tumbled to a record low of $30 per barrel soon after Buhari began his second term as the pandemic took a toll on the economy. Critics, however, say the president’s inept approach to economic matters made a bad situation worse.
Buhari has dragged on some reforms that economists say were necessary for robust economic growth.
Of late, however, he is pushing reforms that will enthrone market-reflective tariffs in the power and petroleum sectors, which could open the sectors to private investment.
The president’s efforts to improve Nigeria’s ease of doing business environment also caught the eye of the World Bank. In 2019, the country was ranked as one of the top 10 reformers. Still, a 25-spot improvement in the ranking has not translated into significant private investment inflows.
Gaping infrastructural deficit and regulatory headwinds leave companies telling tales of the hardships they have to deal with.
Nigerians squeezed and poorer for six straight years
Six years of contracting per capita GDP has wrecked pain on businesses and households, whether they understand what is happening or not. For many businesses it has meant dwindling profit; for many individuals, a lack of jobs and worsening poverty.
Take the case of Jide Ibrahim (not real name). Ibrahim’s highest qualification is a Bachelor’s degree in Human Kinetics from the Lagos State University (LASU). He worked at Woolworth, a South African clothing retailer that closed its three stores in Nigeria in 2013.
It has been seven years and he is yet to get another job. His lack of a job has forced some changes. He has had to move away from his two-bedroom apartment somewhere in Ikorodu to live with a friend in a one-bed apartment almost the size of a telephone booth within the same area.
When asked how he felt when he was laid off, he heaped the blame on Woolworth, saying the company unfairly asked people to leave after milking Nigeria dry.
“These foreign companies just use you and dump you,” Ibrahim said.
Little did he know that the loss of his job was no fault of Woolworths; rather it was the high cost of operating a business in Nigeria. These expenses sucked the life out of the South African retailer and sent it scrambling back to Cape Town
“When an investment no longer generates viable returns, difficult decisions have to be made to contain costs,” Woolworth’s CEO, Ian Moir, said at the time.
High rental costs, custom duties and complex supply chain processes made trading in Nigeria highly challenging, according to Moir.
Woolworths’ 18-month foray into Nigeria is peculiar for a company that has been operating in South Africa for decades – since 1931 – and has operations in various African countries and elsewhere. The remaining 59 stores in 11 African countries were not affected by the Nigeria decision.
Since that time, Woolworths has expanded to 64 stores and is in 13 African countries. Woolworths’ experience is not unique; several companies have had to close shop in Nigeria due to the country’s difficult business environment.
Though efforts have been made to improve the business environment, the country sits at a lowly 131 of 180 countries in the World Bank Doing Business ranking.
Challenges from multiple taxes to inefficient transport networks and lack of adequate power have made operating in Nigeria business unbearable. Excessive regulation and corrupt government officials are also chief culprits in pushing businesses, foreign or local, off the cliff.
Hence, Ibrahim’s anger is misplaced. It should be channelled towards the government, which has failed to allow companies to operate, succeed and generate jobs for millions like him.
A rapid decline in the inflow of foreign investment into the country since 2014 and tales of woes by local businesses have not moved the government to improve the business environment.
Since 2008, when Nigeria attracted a record $8 billion in foreign direct investment (FDI) in a wave of privatisations, the country got $3 billion on average between 2009 and 2015, and $1 billion a year since then, according to the NBS. Nigeria now trails smaller peers like Ghana.
Considering the size of Nigeria’s population, a billion dollars works out to $5 per head.
Foreign companies are not the only businesses to have walked out on Nigeria, even local companies have struggled.
The Manufacturers Association of Nigeria (MAN) said about 272 firms were forced out of business in 2016 alone, 50 of which were manufacturing companies, amid stifling government regulation. The manufacturers say that led to 180,000 job losses in the period.
Surely, Ibrahim and the over 20 million Nigerians without jobs should hold the government more accountable for the damage done to their lives by bad policies. The lack of jobs has helped poverty thrive.
Nigeria, home to 87 million poor people, became the world’s poverty capital in 2019, overtaking India, according to a Brookings Institute’s report.
Another set of statistics by the World Data Lab estimates that 90 million Nigerians live under $1.90 a day while the United Nations Development Programme reported that 98 million Nigerians live in poverty.
What is worse is that the IMF predicts that the trend of contracting GDP per capita could well last for another five years.