Everything that is happening to Nigeria's economy today, could have been predicted as far back as 2008. In 2012, it became obvious we were heading to hell and some of us started shouting and screaming that change was necessary to avoid catastrophe. Unfortunately, we only moved from crony capitalism to feudalistic socialism.

Brief summary. In 2008, low income earning Americans were unable to pay their mortgages. These mortgages were backed by banks from across several countries. A crisis of confidence occurred causing a global credit crunch.

Two things are responsible for growth of GDP. Productivity and credit. With lenders refusing to lend to new businesses, the global economy started to slow down. Interest rates were dropped almost to zero percent to encourage lending, but Lenders only gave money to market speculators, so Stock prices rose to unprecedented highs and commodity prices like oil and gold also rose to ridiculous levels.

Market participants sold the story that demand for commodities was on the rise while supply was falling hence the rise in prices.

Around June 2014, interests rates started to rise and with that commodity prices started to fall as speculators shifted their funds from riskier commodities to treasury notes. Countries with commodity driven economies like Nigeria, South Africa, Venezuela and Russia were suddenly exposed to the shocks the rest of the world had been facing since 2008. This is why there is so much anti immigration and also why people like trump are world leaders today. The global economy is really messed up and may be this way for an extended period.

As earlier started, two things lead to the growth of GDP: productivity and credit. Nigeria has never really been a credit driven economy neither has it been a highly productive one. We simply rely on productive countries to buy our raw materials to increase their productivity. Things have to change or poverty will consume us.

As grandstar has stated, the federal government must carryout painful restructuring. Any hope that oil will rise to over 100 dollars again is wishful thinking and even if this were to occur, it probably will not be for an extended period. A focus on primary and secondary education, and healthcare to improve productivity is also necessary.

Good luck to Nigeria.

grandstar:


The strength of an economy is not based solely on the quality of infrastructure it has or else Taiwan and Italy would never have become rich countries.

Companies in developing countries can still thrive with poor infrastructure. 2 examples today are India and Pakistan.

I have always argued that for the country to hit 7% growth rates now, it would need structural reforms.

Anyway, Buhari's exchange controls using the words of Charles Soludo simply made a "bad matter worse.". That's my anger with Buhari

I wrote off this government within a month of taking over. He arbitrarily fixed the exchange rate at 197 to a $ without regard to market forces. He thought wicked economist were the ones that determined exchange without regard to the masses. It's like thinking that it was mathematicians that determined that 1+1= 2. They are simply interpreting what nature says. The same with economists.

Diversifying exports is very important but commercial lending rates of 25% does the most damage to businesses in the real sector and not even infrastructure. Dangote said how can the country have a thriving agricultural sector with leading rates at 20%?

Low lending will enable manufacturers for instance import world beating machinery that would make them competitive. Productivity is very low because of the high cost of credit. If Nigeria was a mine, it would be artisanial with corresponding low levels of productivity. Low credit would enable them to keep expanding until the local market is too small and exports are the only option.

The only way non-oil exports can boom now until lending rates are brought down is through foreigners setting up factories and mines. FDI tends to target areas the country has comparative advantage.

Angola was badly governed by Dos Santos so it's not a surprise. This is a country with about 20m people producing about 2m barrels of crude oil daily but can't balance it's budget.

Venezuela since 2003 to me has been a basket case only it wasn't discernible . It is not until you marry your fiance that you realise she's not wife material. The signs were already there from the word go.

FG can bring down lending rates to single digits levels by ending the "Naira substitution" policy.
Google " Ending Naira substitution policy by Henry Boyo".

Foreign investors can be lured to invest by slashing corporate taxes to no more than 15%. FG must also end multiple exchange as it screams economic incompetence to foreign investors.

Comments like this one seem so enlightening and educative, yet unfortunately, are terribly wrong.

Nigeria neither needs to increase exports nor should it consider reducing interest rates. As you rightly stated, just as economist do not control exchange rates, they also do not control interest rates. The rates proposed by the CBN only act as a guide to the market but in reality, the rates would naturally rise to that level.

What is Reason for high interest rates in Nigeria? High importation of foreign goods. High interest rates make treasury bills/bonds attractive to foreigners, thus it brings in a high amount of foreign exchange. This foreign exchange is then substituted for the naira to allow for importation. What this means is that if Nigeria imports less, it would not need as much foreign exchange, so it would not need such high interest rates.

Obviously, To reduce importation Nigeria has to increase the productivity of its people. Best way to do this is in investments in education and healthcare.


Steve Babaeko, founder of X3M records rightly said the Nigerian government did not invest in music nor nollywood, yet both industries are highly productive, increasing Nigeria's earnings and also projecting a good image of Nigeria to the world.

How much money did the US government give to google, Facebook or Amazon? Zilch.

With education, people will naturally find productive endeavours to go into. The government does not need to focus on agriculture, science and technology. Even electricity was not discovered through government intervention but by educated and creative people whose focus was on increasing their productivity. Even infrastructure, there may be more efficient ways to solve our deficit but without mass education such solutions will never come out.

Another thing the Nigerian government can do to increase our GDP more quickly is to become more efficient in its spending of our earnings from crude oil. Like a business can increase its profitability by reducing its costs, a country can also increase its GDP the same way.

Ways to increase efficiency include:

-further devaluation of the naira which would reduce local demand for dollars hence naturally bring down interest rates.

- sack government workers. Most of them are unproductive including myself TBH. This will also bring down interest rates without having any adverse effect on the economy. It is actually brainless to continue paying people for no services. It is a moral hazard to cater for only 1 percent of your population. Funds need to be spent on education and healthcare as earlier stated.

- increase taxation specifically on the rich. Increased taxation reduces disposable income does leads to lower demand for foreign exchange and would also naturally bring down exchange rates.


I just reread boyo's view. With his substitution, he will invariably float the naira freely thus allowing market forces to determine the value of the naira. His view is better than what is currently being carried out but monetary policies by the CBN are not enough to turn this tide. I must admit, I thought there was no validity to his point of view.

Ovamboland:


USA has been running Social Security since 1930's , there is no serous discussions about ending it despite the $17 trillion debt of the country.

Many Western countries started their even earlier, they know the importance. Nigerian government has started within what they can sustain, yet the privileged are the ones crying the most. Why has the IMF not advised European countries having economic crisis over the past 100 years to cancel their own welfare programs? Why should no poor person in Africa have support or help while whites that are richer have? Why should the few rich have access to so much via contracts and connections while nothing is offered to poor?

No sensible country puts social spending/welfare over investments in basic education. If you read the article, you would have seen that attainment of a percentage of a population being educated is a metric used to measure the development prospects. In Nigeria, the government focuses on helping the poor. In these countries, the governments seek to invest in the poor so as to be able to tax them in the future.

I really like Buhari as a person so please do not take this comment personally. Buhari invest in his cattle because he sees them as his wealth. Our leaders need to see the Nigerian population as their wealth and not problems.

Living conditions in Nigeria have always been worse than Venezuela. Nigerians are used to suffering and can adapt to any condition they find themselves.

I can no longer get fish head in the market to buy for my cat as people have started rushing it.

Economics is a social science and not a science that is based solely on numbers. Venezuelans expect more from their government, so they protest and their rulers make hasty decisions, which are bad for their economy to maintain peace and orderliness. If you push a Nigerian to a wall, he will pass through it.

The people buying the fish head will still baff up, will still wear polished shoes, will still smile and thank God that their situation is better than their neighbor.

This is Nigeria!!!

SocialFinance:


Before you shout Buhari and APC;


PDP CREATED POVERTY.....

This analysis below is important to common man.... who are majority Voters in this 2019 elections.....

1. They said when Buhari took over from them a bag of rice was N11,500 but they took over when it was N2,500

2. They said when Buhari took over from them ltr of petrol was N87 but they took over when it was N11.

3. They said when Buhari took over from them $1 was N235 but they took over when it was N20.

4. They said when Buhari took over from them a bag of cement was N2,000 but they took over when it was N400.

PDP met minimum wage at 1500 and took it to 18500.
Buhari has failed to increase minimum wage even though prices of everyday items have gone up. this has pushed many into extreme poverty

To cushion the effect of property tax on home owners. That you own a home doesn't mean you're rich. You're not planning to sell your home of course. Most homes were built on mortgage and years of savings. There's no property tax in Dubai, one of the best places to live.

People pay municipal taxes which is equal to 5% of the rental value of similar houses in their neighbourhood.

Property tax has been argued over and over again to be wrong because owning a house doesn't mean you're as rich as the value of your house (except you're making money from the house, which usually isn't the case).

Please name any successful nation that doesnt have property taxes and also state were these arguments have been carried out.

People go out of money and go broke. The only thing they have is the house they built when they had something going for them.
They still have to pay their taxes. they can sell the house. this would improve nigeria's estate management industry as plenty houses will be up for sale similar to the US housing market. 90's star, MC Hammer, had to sell his house.

Which is why pensioners/retirees (people above 60 years) don't pay property tax because they're exempted. The question is, what happens to people out of job, or without regular income?

not all countries exempt senior citizens and once they pass away, the new owner needs to start paying property taxes. people without regular income should cut their coat according to their size. you know you cannot afford to pay the property tax on a mansion yet you go and build one. they can SELL IT on OLX.



Money is not Nigeria's problem. A clueless nation is clueless. Nigeria has no bearing, just disoriented. What we make is enough if we know what we're doing.

We have one of the lowest tax to GDP ratios on earth. What are you talking about Willis. do you know how many unoccupied buildings there are in Abuja and Kaduna. if people had to pay property taxes more houses will be on the market.

dadark:


nigerians dont like paying tax...if people that dont pay tax are thrown into prison like in western nations,many nigerians would land in prison....

No one likes paying taxes. I have never met or heard of a person who genuinely likes paying taxes.

So why do other nations pay taxes? the same reason you brush your teeth and take your bath in the morning. Without taxation, civilization can never develop. it is a necessary evil.

When the government collects taxes, the people are more willing to fight for their rights. on another hand, the government uses taxes to invest in its people in their youth and then recoup their investments through taxation when their citizens start working.

No one is naturally good. Without structures and institutions in place, All humans are not much better than animals.

Newboss:


Nigeria has property tax.

Lagos tax rate (the craziest in Nigeria, apart from Abuja's) is 0.076% for property the owner lives in. There's also 40% relief (discount) for all properties.

So a house valued at 2billion will pay about 912k in property tax yearly. That's nothing much. My maths may be wrong tho

Why is there a 40 per cent discount?
Nigeria has one of the lowest tax to GDP ratios on earth. All the time our government complains about diversification. All governments primarily earn revenue through taxation.

Our public healthcare system and education system are broken. Shouldn't his taxes be used to develop Nigeria?

Is the property tax even enforced? what is the penalty for defaulting?

Newboss:


Go and check the meaning of estate tax before you say what you don't know

Sorry, Mr Lecturer. Property tax*

The same thing used to happen in England in the past.

Every rich family built a castle to show their wealth.

What made them change their ways? Estate taxes.

Omooba77:


Thanks sir, as long as subsidy is there, some dishonest people will be profiting from it. Let it be free flow economy determined by demand and supply

my post actually supports the removal of subsidies. it is how subsidies are to be removed that my view differs from the popular view. the price of petrol in Nigeria is affected by the demand and supply of crude oil in the international market and also the demand and supply of dollars within Nigeria. why the price of petrol today should be 210 naira without subsidies is not because of the international price of crude but the fall in the value of the naira. My point is that Nigeria can lower the price of petrol by lowering the demand for dollars through taxation. This invariably will eliminate subsidies without further impoverishing the masses.

Omooba77
Nice article with a lot of important information and an absolutely accurate conclusion. There are however a few recommendations I personally do not agree with for a number of good reasons.

I do not agree that fuel subsidies should be removed and also that we need to seek out foreign investments. I know my view is not popular but give me your attention for a moment.

Your article focuses on the fall of federal revenue and the hardship it has brought and also the unsustainable path the federal government is towing.

Is Nigeria's issue the fall of revenue or is it the resulting hardship. Must these two events go side by side?

I think Nigeria's issues are the crazy levels of inequality between the rich and the poor. I think our lack of productivity is tied directly to the high rate of extreme poverty in this country. I think the biggest failings by governments is in not equitably using our oil revenues in ways that benefit all Nigerians.

Nigeria runs a trickle down economy where government workers and contractors take all the oil money. The rest of us earn our living by providing goods and services to these government workers. So basically, we get the crumbs that fall of their tables. What makes the matter worse is that Nigeria, like most nations, operates an open economy so once an iPhone, Samsung, a Mercedes, is bought by any individual in Nigeria, we have invariably exchanged our crude oil for the purchased item, thus reducing the number of crumbs that can get to the common man.

In the past, our leaders exchanged our people (resources) for mirrors cause they found their images amusing. Today, they exchange our resource (oil) to satisfy their vanity.

My issue with oil subsidy removal


in general, two things affect the local price of fuel: The price of crude oil and the value of the naira against the US dollar. between 2006 and 2007, crude oil prices were about 70 dollars as it is now, yet petrol was 75 naira per litre. the dollar was 130 something then as opposed to 360 now. the question we should all be asking is why has the naira fallen so badly? I guess more demand for iPhones, Samsungs and Benzs.

should a Barber, a Tailor, a carpenter, a plumber, a Farmer, an Electrician pay more for fuel because Nigerians want to use iPhones?

SOLUTION
As your article stated, an increase in our VAT to the continent's average will help. Yearly progressive taxation on houses and cars will also go a long way. This is how to eliminate subsidies by raising the value of the naira through decreased demand for dollars rather than simply raising prices of petrol all the time. We already have the highest number of people living in extreme poverty, yet we have the richest black woman in the world and the richest black man in Africa.

foreign investors do not have to be marketed to. investors look for profitability with the smallest amount of risk. rather than focusing on attracting them, we should make our country more productive by investing massively in public primary and secondary education. when we can produce our own iPhones, and live in peace and harmony, investors would naturally troop in. we need to look inwards. Our people are more important than mirrors and Benzs.

jpphilips
My guy, no informed person is saying Buhari caused this mess. Even if Jonathan had saved money, that money would have served as a shock absorber and not a cure to this economic crisis. Tough policy changes need to be made to improve this country and for 4 years Buhari has done nothing to move this nation forward.

From your write up, you seem to deceptively imply that this crisis is over when in reality, Nigeria is deeply indebted and may start selling national assets to stay afloat.

What exactly do you want? Progress for your country or APC winning this election?

The relaxed attitude Buhari has shown towards his re-election is the same relaxed attitude he has shown towards managing our economy.
(One week to elections and you start youtube ads. You clearly aren't serious about winning.)

You are an intelligent man. the only reason you should be doing this is if you personally benefit from Buhari and this is you being loyal, You should simply take a non-partisan stand in the election and let the chips fall wherever they may. Goodluck

theoldpretender:


We are borrowing because oil is below the price we need it to be not to borrow.

Right now, we need oil at 140 USD before we can run a budget without borrowing. Oil is at 60 USD.

Foreign reserves are not for spending recklessly. They are for keeping as a buffer for the day when Nigeria cannot sell oil.

I'll give Buhari kudos for growing the reserve in the midst of declining oil prices. Venezuela did not do the same. See where they are now

When a country earns money in foreign currency, it can choose to do two things: set up a sovereign wealth fund(excess crude account) or save the foreign currency in its foreign reserves.

What is the difference between these two accounts?

In foreign reserves, the naira equivalent of the dollars earned is spent by the country and only the dollars remain in savings. This means that the country can only use the dollars to meet demand for foreign currency by its locals and not for purchasing infrastructure or investments. basically, the value of money in the foreign reserves have already been spent by the government and cannot be spent twice.

sovereign wealth funds are what most of us believe as foreign reserves. true savings that can be used for investments, infrastructure and whatever.

The increase in our foreign reserves reflexes the increase in our foreign borrowing and not better management of earned funds. the naira equivalent of that money has already been spent.

The only props a person can give this government is in reducing the demand for dollars by raising the price of dollars (from 160 to 360) which has invariably brought untold hardship to the Nigerian masses.


By the way, the key difference between Nigeria and Venezuela is that the Venezuelan MASSES are used to drinking milk(fresh milk), eating pasta, eggs, butter(not margarine), cheese, brioche, sausages and other assorted foods uncommon to average Nigerians. Many of these foods are imported into Venezuela so when oil prices fell and the value of their currency fell, the common people in Venezuela were no longer able to afford the food they were accustomed to. In Nigeria, our diet is very west African and our masses eat locally produced food. food prices may have even fallen in this period as producers compete to sell their perishable foods to fewer people with money.

In summary, the Venezuelan crisis is as a result of the taste and preferences of the Venezuelan people and not because their government is worse or better than ours.

omohayek:

For such retrograde thinking to pass for "policy" is all the evidence one needs that Buhari has probably never even heard of the term "comparative advantage", let alone attempted to understand it. I'm guessing there probably aren't more than 3 or 4 members of Buhari's entire cabinet who would know what comparative advantage means (Fashola, Osinbajo and a few others), and in any case they clearly have little influence on Buhari's decision-making, so it wouldn't really matter if they did. 4 more years of Buhari's poorly informed leadership will see Nigerian living standards drop to a level last seen in the Obasanjo era, that's how bad it is.

I wish I could hope that an Atiku victory (unlikely as it is) would make a big difference for the better, but in his case I don't see any greater understanding of business and economics translating into a significant improvement in the average Nigerian's standard of living, even if the annual GDP growth numbers rise to 7% or more. I say this because I fully expect most of any such gains to be captured by Atiku and the tiny clique surrounding him, through shady privatizations that grossly undervalue assets, the facilitation of yet more oligopolies like the ones Dangote already has in cement and rice, the expansion of "import substitution" schemes that allow a privileged few to make risk-free profits at the expense of the general public, etc. I simply don't believe it's possible for a 72-year old man whose entire fortune is built on corruption, and who relies heavily on the support of crooks like Saraki, to suddenly turn a page and start seriously working for East Asian style broad-based growth - especially not when he basically bought his nomination as the PDP standard-bearer. A President Atiku will be wanting a health return on his "investment", which means any "good" policies he enacts will likely be subverted to primarily enrich him and his supporters.

In short, I think Nigeria is doomed to another 4 years of economically subpar policy-making as long as Atiku and Buhari remain the only serious choices.

Just as he setup Mikano (power), Faro (water), and ABTI (education), for himself during his last time in power, he is coming in this time to set up mining, agriculture, construction, and telecommunications companies for all his children.

Buhari does not value knowledge on economics and Atiku is too criminally inclined. Only God will see Nigeria through the next 4 years

Ohh, if only I could write as well as you!!!

Vote for Mughalu. He is the only candidate capable of improving Nigeria. I mean it. Not joking. Okay now, I guess you have another 53 days and a few hours to go to vote, soo . Read a book

We all hate taxes but is taxation really such a bad thing?


The effect of taxes on people is that people will have less money to spend after taxation. the effect of the naira losing value is that people will have less money (in dollar terms) to spend. in both scenarios, the result from the peoples perspective is the same.

when the government allows its currency to be devalued, it blames its masses for being unproductive. it blames international factors such as a fall in oil prices. it blames the IMF and the world bank. the government blames everybody but itself for its own failed macroeconomic policies. however, when the government taxes its citizens, the government is seen as the bad guy and if the citizens keep suffering, the government will have to pay a political price. Basically, taxes make the citizens hold their governments to account.

NIGERIA'S SITUATION
Revenues are falling, debts are dangerously high and the labour unions are requesting for a higher minimum wage. it will take an act of God for Nigeria to fund its budgets in a few years time. realistically, the government has two choices:

1. increase taxes or fire civil servants (or a combination of both)
2. further devalue the naira.

these are the same choices Buhari had in 2015 and he chose to devalue the naira, ushering in a biting recession that till this day, Nigeria is only "technically" out of.

Some Nigerians tend to think we can become a productive country overnight without massive investments in mass housing, education and healthcare. this is simply not possible anywhere in the world.

we should have invested in our people during the oil boom, but we didn't. now we must all come together to face this crisis cause we either all grow together or we die together.


IMHO, this current tax policy does not go enough. we pray the minister of finance knows what she is doing.

very nice write up. i concur!

grandstar:


Togo being a francophone country "may" have quality public schools but I'm sure a majority of the eligible kids are out of school because these schools won't be free!

Whether these countries have good schools or not is irrelevant

More money is wasted on fuel subsidy than is spent on education health and defense combined!

If this waste can be spent on education alone I am sure the quality of education will improve

Anyway primary and secondary school education are the responsibility of the state governments and not the FG so each state is to be held responsible for the quality of education given to their wards

The fuel subsidy also discourages investment in the downstream sector of the economy because investors are discouraged by price controls on products.

Merry Christmas.
Most of what you just typed is the faulty thinking of the PDP and APC governments. In fact, I can say most older elitist Nigerians share this common view with you and that is why Nigeria will never progress until you guys are booted out of government.

First of all, our fuel subsidies are mainly as a result of the fall in the value of the naira and not fluctuations in the prices of oil. When Obasanjo was president, oil sold for 70 dollars and yet fuel was 65 naira. Today of is selling for 50 dollars and the federal government is paying subsidies.

Why is the naira constantly falling? Too many unproductive workers purchasing foreign goods which do not add productive value to Nigerians.

How do you correct this?

By reducing government workers, raising taxes and using the saved funds for social investments such as mass education, healthcare or low cost housing.

If the government fires workers and does not use the savings on social programs, the economy will go into a recession. What is wrong with Nigeria is that we are not using our revenues in an efficient way. The only way out of this mess is for the government to refocus its priorities from paying government workers to providing social services to all Nigerians.

This is how you stop the naira from falling and how you reduce the subsidies. We are having systemic issues. This isn't a head ache that panadol will solve. Nigeria is having acute malaria and its treatment is not necessarily by building refineries or any other nonsense plan these old men have come up with. Even if Dangote's refinery were to open next year, petrol may still be expensive. The advantage in local refining is that in theory, it should reduce the pressure on our foreign reserves. If all petrol in Nigeria is gotten through swap deals, then there may be absolutely no difference refining crude oil here or abroad.

Your point about state governments and federal government job on education is semantics. All that needs to be changed is the law. All government have three basic functional requirements every other thing they do is Jara. These are Education, Healthcare and Security. Even electricity is a non functional requirement and only adds value to these three priorities. As you can see , both the federal and state governments in Nigeria are complete failures as they do not even attempt to handle any of these issues.

Fuel subsidies are as a result of an unfocused unserious government that lacks ideas and fails to put the right people in place. If the government removes the subsidy, the economy will just spiral out of control and people will certainly protest. The government is not doing anybody any favour but preserving its elitist way of doing things.

Finally, please google Education in Togo. Quality Primary Education has been free since 2008 and the country is moving forward.

obaataaokpaewu:
This was because when price of crude oil rises, the under-recovery on product price also rises.

I need someone to educate me on the emboldened, when price of crude oil rose up-to $100+, price of PMS was below #100 but now the price of crude oil is below $100, the price of PMS is #145. And I read that the price of subsidy (under recovery) keeps going up every year/budget. Is it that the current admin is importing more volumes of PMS compared to the previous admin or what? Isn't that an indictment on/of the current Minister of Petroleum?

oil is sold in US dollars and the Naira has fallen in value since then. all in all, it is both GEJ and PMB fault. our leaders are clueless in managing our economy

grandstar:
Poorer neighboring countries pay the full market price for Petrol and they've not died.

Rice and many things are even cheaper despite a higher price for Petrol.

neighboring countries like Ghana and Togo give quality public primary education to their people. tell your government to be responsible for its people. when you want to build a house the first step is to draw a blue print and dig the foundation on the land. the first step to increase the productivity in a country is to develop your peoples abilities through education. what is the average class size in our government schools. a government that wants to diversify and does not take mass education seriously is an irresponsible government.

jpphilips:
This analysis is pretty flawed in some areas, I will still commend the writer for an effort, its hard lately seeing Nigerians that wish to embrace reality not the mumbo jumbo thrown around by politicians.

Nigeria earns most of her revenue from oil but not all, you skipped FIRS receipt, NIMASA & NLNG.
Rightly put, Nigeria is doing about 1.9mbbls daily but you forgot that Egina is coming on board in January to inject another 220k bbls daily, the trans ramos pipeline presently undergoing repairs injects another 110k bbls daily, Realistic production for 2019 is around 2.1mbbls or more.

The present Opec basket is selling at $54/bbl, so the $60 may be a stretch today, however, OPEC+ is looking at a reasonable production cut and most refineries like formosa under repairs and dangote with 680kbbls coming upstream will inject a demand that will have positive price implications, 2nd phase of Iranian sanctions will equally necessitate a significant production cut, therefore, $60/bbl is very realistic for 2019 fiscal year not wishful thinking.

The FG has nearly reached her borrowing cap so it will be most reasonable if we see tax increase in 2019, that will equally balloon the FG's revenue standing.
The CBN pegs its transactions at 305 naira to a dollar since 2015, so it is not surprising to see it feature in the
2019 fiscal year, that doesn't mean you will have access to that cheaper dollars but a benchmark for government transactions.

The present inflationary pressures we have are the elections and yultide celebrations, recall it was at 11.23% in August, the CBN's aggressive mop up of over 1.4T in excess naira liquidity in the last month will surely drive it downwards.

Overall, the budget is an ambitious one with less deficit like the 2018, also the war on terror will as usual put the country on a fiscal strain, we can only hope for the best.

As for Atiku and his rhetorics, he can only appeal to those bereft of fundamental economics principles.
The challenge Nigeria has is beyond APC and PDP, I totally agree with that.
Buhari may not add stealing to the fiscal crisis, I can't speak for Atiku.

This your analysis gives me a lot of hope. Although the initial op criticised prayers, I personally cannot think of any option the Nigerian masses have. It shall be well. We are in the END GAMES now

I like Sowore as a person, but whenever he makes statements on the economy, he is always wrong.

If Sowore had partnered with Mughalu and one of them stepped down for the other, this election would have been more competitive. Sowore blamed SAP for Nigeria's problems but countries like Czech Republic successfully implemented SAP.

Sowore blames IBB (I agree, he is a bad man) for Nigeria's economic troubles but Soludo wrote in his book that the Buhari led government had brought the economy of Nigeria to a complete halt before IBB took over and that policies implemented by IBB restarted the economy. Sowore studied geography, which is a challenging and important course. He should stick to people oriented policies and things his experiences have taught him that makes him an outstanding candidate. I see him as an exceptional human being and he is a gift to Nigerians. All he has to do is to stop speaking on economic matters or he should get quality advisers.

gbolah1:


Very sound argument and analysis, from your own observation, what did you think is the way forward and which advice did you think you can give this goverment?
Do you think changing goverment is the best solution or allow the current ocupant to correct there mistake and put more pressure on them to do the right thing.
I need your unbiased response please as you may not know that so many high ranking goverment official are in this forum and they read people views and they might as well take the your advice and suggetion.
Awaiting your own suggetion

IMHO, there are a lot of very smart Nigerians both in the APC and the PDP. Take El- Rufai for instance, he may be failing as a governor, but his general idea on governance is right. Take HRH SLS as another example. These are two competent men from the north west region. There are many others from professor Sam Amadi, Obi Ezekwesili, Charles Soludo, even Peter Obi(atiku may not allow him to change Nigeria) all from the south eastern region. In the south west, we have all seen what Fashola and Ambode have been able to accomplish, so there is no shortage of smart Nigerians.

The problem we face is that we are like a sick patient suffering from malaria and we are refusing to take chloroquine because it is bitter. We will not get well no matter what. The solution to Nigeria's problems is to implement the Oronsaye report, reduce the current civil service and invest the saved money in mass education.

Economics is not buying and selling. It goes way beyond this. It is about aggregate spending. If one person earns 100 naira and buys something imported with that money. That money has left Nigeria. If however, the person buys something produced locally and then the new owner buys another thing produced locally, three people have now earned 100 naira each and now have the spending ability of 3 hundred naira.

Another way to look at this problem is this, if you are paying people more money than they need for their basic survival, this extra money( disposable income) can be used to buy imported things. Once this imported things are purchased, that money has left the country. This is why the IMF asked the government to raise taxes on the rich. In fact, the British government regularly raises taxes in place of devaluing the Pound.
Raising taxes would reduce the pressure on our foreign reserves and stabilize the currency.

I must admit, Nigeria's economic problems are not an isolated case. In fact, a majority of countries are passing through issues. Capitalism as we know it is under attack and several economists such as Tom Piketty and Paul Krugman have suggested that a way out would be a wealth tax. Nigeria seems to be worse than other countries because although we have many smart people in the corridors of power, implementing their ideas is unpopular with the public and all our Ogas at the top are not smart enough to understand that popularity is different from governance.

Buhari has done well in trying to tackle recession, remember the best way to tackle recession is for the Federal government to release stimulus packages, hold up the currency and pay for subsidies,
This is extremely false logic. Who told you this or where did you read this? The IMF advised Buhari to raise taxes, float the naira and invest in education and healthcare. This is the very same advice Bill Gates gave. But did Buhari listen. No!

America's economy and currency are different from Nigeria's. The US cannot devalue their currency to gain production advantages because the USD serves as a reserve currency. If America were to devalue its currency, lots of countries will cry foul. Nigeria is not in this complex position.

Nigeria's economic problems stem from 2 issues. Poor taxation on the part of the government and lack of productivity on the part of the citizenry.

Both issues are tied to our over dependence on crude oil revenues. What any serious government would do is to reduce the size of the current civil service and invest heavily in education (primary and secondary schools). By switching its spending from civil servants who produce nothing to building schools and employing lots of teachers, many poorer Nigerians will be able to earn a livelihood. This is what Buhari failed to understand and what El-Rufai kept stressing but buhari's dull cabal refused to understand.

No serious country leaves basic education to parents and private individuals. Both capitalist and socialist nations invest heavily in basic education. China's former One child policy was tied to this as their government is fully responsible for educating children.


but did PDP leave any money for this in the treasury? wasn't PDP already borrowing to pay salaries in the later years of GEJ's government, and what's worse even the borrowed funds were also looted.


Yes PDP messed up by relying totally on revenues from crude and also stealing the borrowed funds. No government has indebted Nigerians as this present government, please correct me if I am wrong.

Buhari and his cabal's only hope to revive Nigeria's economy rested on the recovery of oil prices. What shocks the hell out of me is that in the 1980’s, oil prices fell as a result of innovation in the industry (drilling of offshore rigs) and this affected Buhari in his first administration. oil prices only recovered momentarily during the early 90's gulf war, and prices remained low until the early 2000’s. That is a 20 to 30 year period. When Buhari chose to contest in 2015, intelligent Nigerians assumed he was aware of hydraulic drilling and the anticipated fall in prices for another possible 20 year period. But his first action was to tell NNPC to search for OIL in the north.


It took the US 3 years to get out recession, and trillions of Dollars was released from the US government, you now expect the same feat from Buhari? With which money if I may ask, from oil? At 25$/barrel at less than 300,000 bpd?


Every recession is different and the solutions to the recessions are different. Economics is a social science because it deals with human behavior towards policies implemented by the government. If all recessions had the same solution then economics would be a science. e.g. The boiling point of water is also 100 degrees centigrade, what goes up must come down due to gravity.


The majority blame the hardship we are going through now on Buhari, something PDP has succeeded in doing.

The majority are unfortunately wrong. However, if Nigeria falls into another recession, whether Buhari or Atiku or any other candidate is president, the full blame for the next recession is on Buhari and his Cabal for failing to take the necessary steps to protect the future of this country.


An example of different solutions to recessions. In the 2000 and 2008 recessions in the united states. Interest rates were reduced to stimulate bank lending. In Nigeria however, reducing interest rates would lead to a fall in demand for treasury bills which will lead to a fall in our foreign reserves as investors who bring in dollars to purchase treasury bills would not be interested in lower yields.

reference, our people are like monkeys, no matter how you try to explain to them, they cannot understand.
The Nigerian military has messed this country up beyond even most of our understanding. Back in the '60s, the intelligent citizens went to universities whereas the secondary trained students who couldn't pass, where taken to the military. these dull students robbed this country of the best-trained leaders this country has ever produced. As soon as independence was given, our education standards started dropping as we black people tend to lack the discipline to maintain structures.

Today, Nigeria is a jungle in every sense. A soldier shoots at unarmed protesters and a "SANE" citizen would blame the protester. All the Sunni Muslim thinks is that the Shiite would convert their members, so they hate them the way satan hates God. This is the simple truth. The few that have spoken are only voicing the opinions of a large population of core northern Muslims. Only mass quality education will save this country.

Oshigun:


My guy, the slide into recession now bedevilling Nigeria is something that was unavoidable because of PDP misrule and the 2015 crash of oil price from over $100 per barrel to around $25 per barrel in months after PMB became President. Today it is about $56.00 per barrel. If you don't fear man try to fear God because he won't bless you for trying to decieve others.

PMB is the best choice for now to get us beyond this unavoidable economic downturn . We are earning far less than we did under GEJ yet more is being achieved because we have a frugal and highly responsible manager in charge of our income. Even Donald Duke confessed that no President, however well-intentioned, can succeed under PDP's corrupt and profligate model of governance.

Go and vote your Atiku. We will return PMB to power, gradually crawl out of the crippling economic dowturn PDP caused and create a more robust and diversified economy that wont be at the mercy of corruption and on its knees everytime oil price crashes. Always remember that PDP had 16 years to address our woes yet you guys cannot even bear with the APC for 4 years and want us back to PDP Egypt.

Yes, you are right. The 2016 recession was caused by Jonathan's negligence. Nigeria seems to be heading for another recession by next year and this one will squarely be on Buhari. Global demand for crude oil is diminishing as the whole world's economy slows. This spells doom for Nigeria as Buhari has wasted the last 4 years without making any meaningful change. I believe he has finally realised trouble is on the horizon that is why he is asking the governors for help.


On the matter of this thread. The core Muslim north will always vote for the more religious candidate. This is always a certainty. No election in Nigeria has been won solely based on the core northern vote. you can split Nigeria into 3 political zones.

1. The core north (north-east and north-west): consist of Muslim northerner.
2. The old eastern block (south-east and south-south): consists of Christians. Will only vote for a Christian or moderate Muslim.
3. The middle-belt and south-west: consist of all northern minority groups across all northern states and southwestern states. mixed religiously. will vote based on religious lines but usually tips the scale towards the more popular candidate.

This brief analysis implies that the core northern votes are usually countered by the old eastern block votes. Although the core north has a greater population size, the middle belt and the south-west typically hold the keys to getting elected.

In my opinion, the South-West will shock Buhari and this is Atiku's Joker.

0monnak0da:

What you are displaying here is a typical undergraduate mindset.
If it is printed somewhere it is gospel.
Government spending may or may NOT be a significant part of GDP. Depends where the money goes.
If a government spends half its income servicing debt abroad e.g with the IMF how is that part of GDP
There are many ways of calculating GDP none wholly satisfactory none perfect. The fundamental thing is to understand the concept of GDP as the aggregate of goods and services produced by an economy for which there is payment.
Gaddafi settled the Lockerbie case with a nearly 4 billion payment to the victims families.
That was government spend. It had NOTHING to do with the GDP of Libya.
What it would affect is Balance of payments.
So looking at Government spend is crude and inaccurate in today's world
Especially when government borrows heavily to fund the spending or a large part of the spending is on interest payments to foreign creditors

Okay I understand your point. Not all types of government spending should be added into the calculation of GDP. the point I was trying to make in my initial post is that rather than focusing on mining resources, the Nigerian government can raise our GDP and get many more Nigerians out of poverty by simply investing in public quality basic education. My point is that we do not have to produce and sell something tangible to grow an economy. If you disagree with this point, I would like to hear your opinion.

The second point I made was that cutting salaries of workers who produce no value to Nigerians and using that money to finance basic education will also lead to economic growth, so the government should not borrow money for this but look inwards.

New Zealand implemented a policy similar to this in the 80's

0monnak0da:

Please stop twisting things
Body temperature is a measure of health
Body temperature is not health
GDP is simply economic output of a nation
Stop confusing yourself with all this nonsense.
Government spending may or may not be part of the GDP depends WHERE government spends. If it is borrowing money to buy weapons ABROAD to fight a war how is that economic output?
e.g when the spend is borrowed money from Brazil spent on Helicopters from the USA what has that got to do with GDP for the reference period?
GDP is not measured by imports/exports. Balance That is nonsense.

What do you mean by economic output? How do you calculate economic output? Common man, you don't need to be rude. gross domestic product is an economics term and it is calculated by adding the 4 components I mentioned. You can check any macroeconomics textbook. This is really common knowledge. The thing is education isn't really the best in Nigeria.

Your example is also shitty. Trader moni is an example of government spending. Whether the money is borrowed by the government or not, it is part of our GDP. the government spending on infrastructure such as schools is part of government spending.

0monnak0da:


You seem to be mixing so many things up here
I do not know what is the basis for your "components" of GDP or how government spending is a "component of GDP"
Government spending is not economic output.
That America is the largest economy is not evidence of "efficiency"
largeness does not necessarily mean efficiency or indeed prosperity.
Largeness is often an indication of "hinterland" size and population e.g China and India are among the largest economies
A better measure of "efficiency" would be output per capita though that is still a crude measure if it ignores purchasing power parity.

The US economic dominance is very much a measure of military and strategic dominance and not just economic dexterity. The dominance of the US is a direct consequence of winning the second world war and having dominance over the major economic powerhouse of Europe ,Japan and Korea.
This has made the US banking system in control of the world economy with the dollar as the go to reserve currency .
If we consider that for decades all trade between Nigeria and countries like China, Taiwan India and many others is conducted by first buying dollars and then converting to the index currency and vice versa on return . The US profits from that structural issue without moving a finger and that is the case with several other countries around the world. not only that crude oil and virtually all commodities are priced and traded in dollars.The US dollar thus has international value based on demand because of trade in goods and services that are neither entering or leaving the US and have nothing to do with the US but often involves the US banking system and they get a slice of virtually all dollar transactions one way or another. This is a strategic consequence of winning World War 2 , isolating Russia and China and bringing the other significant economies under its control. What this has meant for decades is that the US warehouses most of the World's capital which has been available to the US government ,its businesses and people to borrow at very low interest rates.

There is no money to borrow in Nigeria but billions are available in the US and this is what led to the crash in 2008 . The US dollar is pretend gold and the US is screwing the whole world. Yes there have been many good businesses started in the US but ultimately it comes down to access to cheap finance
Many countries are waking up but there is a long way to go e.g. Nigeria and China announced a currency swap and many countries

https://www.investopedia.com/articles/investing/051415/how-calculate-gdp-country.asp

a country’s GDP is a measure of consumer spending (C) plus business investment (I) and government spending (G) as well as its net exports, which is exports minus imports (X-M).

Nice educative comment. I actually had this same opinion you have and blamed Kissinger for creating the petrodollar which is the deal between America and Saudi Arabia for oil to be priced and sold in USD. This effectively ended the gold standard and dollarized (not a real word) the world.

A few years ago, I realized that this advantageous position America has also has its disadvantages such as the fact that since 1970, America has had a current account deficit every year apart from four years. This is as a result of the strength of the dollar. Companies in the states have had to close down because of expensive labour and the federal reserve cannot manipulate the value of the dollar since its true value is in its transparency. In my opinion, President trump thought he could reverse this system but quickly realized that this petrodollar system has not only led to global growth and prosperity for hard working serious nations such as Singapore, China and Malaysia and preserved the way of life for the western world, but it has also prevented another world war.

Think about it this way. Global economics is like a pyramid. As you work hard to get rich, you climb up the pyramid. A higher number of countries are poor so these countries form the base of the pyramid. Once you get too rich, wages in your country start to rise. This makes producing goods in your country less profitable.
You join the G6, you get a higher percentage of IMF's special drawing rights (SDR), and you compete with other countries at your level for global reserve currency rights. The other mismanaged countries at the bottom of the of the pyramid beg you for aid and you print your currency (piece of paper) and you provide aid to these countries. You bargain for trade deals and you either take their mineral resources, since they really have no use them, or your set up factories to take advantage of their cheap labour, if such countries have managed to handle their security and political risk. After all, Life is always more important than money. God bless Henry Kissinger.

The point I am trying to make is that it is a fair system. For many years, I felt just the same as you presently do, but my present opinion is that the system has maintained peace and hasn't prevented serious countries from developing.


Finally, America's GDP growth is tied mainly to improvements in efficiency both in production and in meeting peoples basic needs. Even the idea of outsourcing provides cheaper goods at the same Quality and is a prime example of the move towards efficiency in the States.