The Nigerian state today seems to be grinding to a halt, with political
gladiators taking over the stage at the expense of the economy.
Accordingly, the fortunes of the country are gradually nose-diving, a
cross section of economy watchers told BusinessDay.
Continued oil theft, incessant budget delays,
rising insecurity, continued university teachers’ strike and political
diatribe amongst the leadership are, according to them, forcing the
nation on its knees.
The analysts specifically say that the
2.38 million barrels daily oil production estimate, as contained in the
Federal Government’s Medium Term Economic Framework (MTEF) for the 2014
budget, may be unrealistic due to oil theft and pipeline vandalism, just
as the current crisis in the ruling People’s Democratic Party (PDP) may
delay the budget presentation as well as implementation.
time of heightened political stress and shortfalls in oil revenue,
finding a compromise that works for all will not be easy,” said Razia
Khan, analyst with Standard Bank, London.
Commenting further on
the implications of the crisis in the ruling PDP, Khan said there is
now less certainty associated with election outcomes, and the months
ahead are likely to see politics move to centre stage, potentially at a
cost to other reforms, adding that if PDP eventually loses majority
membership at the National Assembly, there could be complications on the
passage of any legislation.
According to her, “Given current
circumstances, it is highly unlikely that Nigeria’s long-deliberated
Petroleum Industry Bill (PIB) will be passed soon. An end to regulatory
uncertainty is thought necessary to unlock new investment in the
upstream oil sector. Even passage of the 2014 Budget, expected to be
read at the end of October, may become more difficult, further
complicating the economic outlook.”
She said that although the
MTEF planned moderation in total spending in 2014 to N4.5tn, from N5tn
in 2013, there are some worrying concerns.
“From a growth
perspective, the share of recurrent spending would rise to 73.8 percent
of total spending, up from 64 percent in the current FY (increasing c.4
percent in nominal terms, to N3.32tn in 2014 from N3.2tn in 2013, but
squeezing capital expenditure. Given the current political backdrop,
budget assumptions for 2014 appear overly ambitious,” she added.
Bismarck Rewane, foremost economist and chief executive, Financial
Derivatives Company, in his recent publication, said the Nigerian oil
and gas sector remains a challenging environment to operate in. “In
order to improve the outlook for this sector, the government has to
ensure consistency in policies, address security issues and double down
on initiatives to improve innovation for increased efficiency in the
sector,” he said, adding that Nigeria remains a net importer of
innovation and so must make the necessary investments in training
institutions to provide capable human capital and innovation to meet the
needs of the sector.
Samir Gadio, emerging markets strategist
at Standard Bank, London, expressed similar pessimism, saying that
spending by politicians would affect the fiscal consolidation of the
Central Bank of Nigeria (CBN). He warned, however, that savings made in
the past had not improved the lot of the Nigerian citizens.
reality, one should be a bit cautious about the assumptions of the MTEF
and their implication for effective fiscal policy. What really matters
in Nigeria is the federally-consolidated fiscal position rather than the
budget of the Federal Government,” he said.
proposed spending terms of the FG budget are consistently adjusted
upwards by the National Assembly, a situation that we see persisting in
coming years,” he added.
FBN Capital Researchers, in their
October 28, 2013 note on ‘Some fallout from the election build-up’, said
the momentum of the FGN’s transformation agenda has slowed, adding that
its execution depends on the strength of the vested interests in
opposition. “Progress tends to be greater where those interests are
weaker (such as agriculture and power), and slower where they are
stronger (such as the PIB and the sovereign wealth fund),” they said.
Vested interests and unnecessary politicking which have visited the
passage of the PIB have slowed down exploration activities in an
industry that government earns almost 90 percent of its revenue. As if
this situation is not grim enough, the leadership of the nation has
enmeshed itself in political acrimony ahead of the 2015 general
With governance practically being abandoned for
political jobbery, Nigerians have been left at the mercy of armed
robbers, militants and kidnappers, as growing insecurity now pervades
The acrimony within the ruling party and between the
opposition parties is deep. Already, governors of the All Progressives
Congress (APC), the major opposition party, are threatening to take the
Federal Government (FG) to court over what they term illegal deductions
of 40 percent from their monthly allocations, a development that
analysts say will further slow down the economy.
governors are also faulting the FG over the creation of the sovereign
wealth fund (SWF), saying next generation would fare better by the level
of investments made rather than by the amount of money saved.
In the midst of all this, there is spending spree at the centre
occasioned by corruption and incessant trips of government officials
overseas, threatening the CBN’s fiscal consolidation.