Jide Akintunde, Managing Editor/CEO, Financial Nigeria International Limited
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Nigeria outlook in 2019 07 Jan 2019
For most Nigerians, it is good riddance to 2018. A lot of bad things happened to too many Nigerians last year. 2018 was the year of mass graves, of citizens who were killed in their sleep or on their farmland by Fulani herdsmen. There were 1,700 such victims between January and September, as tallied by Global Terrorism Index. In the first six months of the year, over 700 Nigerians fleeing the harsh conditions at home ended up at the bottom of the Mediterranean Sea, according to Migration Enlightenment Project Nigeria.
In January 2018, Nigeria became the poverty capital of the world. 87 million fellow citizens – the highest number for any country – were trapped in extreme poverty. By year-end, additional 3.15 million Nigerians became extremely poor, as six people fell below the poverty line every minute. In December, the National Bureau of Statistics released its latest employment report, which shows the unemployment rate has more than doubled to 23.1 percent, from 9.9 percent three years earlier.
More generally on security and economic wellbeing, 2018 was a nightmare from which Nigerians want to wake up into different realities in 2019. The hope is that the new year will bear no semblance to the preceding year. Unfortunately, 2019 comes with new and old Nigerian challenges.
The immediate anxiety is the general election. 2019 is an election year. General elections in Nigeria are historically associated with widespread, general breakdown of law and order.
Security concerns are particularly elevated in the 2019 election cycle. In the recent governorship elections in Ekiti and Ondo states, the security agents were deployed to assert a partisan agenda of the ruling party, APC, to win at all cost. In that was little protection for the voters, journalists and other election observers. The outcomes of those elections remain disputed till date.
Any real assurance of a credible poll in 2019 has been further diminished by President Muhammadu Buhari, for withholding assent to the Electoral Act Amendment Bill 2018. There is now a real prospect that the results of the elections that would be hotly, if not bitterly, contested would be discredited and disputed.
Yet, the 2019 presidential election will be a novelty. It will be polarising in a new and different way. The political establishment is pitted against itself through the APC and PDP presidential candidates. But the septuagenarian candidates of the two parties are also running against some popular “youth candidates”, who represent the vast aspirational “youth constituency” that is fed up with both parties.
In the meantime, there seems to be lack of unity among the “youth” presidential candidates. But if they don't present a united front to contest the election, they may join forces in mobilising the youth to object to electoral irregularities that may be perpetrated by the two major parties, who basically try to out-rig each other in elections.
In the environment of intolerance, which the incumbent administration has fostered, in addition to the government's tendency to use maximum military force to quell serious descent, a frightful post-election upheaval may mar the 2019 political outlook. This calls for peace initiatives to be more frontloaded before the election, rather than being reactive to a crisis outcome.
It is no brainer that the political risk of 2019 will weigh heavily on the economic outlook. The signs are already showing. In Q3 2018, capital importation into Nigeria nosedived by 48.2 percent quarter-on-quarter or 31.1 percent year-on-year. Nevertheless, there are other powerful headwinds against the economy this year.
The 2019 Appropriation Bill has the hallmarks of the oil-dependent Nigerian economy and the mismanagement of the same. The budget was presented to the National Assembly on December 19th. Therefore, its passage will likely be closer to mid-year. Whatever salutary effects the capital expenditure in the budget could have would be missed in the first six months of the year.
Moreover, it is a contractionary budget, which may be antecedent to austerity measures, especially if the current administration succeeds itself. Whereas government needs to spend more to stimulate the economy, it has budgeted less than in 2018 by about N300 billion. Yet, uncertainty about how the 2019 budget would be financed is perhaps higher than in the previous years.
There will be challenges in financing the deficit. And it is highly unlikely that the 2.3 million barrel per day (bpd) oil production benchmark would be achieved. The best-case scenario for oil production in 2019 would be just about the same average 1.9 million bpd achieved in the first three quarters of 2018.
The budget may as well be dead on arrival, on account of its benchmark oil price of $60 per barrel. Recognising that oil was trading below his budget price while presenting the appropriation bill to the National Assembly, President Buhari said the current price threshold will lift up. But so far, since the budget presentation, oil prices have fallen further.
Nigeria's economic outlook in 2019 will be further undermined by the United States, who is poised to be the major force for global instability in the year. The US economy faces the prospect of a cyclical downturn; interest rate hikes by the Federal Reserve will spark financial outflow from emerging and frontier markets; and the trade war with China bodes ill for the world markets. Besides this, a soft or hard Brexit is good for no one; and China that will grow at a slower pace will cut oil price and global investment.
Returning to domestic issues, the Nigerian economy has been grappling with low labour productivity for some years. Growth has also been very mediocre in the last two years after the recession of 2016. Many companies, including the banks, have weathered the storm by cutting jobs. At such times, training becomes an unbearable cost. While this has helped business continuity in the short-term, it has also depressed staff morale while brewing higher levels of labour inefficiency in the system. Another year of low productivity of labour and downsizing of manpower appears to be here.
In 2019, years of short-sighted political leadership and cumulative effects of the structurally-defective economy that cannot create sufficient jobs may come to a head. But this, actually, amplifies hope on the horizon. The election, rather than perpetuate the recent course of further decay in the system, may actually help move the needle or even offer a profound new and different beginning. If this appears far-fetched, we should nonetheless remain hopeful. “Hope that is seen is no hope at all.”
Happy New Year!