Financial Expert, John Okoronkwo, Reviews The Nigerian Economy In 2012
This short piece is primarily intended to review the performance of the Nigerian economy in 2012. This discourse will try to examine government economic policies and its impact on the lives of the ordinary Nigerians. The inflationary rate and its impact on the economy, the budget, unemployment, monetary policies, fiscal dominance, foreign economic linkages, infrastructure and local economic stimulus will be among other subjects under review.
Our economy in 2012 could be seen as stable as no major economic incident was witnessed in comparison with the year before. Growth has continued to be largely nominal with little or no impact on development indices. Government’s economic policies have again failed to drive the needed growth in the real sector as access to funds has been fraught with unfavourably high interest rates and cost of production witnessed an upward trend. The CBN MPR has been maintained within the bandwidth of 12% in line with the government’s policy on liquidity tightening. The CBN within the year tilted towards inflationary control at the expense of lowering cost of funds for real sector development.
The banking sub-sector within the year did not grow their loan assets to such a level that will provide the much needed lifeline to the real sector. This was not unexpected as banks were still recovering from the tumultuous loan losses and write-offs from previous years. Bank’s profits are gradually picking up again after the clean up of ‘loan dirts’ by AMCON. Last year also witnessed further consolidation of the Nigerian banking sector through record-breaking business combinations and acquisition by different banks which led to severe job losses. Licenses of some banks were also withdrawn and bridge banks created to replace them. It is a well known fact that the banking sector has continued to be one of the largest employers of labour in Nigeria. However, the employment rate within these financial institutions have witnessed a sharp drop when compared to the pre-financial crisis era. The cost of borrowing within the year averaged at about 20%.
Fiscal dominance within the year continued to increase as the large size of government posed a serious risk to the economy as huge funds which should have been funnelled into the real economy were rather expended in running the government. This huge government expenses is bleeding this economy. The business of government seems to be the only viable sector everyone is struggling to play in. The burden of government needs to be lifted off this economy if we are to make meaningful progress in 2013. Another critical area in 2012 was fiscal deficit financing. Funding of government’s deficit last year caused a slight crowding-out effect in the market. Increased government borrowing heated up the cost of funds in the market.
The oil sector within the year continued its dominance of the economy as last year’s budget was largely hinged on inflow of petro-dollars. Nigeria supplies 2.7% of the world oil needs. The subsidy $8 billion scam was a burning issue within the polity this year. Government has been accused of conspiracy and complications bordering on management of the oil subsidy in the country. The increase of local petrol price to NGN97/litre also affected the economy as several labour unions participated in a week long strike which shut down the economy for this period and increased the inflationary pressure slightly. The CBN was able to control inflationary pressure from going viral as the year ended at 12.3% though a single digit rate is anticipated as government continues its monetary tightening policies.
Job generation within the economy was not as impressive as earlier anticipated which could be largely linked to non- vibrancy of the real sector. Job additions were impaired also due to the widespread insecurity posed by the dreaded Boko Haram sect especially in the Northern part of Nigeria. Poverty within this geographical zone of Nigeria seems to have worsened as many businesses have been forced out of business due to the carnage witnessed within the period under review. 2013 could see the North completely being shut out if concerted efforts are not intensified by government.
Foreign Direct Investment (FDI) suffered a major setback within the year due to widespread insecurity and somewhat inconsistencies in government policy decisions. Foreign investors have been discouraged to invest despite the green potentials of our economy. The telecommunication giants have suffered sustained attacks on their critical infrastructure up North. However, there has been a slight inflow of foreign investment in the money market due to the attractiveness of government debt instruments.
The economy growth last year hovered around 5 to 6 percent. This growth many Economists have argued, was nominal without being inclusive to improve the living conditions of the ordinary Nigerians. From my observation, growth this year has happened within the top echelon of the society and we saw the shutting out of the middle class and the lower class. The rich seem to be growing even richer and the poor, poorer. Banning of motorcycle transport by most State governments within the year 2012 further worsened the situation.
We expect government to take very clear and deliberate steps in re-directing policies towards improving the lives of the real Nigerians -those below the middle-class.
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John Okoronkwo
Twitter Handle: @okoronkwoo
John Okoronkwo
Mobile: +234-806-896-2067
Email: john.okoronkwo2@yahoo.com
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