Despite the rise in the Manufacturing Purchasing Managers’ Index (PMI) at 61.1 index points for December 2018, as against 57.9 index points recorded in November, analysts say at the weekend that the outgoing year will not be forgotten in a hurry due to other negative indicators like high unemployment, dearth of credit by banks to critical sectors of the economy and high inflation in the midst of low purchasing power.
Bismarck Rewane, Chief Executive, Financial Derivatives Company’s December Lagos Business School’s publication sees 2019 as a year of “Trepidation and Growing Uncertainties,” adding that “The Nigerian economy may succumb to pressures of an oil price (down by 40%) to $53pb range and a cut in production to 1.67mbpd. The lower oil revenue and a growing deficit will erode the fiscal consolidation policies of the government.
With banking industry fragility and a naira under speculative pressure, 2019 will be a year of technological and investment opportunities but serious political and policy challenges.
The amicable settlement between Nigeria and MTN after an avoidable saga is a good way to end an eruptive year. A listing of MTN is the much needed booster shot the Nigerian stock market badly needs.”
According to the foremost economist, Nigeria’s 2019 election is being greeted with the classical reaction of an economic indifference curve, which is a combination of choices between commodity A and B which gives a consumer the same level of satisfaction or dissatisfaction.
‘Talking to a cross section of young people between the ages of 20 and 30, most respondents were unenthusiastic, indifferent and apathetic. Some considered it an Hobson’s choice. Based on this, we are anticipating voter apathy and a low turnout in the February election,’ he said.
Lagos Chamber of Commerce and Industry, Muda Yusuf, Director-General would like “foreign exchange management framework that reflects the market fundamentals, the acceleration of the economic diversification agenda, normalization of Lagos ports environment, the oil and gas sector reform, especially the petroleum industry bill; better debt management strategy to ease the burden of debt service, reduction in the cost of governance at all levels; improvements in the domestic revenue (particularly independent revenue) to reduce volatilities in government revenues,” in the new year.
President of the Nigerian Employers’ Consultative Association (NECA), Dr Mohammed Yinusa says the implementation of Nigeria’s 2018 budget, benchmarked at $60 per barrel could also suffer should the slump persist in the oil price at the international market persists.
Consequently, Yinusa says, “Nigeria’s economy which is currently stabilising on boost in crude oil price, could be adversely affected as crisis in foreign exchange, primarily sourced from the oil sector was projected to worsen.”
Yusuf believes that the non-passage of the Electoral Act and Petroleum Industry Bill (PIB), are considered as sore points for the economy and polity, adding, the “downstream sector as currently constituted is unstructured and largely uncompetitive.”
In the last quarter of this year, the globa oil industry witnessed steady decline in prices of crude oil prompting several oil producing countries especially OPEC to consider production cuts.
In fact, OPEC, Russia and other producers have agreed to remove 1.2 million barrels per day from the market beginning in January. Consequently, some observers also said price volatility in 2019 may be inevitable considering the conflicting priorities of the three top world producers, namely the US, Saudi Arabia and Russia.
The move follows a more than 30 percent drop in oil prices that saw international benchmark, the Brent crude, fall from more than $86 a barrel to a 13-month low of $57.50 last month.
Apart from the downward movement in the international prices of crude oil in the outgoing year,2018 witnessed a mixed feeling among the stakeholders in the country’s oil and gas industry.
Muda Yusuf said data from the Organisation of Petroleum Exporting Countries (OPEC) shows that oil prices are trending down at $54 p/bl on 22nd December 2018 from its peak of $88p/bl in the month of September and October 2018.
He said this is already below 2019-2021 Medium-Term Expenditure Framework (MTEF) and 2019 budget benchmark of $60p/bl. The declining global oil price will likely distort FG’s economic projections for 2019 as well as impact adversely on its MTEF if the trend is not reversed.
Consequently, Yususf said in 2018, the oil and gas industry was characterized by weak incentive regime to facilitate the penetration of the use of cooking gas in the country as well as high cost of the LG equipment as result of high import tariff. He also said the industry was characterized by the discriminatory VAT imposed on the locally sourced LPG, while imported LPG does not attract VAT.
“Petroleum subsidy debts and non-payment of interest rate and exchange rate differentials to oil marketers is affecting the ability of the oil marketers to meet up with their financial obligations with the banks. This is also having a multiplier effect on the revenue of the banks/lenders. It also has implications for the stability of the banking system and the growth of non-performing loans in the financial system,” he added.
A banker and chieftain of the Peoples Democratic Party (PDP), Dr John Ayuba says the failure of government to provide the much needed enabling environment led to the drought of Foreign Direct Investments (FDIs).
At the home front, Ayuba said the economy did not fare betther as local investors were hounded with harsh and vindictive policies.
According to him, the economy needs a leaders with business acumen and who understands and with a face of business.
Chief executive of Abuja based Muregi Associates, Dr. Husseini Mohammed in his response to inquiry titles his submission “Economic Annus Horriblis.”
As the above indicates, Commenting or writing in assessing the Economic situation of the country in 2018 is not farfetched considering a number of factors, namely, Inflation, Unemployment, Manufacturing, Private Sector Performance and indeed the overall activities of the socioeconomic indicators all proved by and large negative.
Manufacturing sector, which is the engine of economic growth in terms of Capacity utilization, was too low and generally considered unacceptable or unrealistic for any meaningful economic growth. In a way it wouldn’t be out of place to conclude that, the year 2018 is what in Latin we call “Annus Horriblis”.
On the expectations for next year, he said, “we need to be cautious because the current budget of N8.83 Trillion Naira with a production of 2.3 barrel and a benchmark of $60per barrels is already questionable by the current sport market of $53 per barrels and OPEC’S cut in our production to a mere 1.93 barrels.
For the Economy to turn around, we must look inwards in the development of Agriculture and other allied resources with a major emphasis on the small-scale industries as enablers.
Leadership is everything, election is just about a month away, therefore, whoever emerges as the president be it the current leadership or the PDP leadership will have Herculean task in managing the state of affairs of the country.”
Engineer Martin Onovo told our correspondent that the “year, just like the previous years under the current administration, didn’t witness salutary growth because the handlers of the country have no idea of how to pilot it let alone functionalize the nation’s section.
He said the development explains the lingering crisis of confidence between the Minister of State for Petroleum Resources, Ibe Kachikwu and the group managing director of the Nigerian National Petroleum Resources (NNPC),Maikanti Baru, fuel subsidy payment, corruption and all other inherent infractions which ordinarily should have fizzled out given the right leadership.”
On power situation some analysts say despite the recent claim by the country’s Power Minister, Babatunde Fashola, that the current administration has taken power situation to the next level, the Senior Staff Association of Electricity and Allied Companies(SSEAC) and critical stakeholders felt the minister played to the gallery .
National president of the Union, Comrade Chris Okonkwo told newsmen that Nigeria didn’t achieve any substantial growth in the power sector in 2018,adding that the power distribution companies had a field day by imposing estimated billings on customers, denying them prepaid meters and shunning investment in infrastructure that could boost power supply in the country.
A leader of a pressure group organization in Lagos, Comrade Chinedu Bosah corroborated Okonkwo’s position, saying the claim of improved power supply by the current government in 2018 is a mere political gimmick
Consequently, President of the Nigerian Employers’ Consultative Association (NECA), Dr. Yinusa, has recommended that government should see to a logical conclusion its power sector reforms to deliver stable power supply to the populace, while priority should be given to the rehabilitation of deplorable road networks while constructing additional ones across the nation.
He said: “There is the need for close monitoring and regulation of the activities of road concessionaires to ensure optimum benefits from such concessions. The transportation and haulage system is virtually road dependent. This is not good for the economy.
“Development of alternative transport system, particularly the water transport, railway, both intra and interstate, should be accorded high priority.
“We recognise the efforts of government in respect of its rail modernisation programme and recommend that the programme should be accelerated in view of its centrality to the growth of internal trade and industrial competitiveness.”
With the upcoming general elections, he advised Government not to focus solely on politics at the expense of the economy and good governance, but continue to work assiduously to sustain the steady stabilisation of our economy through informed policies to position it for continued growth.
However, on the anti-graft war, the government, according to some analysts was able to change the status quo to an extent, as they all agree that it became obvious that there was a new sherrif in town.
Indeed, one of the landmark strategies initiated by the government was the Whistle-blower policy, which, according to the government, has yielded several recoveries, including, N13.8 billion from tax evaders and N7.8 billion, $378 million, £27,800 in recoveries from public officials targeted by whistleblowers.
It also said the National Economic Council (NEC), under the Chairmanship of Vice President Yemi Osinbajo, approved the audit of key federal revenue generating agencies, which has so far yielded a total sum of N526 billion and $21 billion. The money was underpaid to the Federation Account between 2010 and 2015.
However, while the ruling APC goes to the 2019 polls with some of these achievements, many believe the government may have fallen short of great expectations Nigerians including improving their living standards. But, rather, what they have experienced in the last twelve months was more of despondency and hopelessness