Background
For those that read my recent article entitled “the Nigerian economy and the dangers of Incompetence”, they will know that my view is that provided the monetary policies currently being pursued by the CBN and the fiscal policies currently being pursued by the FG remains unchanged, the Nigerian economy will come to a sharp halt either by April or by August of this year.
The Nigerian economy has a problem with government revenue not a problem of a overheated economy. The drugs being administered by the twin policies of the CBN and the FG is not suited for the recovery of the patient from the ailment that it is afflicted with. The fall in government revenue is more to do with the disappearance of the US market for our specific type of Oil (which is similar to the type of oil being produced by fracking within the US) than the fall in the price of oil (which is also a cause of concern). The long and short of matters is that even if the price of oil had stayed at over $100 dollars a barrel, the Nigerian government would have had a revenue problem because we lost our major market and have been unable to replace that market with new markets. The attempt to replace the lost US market with the Asian market has been unsuccessful because most of the Asian refineries are geared towards the type of oil produced by middle eastern oil exporters (as opposed to the type that Nigeria exports) and secondly, it will be more expensive to ship oil from west Africa when more adaptable oil can be purchased from nearby middle eastern oil exporting countries.
Rather than focus entirely on reducing costs of government and increasing revenue (whilst allowing the private sector to continue to grow through the use of pliant monetary tools such as low interest rates and less use of policies that restrict money supply) the economically constraining fiscal and monetary policies currently being pursued will ensure mass unemployment of private and public sector workers, weak demand within the domestic economy, high interest rate charges on loans borrowed from domestic banks and higher tax liabilities for private companies and its citizens as a result of federal, state and local governments desire to make up for lost revenues (caused by the loss of the US market and the fall in the price of oil). To the extent that any profitable enterprise manages to stay in existence within Nigeria after the above effects have taken hold, it will surely be sitting anything but pretty.
Foreign Direct Investment that have been pouring into Nigeria due to the increased standard of living within Nigeria (as shown through the growth of Nigeria’s GDP) and the growth of its middle class will start to have second thoughts before making any further investments. The demand for goods will be severely weakened once the twin policies of the FG and CBN takes full effect. Weakened demand will no doubt lead to depressed or non existent profits (especially after taking account of the increased tax burden, high interest charges and the high cost of doing business in Nigeria).
Burden
A new Buhari Government (if elected) will therefore have very little room to manoeuvre.
It will be taking over a country with a high yearly debt repayment obligation (about 20% of current estimated budget), an Insurgency that needs to be fought, a poorly equipped army that would need to be armed, a barely profitable private sector that has been depleted by bankruptcy, a dejected civil service that has not been paid for months, a general populace that cannot find work or afford exorbitant interest rates needed to start a business, a treasury that is basically empty and will inherit a critical, impatient and aware group of citizens waiting for an immediate impact or immediate solutions.
I sincerely hope the heart of the 72 year old general is strong because the scale of the problem he will be inheriting is enough to send a young healthy man to the emergency ward!
What a Buhari candidate should avoid doing is promising things it cannot deliver even if it wants to (at least in his first term).
It is irresponsible for his vice presidential candidate to suggest that it can create 720,000 jobs in its first term or that the government can afford to buy up all the produce produced by Nigeria’s farmers! Additionally, it would be highly unlikely, that the FG under a Buhari will have the funds available to feed primary school pupils or carry out any major infrastructural developmental projects when viewed against the constraints it will be dealing with (unless it intends to go on a borrowing binge). Any borrowings at this stage will be at very expensive rates of interest and would be barely affordable by the Nigerian government in the short term.
Conclusion
A Buhari Presidency (should it materialize) will be a fire fighting presidency. It will have to spend most of its first term bringing its spending in line with revenue, resuscitating the private sector, arming the army with sophisticated weaponry needed to decisively defeat Boko Haram and repairing the badly damaged bond of unity among Nigerians. If Buhari is fortunate, the CBN may reverse its damaging misapplied policies of shoring up the Naira at the expense of ensuring the inevitable collapse of the private sector. Otherwise, Buhari should hope that the economy’s inevitable collapse happens before he assumes power. If the latter happens, then he would be as lucky as Obama was (when the US economy collapsed at the tail end of the Bush Presidency rather than at the start of the Obama presidency).
Dele Awogbeoba
Dele.Awogbeoba@gmail.com