The Nigerian Recession

I picked up my phone this morning and saw a tweet from the Vice President Pastor Yemi Osinbajo talking about telling the story of the Nigerian recession repeatedly and truthfully. So, I decide to read what he has said about the recession. Imagine my surprise when I discovered that his own account of things was a gross distortion of the facts.

First, he tries to blame our unstable economic structure. He talks about how much our economy depended on oil and so on. This is laughable at the very least. While oil has been a major source of forex for Nigeria, it made up less than 20% of our GDP as at 2015. Also, oil prices dropped drastically from 2014. By 2015 when Buhari took over, the previous govt had already devalued the Naira twice in an attempt to deal with the pressure the drop in oil price had put on our foreign reserves.

Buhari refuses to continue the devaluation trend, insisting on shoring up the Naira value and, in the process, running down our forex reserves. That had multiple effects.

First, foreign investors were wary of bringing in their funds only to have a drastic devaluation lead to them losing 30–50% of their investments. They decided to wait for the inevitable devaluation before investing. Seeing as investments by foreigners was one of the largest sources of forex after crude oil, this led to a scarcity of forex. Further government attempts to prevent investors already in the country from repatriating their funds also helped keep new investors at bay.

That scarcity of forex led to a serious dip in production in other sectors of the country's economy, from the pharmaceutical to agricultural to manufacturing industries, which all relied on some form of imported raw materials, machinery or parts to help maintain optimum production.

The attempt to further save forex by cancelling the subidy regime and not paying importers on time also had its own effects. For 8 out of this government's first 12 months, fuel queues were the norm at filling stations. Millions of man-hours were lost due to fuel queues; either from queuing to buy fuel or from the resultant traffic bottlenecks caused by these fuel queues. The lack of fuel also caused a lot of producers to cut down on production levels seeing as grid power was also quite poor during the same period.

These two (2) aforementioned acts played a huge role in the contraction of different sectors of the economy, which was what led us into a recession. The price of oil itself did not change much in that period, but poor management and a total lack of the necessary policies (remember that ministers were appointed 6 months into Buhari's tenure) were what led to this.

To now turn around and blame the fall in oil prices as being a major cause is to deny the responsibility of his government as far as providing an attractive and conducive environment for investors and businesses to thrive.

He also blamed what some have termed our culture of consumption. This is a simplistic excuse given by people who specialise in focusing on the trees and missing the forest. While Nigeria really has a high appetite for imports, basic analysis shows that Nigeria had the lowest import to GDP ratio in the world at that point in time. Only an economic illiterate would expect Nigeria to survive without imports. Economic giants like China, Israel, Japan and even the US rely heavily on imports to fuel their factories.

That aside, Nigeria was, at that time, much less reliant on imports than they made us out to be. Policies and incentives starting from the Obasanjo regime had made it more profitable for a lot of our hitherto imported needs (food items, toiletries and so on) to be manufactured locally. A large part of our import bill as at 2015 was taken up by fuel imports and luxury goods. However, this government chose to blame imports for our troubles and went on a banning spree, banning 41 imported items, items for which the local production either did not exist or was sorely inadequate. This led manufacturers who required these items to have to source for funds on the blackmarket, leading to a drop in production levels and an increase in product costs.

What is worse is that the govt did not then implement ANY policies which would help accelerate the local production of these banned items. No grants, policies, tax waivers or other incentives to help anyone trying to fill the gap left by the bans. Add to that the poor power situation and the manufacturing sector of the economy was effectively brought to its knees by Buhari's government. Companies were downsizing or closing shop and a lot were moving to Ghana and other West African countries. How was that not going to result in a recession?

The second reason given by the pastor turned politician was CORRUPTION. This is totally laughable as this amounts to claiming that the results of the corruption did not manifest for the 16 years they claim corruption was the order of the day, but suddenly showed up a year after they came to kill corruption.

To buttress the corruption claim, all sorts of allegations have been made about how GEJ inherited a reserves of $45bn and ran it down to $28bn. Ask them for proof and they turn an intellectual discussion into a fight. To fuel the fire, they claim that, despite the oil windfall between 2012 and 2014, there is no infrastructure to show for it. They stylishly hide away from the many roads which were either built or rehabilitated by the previous government. They deny the railway rehabilitation and try to take the glory for the Abuja-Kaduna rail line. They deny the existence of the NIPP power stations built and/or completed by the previous government. The Sovereign Wealth Fund and SURE-P are disregarded despite their continued existence. YouWIN and other projects are said to be fraudulent despite their inability to find the crimes they allege occurred.

They also choose to label the previous government as the most corrupt, ignoring the prosecution of multiple corrupt politicians and government top dogs and the creation of multiple tools to fight corruption (GIFMIS, IPPIS, BVN, TSA and the FoI Act which they hate).

Talking about TSA, that was another tool they tried to take credit for. Also, their insistence on 100% implementation of TSA despite advice from economists on the dangers was another major aspect that helped fuel the recession. Nigeria is a country where a lot of the funds being loaned out by banks was actually backed up by goernmment funds in the said banking system. By implementing TSA 100% in such a short period of time, critical funds were taken out of circulation without provision of alternatives. That meant that banks were constrained in their ability to give out loans to businesses in need. So, at a time when businesses needed the boost that should come from loans and grants, there were no funds available for such loans, leading to distress in the sector. This helped push the economy into distress, but the default response by this government and its supporters to anyone who points that fact out is that they are supporters of corruption.

Pastor Osinbajo then turns to the ill-fated bailouts by his govt as what saved us from recession. This is despite the fact that most bailed out states cannot accurately and honestly spell out how the money was spent and there's nothing Buhari and his government can do to those who misappropriated the funds. A lot of the money ended up disappearing, yet we are to believe those missing funds helped to end the recession? LOL.

He also tries to blame the National Assembly by mentioning intractable delays in passing the budget. He forgets that his government gave us the disappearing budget of yams which was initially presented in December, a minimum of 3 months late. The retraction and the drama surrounding that led to further delays. All these were down to tardiness and corruption on the part of the FG. For the 2017 budget, it was Buhari himself who refused to sign the budget passed by the National Assembly for at least a month after it was passed. However, we're to gloss over all these failings on the part of the executive and blame the National Assembly? While they are far from perfect, the National Assembly has had much less of the blame than the executive. Consider the fact that, even the budget for 2018 which was supposed to be delivered early is just to be delivered to the National Assembly in the 2nd week of November. Now, who's being tardy?

It is sad that we have been saddled with a government of irresponsibility which, rather than sit up and tighting its belt, prefers to look around for who to blame, totally running away from its responsibilities and wasting its time and energy looking for who it can pin its woes on.

It is even worse when we have a pastor and a lawyer as a vice-president who joins in spreading lies and trying to pull wool over the people's eyes.

The real truth about the recession under Buhari's government is that it was down to incompetence on the part of the government in power.

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