The latest report of the International Monetary Fund (IMF) on the economic outlook of sub-Saharan Africa is far from reassuring for Nigeria and some other countries.
The verdict is that the ambitious reforms (reckless and callous by many views) which the current Nigerian administration has been pursuing for one and half years are yet to show that they’re on the right track. Put bluntly, they are not working! That’s certainly not the sort of thing President Bola Tinubu and his team would love to hear.
That assessment is antithetical to the viewpoint expressed in Abuja only last month by the Chief Economist and Senior Vice President of World Bank (WB), Dr Indermit Gill, who praised the government for the courage to hit the ground running with its unprecedented decisions to remove petroleum subsidy and float the naira. Gill capped his eulogy with a strong appeal to the private sector and citizenry for their cooperation and patience. Of course, his physical audience let him know instantly that he had struck the wrong chord. He clearly underrated the trauma the nation was experiencing. Anyhow, that outing provided a window into the bank’s convictions about Nigeria’s tortuous quest for restored prosperity.
This unpalatable IMF dish has thrown a shadow over whatever is left of the country’s hope of exiting the woods soon. It was the turn of the fund’s Deputy Director, Catherine Patillo, to serve the menu last week at the Lagos Business School (LBS). She wasn’t sparing: ‘‘More than two-thirds of countries (in sub-Saharan Africa) have undertaken fiscal consolidation, with the median primary balance expected to narrow by 0.7 percentage points alone in 2024. And these have included notable improvements in Cote d’Ivoire, Ghana and Zambia, among others’.
“On the imbalances side, median inflation has declined in many countries. And it’s already within or below the target band in about half the countries…. Inflation is still in double digits in almost one-third of countries, including Angola, Ethiopia, and Nigeria, and above target in almost half of the region, particularly where monetary policy is not anchored by exchange rate pegs…. Looking further at exchange rates, we do see that foreign exchange pressures have largely abated since the end of 2023.” Two key elements of this declaration are truly painful. First, the astronomical increase in the cost of goods and services. The National Bureau of Statistics (NBS)’s Consumer Price Index (CPI) report for last month indicates a raise in headline inflation from 32.7 percent in September this year to 33.9 percent. Within the same period, prices of foodstuff rose to 39.16 percent from 37.8 percent. One depressing side of the story is that informed projections haven’t identified any grounds for optimism in the near future. Transportation and energy costs are compounding an increasingly impossible situation. Sadly, both rural and urban populations are united in this long-suffering
Second, Nigeria, an erstwhile undisputed regional and continental political and economic leader, is tumbling rapidly, displaying mediocrity where less endowed nations earn better ratings. In few months, the country has descended from the lofty height of being Africa’s largest economy to the fourth position. How much lower can it go even in, say, one year’s time? So, beyond the obvious threat of the spiralling degeneration in the quality of life of Nigerians, the worsening ranking of their country among the comity of nations is set to deal more blows to the national pride garnered in the past decades. The effects, though intangible, are damaging nonetheless.
In addition to concerns about the nation’s present predicaments, the attendant vulnerability of its future is also captured in the IMF paper. According to it, “debt service capacity remains low by historical standards. In almost one-quarter of countries, interest payments exceed 20 percent of revenues, a threshold statistically associated with a high probability of fiscal stress. And rising debt service burdens are already having a significant impact on the resources available for development spending. The median ratio of interest payments to revenues (excluding grants) currently stands at 12 percent. Some three-quarters have already witnessed an increase in interest payments (relative to revenue) since the early 2010s (comparing the 2010–14 average with the 2019–24 average). In Angola, Ghana, Nigeria, and Zambia, this increase in interest payments alone absorbed a massive 15 percent of total revenue’’.
The borrower, without doubt, constantly puts himself at the mercy of his lender. Again, Nigeria, once virtually debt-free at the dawn of the current republic, is now comfortably in the company of some of the continent’s worst debtor countries. President Tinubu has just sought the resolution of the National Assembly to borrow 2.2 billion dollars, equivalent of 1.7 trillion naira, to implement part of the 2024 Appropriation Act. And nothing yet to suggest the end of borrowing in sight.
Neither is there much to elicit positive expectations, to give the largely frustrated Nigerian people enough cause to rejoice and be hopeful. The other day in Benin City at the inauguration of Senator Monday Okpebholo as governor of Edo State, Tinubu delivered his signature smooth words through his vice, Alhaji Kashim Shettima. In his own reckoning, “we have weathered the hardest days as a nation. We have pulled back from the brink of economic collapse, and now we step forward into a time of growth…. When we took office, we knew that securing the future of our economy would demand serious reform—reform to stave off looming fiscal and monetary threats to the stability of this great nation.
That may be soothing to textbook macroeconomists who dwell inside bloodless data and analyses. Or diehard admirers of the president’s policies and programmes. But definitely irritating to most citizens and residents who bear the brunt of the prevailing choking realities. While it won’t be fair to accuse this government of not trying, it also would be provocative to give itself any form of pass mark at this moment. The sharply rising stress level in Nigeria today, occasioned by semi-baked economic experiments, is real. What people feel can be more compelling than figures rolled out to serve bogus propensities
It’s not even that the people actually depend on submissions by either IMF or WB to tell them where it hurts. As in many other locations on earth, especially in the developing and underdeveloped world, these twin financial institutions are viewed with suspicion here, hopefully not hatred. It’s hard for those Bretton Woods organisations to shed the image of being oppressive agents of advanced nations and promoters of the status quo. As Prof. Ibrahim Gambari, a former Minister of External Affairs, explained it at a public function earlier in the week, “we are not rejecting partnership because we will not be in isolation but partnership in which we are real partners that will serve our interest. If the prescriptions of the World Bank and IMF are correct, we should not be struggling the way we are today…. We must be ready to harness our abundant human and natural resources to leapfrog our development to achieve the structural transformation that has eluded us for too long.
“We have the opportunity to insist on being joint rule makers so that the new global order being forged reflects our values and aspirations for a fairer, more inclusive, and equitable world. In this, we must ensure that our youth bulge is turned into an advantage that puts us at the forefront of the digital economy and the innovations underpinning it.” Well delivered. The perception out there that Tinubu is implementing recommendations from abroad isn’t helping. Only domestically-compliant remedies, sourced locally and externally, remain our best chances of surmounting these difficult times.
Ekpe, PhD, is a member of THISDAY Editorial Board.
