The Re­ces­sion of the Trust of Nige­ri­ans in Eco­nomic Data

Financial Nigeria Magazine - - The Fixes From The Man­ag­ing Edi­tor -

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.

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