Revisiting the economy, 1984anomics (How the econony stood in 1984 and now 2015)

The elections are here again. Predictably, the two leading candidates are the incumbent, President Goodluck Jonathan, and former military head of state, Gen. Buhari, who has fast established himself as a recurring decimal in recent Presidential contests.

Given that both have at some point been head of state, it leaves us with easy evaluation criteria – their past achievements. I am not one to take the promises of politicians too seriously, especially given that some are ready to even tweak their dress sense to suit your expectations; rather, I’m more interested in how both leaders managed the economy.

Although there are a myriad of social and emotional reasons one can predicate his decisions on, given my bias for facts and figures, I have decided to go empirical – with verifiable facts and figures of both period under review. For a private sector man like me, the economy is key. How was the economy under Gen. Buhari and how is the Economy under President Jonathan? It’s a straight duel between Buharinomics and Jonathanomics. In this match up, I shall rely on verifiable data from reputable sources.

Let me start with a caveat: I am not an economist, and expectedly, lack the finesse of one, especially in explaining economic concepts. Thankfully, I do not need a Ph.D. in Economics to grasp basic economic issues that concern my enterprise. As an Engineer with inclination for research, a private sector person, and an entrepreneur, my personal interactions with several sectors of the economy, and my experience in “doing business” in the country, gives me first hand opportunity to robustly interact, interrogate, engage and assess the state of the economy, especially in the last decade. Let me also state here that because I was quite young during the Buhari regime, I will rely on verifiable data from reputable sources and expert opinions which shall be properly cited. 

Management of the Economy

Buharinomics

When Gen. Buhari truncated the civilian administration of President Shehu Shagari on 31st December, 1983, the economy was already in some sort of recession following dwindling proceeds from oil revenue. And so, expectedly, there were a few jubilations when he came in. The administration also got the support of the public initially, in the fight against corruption. However, such goodwill petered away a few months down the line, as the public appeared to have lost confidence in the draconian methods and the questionable motives. The foreign policy of the administration also left her further alienated in the comity of nations.

In management of the economy, the initial enthusiasm by citizens also faded away a few months later as conditions worsened. The regime put in place austere measures in addition to some crude jack-boot strategies that left citizens reeling in pain. The result was that the same citizens who sang “Hosanna” on New Year’s Eve, began to sing “Crucify him” few months later. Gen. Buhari had a taste of the citizen impatience (with government) he benefitted from initially. Twenty months after, that regime was history. In analysing Gen. Buhari’s regime, the Encyclopaedia Britannica stated that: “Insurmountable economic problems plagued the Buhari regime as petroleum prices collapsed in the face of expanding foreign debt. Buhari instituted austerity measures that caused severe hardship to the average Nigerian. 

In addition, political corruption continued unabated, with politicians escaping to Western countries with millions of dollars in government money”. The British Press led by the Daily Telegraph and London Times, in separate articles, blamed the fall of the regime on the failure of his administration to solve the worsening economic crises (Source: Guardian Newspaper, 30th August 1985). For some, the loss of public goodwill by that regime was not a surprise. Indeed, Over a year before the fall of that regime, Clifford D. May of the New York Times of 1st May 1984, wrote that: “In addition, prices for food and other essential commodities, which fell in the first weeks after the coup largely because of the presence of soldiers in the marketplaces, have now returned to or exceeded their levels before the coup. Unemployment has been rising, and many of the imported raw materials and spare parts needed to keep factories running have been lacking".

Clifford’s submission above clearly gives an idea of the jackboot price control strategy, without recourse to production cost and market forces. The regime insisted on such rigid, hostile and ineffective strategies at the expense of liberalization and investor friendly strategies. This koboko-inspired price control consequently inspired scarcity, and Nigerians had to queue for basic commodities that were hitherto readily available. The result was that the scarcity drove prices even higher, inflation spiked. In a report by the Guardian Newspaper of 26th May, 1984, the then Nigerian Grains Board was reportedly unable to buy grains “because market prices were higher than what it was allowed to pay”. In another report by the Guardian of 24th May, 1984, the Association of Master Bakers, Confectioners and Caterers, in view of the scarcity and rising price of bread, made a passionate appeal to government, and offered advice on the way forward. Such was the life in 1984; essential commodities such bread, milk etc. had turned scarce commodities just a few months into that administration. The market had reacted sharply against the koboko economics. 

In scrambling for respite, following dwindling oil price and depleting foreign reserve, the regime went into counter trade, otherwise known as barter trade with some countries, where oil was exchanged for certain commodities. This move was unpopular, unprofitable and a questionable option of international trade, as the result would prove. Mallam Nasir El-Rufai years back described it as “Buhari’s stone-age economic strategy” (Source: Sahara Reporters, 4th October, 2010). Writing on this, Okpeyemi Agbaje in an article in Businessday Newspaper of 10th December, 2014, stated that the ‘economically inept Buhari-Idiagbon regime even tried “counter-trade” euphemism for “trade by barter” which resulted in even greater fraud than import licensing!’. Writing in the 1985/86 winter edition of Foreign Affairs (a publication by Council on Foreign Relations), Larry Diamond wrote that:

“Furthermore, the continuing economic crisis contributed heavily to the public’s profound disaffection. The Buhari government’s progress toward balancing Nigeria’s external payments came at the price of deepening austerity and recession. As industries remained desperately short of raw materials and spare parts, tens of thousands more workers lost their jobs and severe shortages pushed inflation to an annual rate of 40 percent. After three years of steep decline in gross domestic product, no relief was in sight.” 

Given that the situation today is a bit similar to 1984, in terms of dwindling oil revenue occasioned by a steep decline in global oil price, are we expecting another round of barter economics should Gen. Buhari become President? I shall return to this later.

Jonathanomics

The Jonathan administration focused on areas they felt were critical to the economy. They embarked on a drive to liberalize the economy and made bold reforms in Agriculture, Manufacturing and in Trade and Industrial Strategies. Recognizing that power is critical to all sectors of the economy, and that government alone cannot bring the needed efficiency to the sector, the administration decided to privatize the sector. 

One of the high points of the Jonathan administration, is the diversification of the economy. Writing for Forbes, Thomas Hansen noted that: “Nigeria’s economy has achieved consistently high growth of about 6 percent a year over the last decade, largely driven by a fast-growing non-oil sector. In fact, non-oil sector has quietly grown at a rate of up to 8 percent a year”. From the manufacturing sector to Agriculture, rapid gains have been recorded.

In manufacturing, the administration is arguably the most successful in the history of this country. Deliberate policies were put in place and the results have been impressive thus far. To support manufacturing, apart from improved infrastructure (Transportation, power, etc.), and bail-outs and grants in some cases (e.g. Textile Industries), the government has had to put in place friendly trade and industrial policies for a quantum leap. An obvious success story is the case of the acclaimed automotive policy that has brought instant results to the sector. A policy was put in place that incentivized (zero import duty) importation of completely knocked down vehicles, while discouraging importation (increased import duty) of already assembled cars (old or brand new). 

The whole idea is to encourage auto manufacturers to set up assembly plants in the country, which will provide jobs to our teeming youths; including craftsmen, technicians, Technologists, Engineers, and other professionals across the value chain. The government also made it a policy to patronize the locally made/assembled cars. Today, Nigeria has a local car manufacturing company (Innoson Motors), churning out different models of her brand. Today, Assembly plants are springing up from the dead; as at the last count, the following brands have set up assembly lines in the country – PAN, Volkswagen, Kia, Hyundai, Nissan and many more that are coming on stream. In a recent report by Renaissance Capital (RenCap), the manufacturing sector was identified as the “major driver of economic growth in Nigeria, growing from 14% in 2012 to 22% in 2013 and growing faster than sectors such as telecommunications, oil and gas, etc; accounting for a third of the total growth in the economy”. A news report by Businessday Newspaper of July 15th, 2014 shows that this figures by the RenCap report corroborates earlier “figures by the Manufacturing Association f Nigeria, which showed that there was an increase in manufacturing capacity utilisation from 46.3 per cent recorded in the first half of 2013 to 52.7 per cent in the 2nd half of 2013”. 

Through the backward integration policy for cement production, today, Nigeria has not only attained self-sufficiency in cement production, but is also a net exporter, with installed capacity rising from 2 million metric tonnes per annum to 39.5 million metric tonnes installed capacity.

According to the Q3 2014 report of National Bureau of Statistics (NBS), the Nominal growth of the Manufacturing sector was 21.58% (year-on-year) in the third quarter of 2014. The report noted that: “The contribution of Manufacturing to Nominal GDP was 9.78 percent in the Third Quarter of 2014, up from 9.01 percent recorded in the third quarter of 2013 and 9.77 percent in the second quarter of 2014”. Let’s move to Agriculture.

In recognition of the enormous potentials of the agricultural sector, the administration made bold policies that turned things around. Today, agriculture has moved from the realm of subsistence to commercial dimensions. Today, graduates are involved in farming. Agriculture has moved from a sector of the uneducated to a thriving business for professionals. Only last year, the biggest rice processing mill in Africa, with 105,000 metric tonnes capacity, was commissioned in Nasarawa State. The provision of fertilizer to farmers that was hitherto burdened by a fraudulent process was sanitized with the introduction of the e-wallet that ensured that farmers get their allocations directly and transparently. It is noteworthy to mention that, Nigeria is the first country in Africa to develop the e-Wallet for input delivery to farmers. In 2012 alone, government saved 25 billion naira through the use of the e-Wallet. Through this scheme, over 10 million farmers have been given direct access to subsidized fertilizer and high quality seeds. 

Apart from this, the government has continued to support dry season farming, thus ensuring year round production of certain crops. The result of this is that Nigeria’s food import bill has drastically reduced by almost half a trillion naira in one year (from 1.1 trillion Naira in 2011, to 648 billion naira in 2012). Going by the consistent progress made, it is expected that the country will be self-sufficient in rice production by the end of 2015. 

In the Q3 report of the NBS, they noted that: “In nominal terms, GDP of the Agricultural sector grew by 9.19 percent (Year-on-Year) in the Third Quarter of 2014, up by 2.72 percentage points from Third Quarter of 2013 and 2.52 percentage points from the previous quarter of 2014. Within the Sector, Fishing grew the fastest by 18.76 percent, followed by Livestock at 12.36 percent. Quarter-on-Quarter, the sector grew by 45.54 percent in the Third Quarter, with Crop Production and livestock growing the fastest by 52.83 percent and 5.05 percent respectively. The contribution of agriculture to Nominal GDP stood at 23.77 percent in the Third Quarter of 2014.”

The result of these is that the economy has continued to grow at an impressive rate. At an average of 7% GDP Growth, the Nigerian Economy is one of the fastest growing in the World. The favorable business climate and attractive business opportunities has meant that the country continues to make gains in Foreign Direct Investment. The United Nations Conference on Trade and Development named Nigeria as the No. 1 Investment Destination in Africa. According to Forbes, Nigeria has attracted over $20 billion of FDI in the last 3 years alone.  In a report by a US-based economic advisory body, Frontiers Strategy Group in conjunction with Wall Street Journal, Nigeria was number one on the Frontiers Market Sentiment Index; meaning that Nigeria “emerged as the frontier-market economy that is attracting the most attention from American and European multinationals”. KPMG, one of the World’s leading Audit and Financial advisory firms also ranked Nigeria as one of the top 4 investment destinations in the world. Also, Nigeria made it in the MINT (Mexico, Indonesia, Nigeria and Turkey) categorization; a group of four countries attracting special attention from global investors for “growth and investment”.

Other notable mentions are the grants given to the impressive entertainment sector (specifically 3 billion Naira grant to Nollywood) that now proudly accounts for a bit of the growth in GDP; the bail-out given to the textile industries; the YouWin Programme that has empowered young entrepreneurs to grow their businesses; the Graduate Internship Scheme, to grow capacity, etc.

It will be a disservice to end the review of Jonathan’s Nigeria without talking about insecurity. There have been growing concerns on the rising threat of terrorism. While the government has made spirited efforts to curb the menace, Boko Haram, that is fast becoming a terror franchise, continues to stage a come-back after each set back. Of major concern is the need to equip the military, as it appears previous administration may not have done justice to their defence budgets. While the administration deserves commendations for the efforts to re-tool the military, however, it is noteworthy to mention that such exercise will realistically span many budget years in view of the fiscal demands of defence equipment. That said, government must continue to improve the security situation as it is an integral factor, responsible for the growth or decline of any the economy. If we have made this much progress in the midst of such security challenges, imagine what will happen if we can tackle insecurity.

Comparative Analysis 

Key Economic Indicators

The Buhari government was largely a mono-economy; public sector driven while the Jonathan administration’s main policy thrust was/is pro-private-sector, where government makes policies that will make the private sector thrive. In trying to get a clear picture of the two administrations, it is good to juxtapose both, and look at the key indicators. Between 1984/85, GDP averaged at about $28 billion, today it has grown exponentially to $521 billion. In 1984, GDP growth was negative (-2.02%), while GDP growth has been averaging over 6% under President Jonathan. In 1984/85, GDP per capita was averaging about $344, by 2013 it had risen to $3,005.51. In 1984/85, GNI averaged at about $27 billion, by 2013, it has risen exponentially to $499 billion. Export of Goods and Services (% of GDP) was 15.71% in 1984, by 2012 it had risen to 31.41% (Source: World Bank). By1984, inflation was as high as 17.82%; as at November 2014, inflation stood at 7.9% (Source: CBN). See figures below for some graphical analyses to give us a pictorial view (Data courtesy World Bank).

Quality of Life

The quality of life of the average Nigerian has improved drastically today, than what it was in 1984. Although, due to the impressive freedom of expression today (as against the extreme clamp down on dissent in 1984), globalization and the attendant awareness, and ICT channels such as social media, one would get the false impression that people are actually unhappier now than then. However, if you look at all the indices of Happinomics, the Nigerian today, obviously has an improved quality of life than in 1984. Today, teledensity has deepened; access to broadband has also increased. Today, more Nigerians have access to Radio and TV (both cable and terrestrial) in their homes than it was in 1984. Today, more Nigerians own cars or have access to better transportation than there was in 1984. Today, an average Nigerian has better access to health care, school, etc. than it was in 1984. For example, in health care, under the current administration, Guinea worm, which hitherto affected over 800,000 lives per year, was eradicated. Immunization coverage increased from 38% in 2012 to 82% in 2013. The result is that Nigeria is expected to be polio free later this year. These parameters and the attendant ‘happiness’ or satisfaction that comes with it, reflects in the life expectancy of Nigerians. The average life expectancy in 1984/85 was 46 years, by 2012 it has increased to 52 years (See figure below. Source: World Bank). So, it is right to say that while we appear to complain a lot more today, due to the reasons above, however, actual quality of life has improved tremendously when compared to 1984/85.

The Scourge of Unemployment

In view of the analyses above, it is easier to predict which of the two regimes would create the more jobs. With one being a rigid public sector driven mono-economy, wholly dependent on crude oil, which at the time was dwindling, and the other that is private sector driven, with favourable trade and industrial policies, the difference is expectedly clear. As Larry Diamond, writing for Foreign Affairs, aptly summarized the gloomy situation in the Buhari regime “…industries remained desperately short of raw materials and spare parts, tens of thousands more workers lost their jobs…” According to a Daily Times report of 17th February, 1985, of the 92,116 students that graduated from the university, only 21,026 secured jobs, representing only 22.8%. A breakdown of this shows that Federal Government employed 7,484, State Governments employed 10,440 and Private Sectors 3,102. What this means is that 77.2% graduates remained unemployed, which is not an impressive job card. A breakdown of the above figure shows government (state and federal) employed 85.25% while the Private Sector employed 14.75%. Without further analysis, one can deduce that this was a static mono-economy; public sector dominated economy where government calls the shot. It is easy to extrapolate the causes of this which is predictably lack of investor-friendly trade and industrial policies that stimulates private enterprise. An obvious sign of a government with extremely hostile trade and industrial policies; the type that asphyxiates and suffocates creativity and private enterprise. 

Under the Jonathan administration, although it is important to note that the country still falls short of her overall potential, however, when juxtaposed with the Buhari job card, it is a tremendous improvement. According to the NBS, from 2012 to 2014, 2.43 million jobs were created. In 2014 alone, in both Q1 and Q2, managerial, professional and technical cadre recorded 1,085,071 employees, operatives employed were 943,652, and clerical related employment stood at about 679,173. The Q3 2014 Summary shows that a total of 349,343 new jobs were created. A breakdown of this shows Formal Jobs - 145,464, Informal Jobs - 198,144 and Public Sector Jobs - 5,735 (Source: NBS). So, as you can see, although the country falls short of her real potential in terms of job creation, however, comparing 1984/85 with today, is like comparing inflation in Mugabe’s Zimbabwe to that in Bill Clinton’s United States. No Contest!

Infrastructure

One of the ways government can stimulate business enterprise is through the provision of quality infrastructure. You need power, you need good roads, sea port, airports, etc. for business to thrive. In this analysis, I’ll concentrate more on power and transportation:

Power

In power, as at 1984/85, the power sector was 100% government owned. Like other public enterprise of that era, this sector was riddled with inefficiency and lack of capacity and expertise. Within this period, no dam or turbine was built, and so there was no increase in capacity.

The Jonathan administration embarked on an ambitious privatization policy for the power sector to leverage on the effectiveness of the private sector and the capacity to attract the needed funding and expertise in the sector. Privatization of the sector has given birth to 10 successor DISCOs and 5 GENCOs. Manitoba Hydro International, a leading Canadian Consultant was contracted to reposition the Transmission Company of Nigeria (TCN). It is only a matter of time and we will begin to witness the needed efficiency lacking in the sector. As an incentive for investors, the Jonathan administration set up the Nigerian Bulk Electricity Trading Company (NBET) PLC to provide the needed investment guaranty for Power production. With this, all GENCOs are guaranteed payment for every wattage generated. He graciously approved $750 million as initial capitalization. This investment cushion is necessary to stimulate further investment in the sector. 

Also, in line with global trends, the Jonathan administration decided to diversify the energy mix, by going in to renewable energy. Recently, the administration commissioned a renewable energy initiative, Operation Light-Up Rural Nigeria. This is a 100% solar powered power project in partnership with Schneider Electric of Germany and Phillips International of Netherlands. The project is aimed at supplying electricity to rural areas not on national grid. Only last year, the President commissioned one of such projects, a 3KW capacity solar powered electricity project that would provide power to 1005 households in Durumi suburb, about 15km from Maitama. Plans are on to extend this to other rural areas not on the national grid. Although, one may not see the effects immediately, but a solid foundation has been laid in the power sector. As Peter Hanson wrote in Forbes Magazine of November, 2013: “The fact that power privatization did happen is significant. Nigeria’s notoriously erratic power supply has been a brake on economic growth. Although it will likely take years for the power supply to improve, private investors are better placed to access the funding and technical expertise required to make it happen. An estimated $5 billion a year in financing is required”.

Transportation

Not much is known of any significant achievement of the Buhari administration in the transportation sector. The high inflation and scarcity at the time meant that vehicles and spare parts were either in short supply or too expensive. In a research commissioned by the African Association for Public Administration and Management (AAPAM) and carried out by the members of the Department of Public Administration in Obafemi Awolowo University, Ife, they noted the following: “The number of all categories of vehicles increased steadily up to 1984 and declined sharply thereafter. The shortage of commuter vehicles has increased tremendous mobility crises in Nigeria”. What this means is that there was mobility crises at the time, hence the long queues at bus stations. 

In the railway sector, what Nigerians remembered the Buhari administration for was the outrageous cancellation of the Lagos metro project; choosing to pay a fine worth about 60% of the cost of the project as fine for contract termination. This action will continue to hunt that administration, as one cannot understand why such damaging decision was made, in view of the potential positive impact the project would have had on the economy, and the loss the country suffered by terminating the contract.

On the contrary, the Jonathan administration has made huge progress in the railway sector, when compared to his predecessors. The Rail lines that where hitherto comatose, have been revived. The following lines have been revived, with more to follow: Lagos - Kano, PH - Maiduguri, PH - Enugu, Abuja - Kaduna, Itakpe - Ajaokuta - Warri, etc. In 2012, 4.2 Million Passengers reportedly used the rail services, a drastic improvement from the 1 million, 3 years earlier. As part of efforts by the Jonathan administration to revamp the sector, 25 new locomotives was supplied by General Electric (GE), in addition to over 200 coaches and wagons that have been refurbished. As part of plans to ensure sustainability and deepen the sector, FGN has reached agreement with GE to establish an Assembly plant in Nigeria, that is expected to handle about 200 locomotives within the next 10 years (Source: Transformation at a Glance). Only recently, KPMG listed Nigeria’s high speed rail project, a project proposed by the Jonathan administration, as one of the global top 100 world-class infrastructure. The rail is expected to connect Lagos, Kano, Kaduna, Warri, Bauchi, Abuja and Port Harcourt, and it is expected to cost about $13 billion. 

In water transportation, the Nigerian Inland Water Ways under the Jonathan administration has also made in-roads. Dredging of lower River Niger (Baro in Niger State to Warri in Delta) has greatly enhanced inland water transportation. Also, in addition to construction of the Onitsha port (Lokoja and Oguta Port are also under construction), the Jonathan administration made bold reforms in the ports sector, reducing the number of agencies at the ports from 13 to 7. By this, unnecessary bureaucracies were reduced. Thus, clearing time has reduced from an average of 39 days to about 7 days for trouble-free cargo. Also, the ports now operate 24 hours in a day.

In the aviation sector, the Jonathan administration has made tremendous progress as well. First, the country recorded total radar coverage years back (TRACON). The Akanu Ibiam Airport in Enugu was upgraded to International status. Also, all 22 FG-owned airports in Nigeria are being re-modelled. The airports are now all wearing new look. To embark on such massive remodeling simultaneously, especially considering the financial implications, is most commendable. Also, within this period, the administration also installed state of the art safety equipment and meteorological infrastructure, as part of efforts to improve on safety of air travel. Also, the administration also set up the Accident Investigation Laboratory, the first in West Africa, and only the 4th in Africa.

Conclusion

We have seen the facts; although I must add that we are in a society where facts mean nothing to some. Which would you go for? The koboko-inspired, barter oriented economy of 1984 or the liberalized economy of today. You are free to make your choice. Let me end by sharing two quotations:

“When you see government leaders really bullying business, you know that government's economic policy is failing. They get angry and they get desperate” - Amity Shlaes (American Author and Newspaper Columnist)….Does this remind you of Nigeria in 1984?

“We need to have a pro-growth policy put in place that offers people hope and offers the opportunity for businesses to expand and for them to have confidence in what the world is going to look like for the next two or three or four years with respect to economic policy” – Dick Cheney (46th Vice President of the United States)…Does this remind you of Nigeria today?

As a private sector man, I’m in no dilemma – of the two, my choice is pretty easy and straight forward! May the man with the better economic policy win.

R. Tombari Sibe Writes in from Port Harcourt. He is an Engineer and a Policy Strategist. He tweets as @rsibe