The Recession of the Trust of Nigerians in Economic Data
After five consecutive quarters of negative economic growth, the Nigerian real GDP grew by 0.55% in Q2 2017, according to the National Bureau of Statistics (NBS). This means the recession is over. But across the socio-political spectrum, Nigerians refuted the end of the recession.
It was suggested that the positive data was a product of political pressure than economic reality. This prompted the Statistician-General of the Federation and CEO of the NBS, Yemi Kale, to mount a spirited defence of the data in the media. But we don't know if he convinced those who wouldn't be persuaded by data. Nevertheless, the professional integrity and grit of the NBS has been well established over the 15-month stretch its data confirm Nigeria's worst recession in 29 years.
There are three reasons Nigerians didn't accept the import of the Q2 data on economic output growth. One, Nigeria is not a scientific, data-driven society. Accordingly, the country's fiscal federalism operates on continually falsified census data. This serves broadly as a cue for making policies without the guidance of data. By extension, Nigerians entrust their health to faith-healers, fortunes to the oracles, and act mostly by instinct.
We now do less than the bare minimum in building a knowledge society. From the rubbles of nationbuilding collapse in the First Republic, rose the autocratic system of military rule that seized the polity for 28 years between 1966 and 1999. In the Fourth Republic, the knowledge society has continued to suffer setbacks, with inadequate public spending on education, incessant closure of public tertiary institutions and the sheer brigandage in the public spaces, which gets well-educated Nigerians disinterested in participating.
Two, the scant economic data available are seen as a political tool. But to underscore the nature of our politics, however, it is not negative economic data the politicians use to tarnish one another; it is positive data, by denying it.
When the government of the People's Democratic Party (PDP) rebased the GDP in 2014, the 2013 national output jumped to $510 billion. This confirmed the country as the largest economic powerhouse of Africa. But the then-opposition party, All Progressives Congress (APC), now the ruling party, derided the idea that the Nigerian economy had towered ahead of its rival, South Africa. The parlous state of Nigeria's infrastructure, high unemployment rate and abysmal electricity supply were cited as the reasons the Nigerian economy couldn't have been bigger than South Africa's.
Now the opposition party, the PDP must have felt it was payback time for the APC government when the Q2 2017 data shows the economy has returned to positive growth. PDP national leaders derided the data and the idea of Nigeria's economic recovery. With over 62% of Nigerians living below the extreme poverty line of $1.25 per day, and without the will to make things better by the politicians, they take turns to lampoon positive data as though the country should remain in the doldrums.
The third reason is the general lack of understanding, or acceptance, of the nature of economic data by the average Nigerian and a great number of the ruling class. The GDP is the total value of aggregated national economic outputs. It is a quantitative data. It doesn't deal with the qualitative attributes, not even of production.
Economic data are nuanced. For instance, the rate of inflation, year-on-year, has fallen in consecutive months, from 18.72% in January, 2017 to 16.01% in August. But the prices of goods and services were still rising during this period. What the “falling” inflation figures mean is that the rates at which prices have been increasing monthly this year, relative to prices in the corresponding months last year, have been reducing. On the average, prices were higher this past August than they were in the same month last year.
With diminished real income (income after adjusting for inflation), Nigerians whose income has been flat since the end of 2016 or risen below the average inflation rate in 2017 are worse off today than they were last year during the recession. Moreover, amongst the 3.7 million Nigerians who lost their jobs last year, only those already reabsorbed in the labour market are likely to accept the recession is over. Even so, those who were part of the huge labour redundancy when real GDP growth averaged 6% under the PDP governments have maintained the growth was a ruse.
It is valid, if the high growth of the past years which we could now only reference with nostalgia, is described as “jobless growth.” That speaks to the structural rigidity of our oil economy, in which growth has weak correlation with job creation. But some Nigerians presumably left out of the benefits of the past growth episode insist the economy had been in “recession” all those years of high economic growth.
So we see partisan politics and harsh personal economic reality strengthened the lack of understanding of economic data among Nigerians. This needs to change. Those clamouring for positive, qualitative socioeconomic data should realise that knowledge is the basis of life improvements. If we don't build a knowledge society – including by fostering data-driven policymaking – we will continue to undercut economic growth and development.
Those who for political alignment disbelieve positive economic data erode their own credibility, and could undermine the external competitiveness of the economy. Nigeria that is stuck in negative growth can be a selffulfilling prophesy. Indeed, much of the 2016/2017 recession derived from the fixation on the negative aspects of the legacy of the past PDP governments, with five-month delay by President Muhammadu Buhari in appointing ministers leading to further delays in policymaking and policy missteps.
Positive GDP data, while not immediately amounting to improvement in the quality of life, holds the hope for upliftment. The IMF projects the economy will grow by 1% in 2017. This means Q3 and Q4 growth would rise above 1 percent. If this happens, we would see more easing in the extant tight economic conditions.
The big challenge is that Nigeria remains susceptible to oil price shock and disruption to domestic production of the commodity. The rebound in oil production and higher prices in Q2, relative to a year earlier, was the reason the recession ended. To forestall a worse round of “jobless growth” and a more horrendous recession that lurks in the shadow of the current disorganised economic management, we have to ramp up efforts at diversifying the economy and building the reserve buffer.