2020 and the weight of figures: ‘Covid was only complicit….’

Last year has gone but the burden of its scaring statistics could continue to weigh on the economy and livelihoods as another year unfolds. The current recession is the most sickening hangover of last year’s recklessness and poor decision. The speed and depth of the recovery will not depend on the global attitude towards the second wave of Covid-19.

LAST year was eventful for the country. Yes, there has been a pandemic that has simply remained an enigma in global affairs. The coronavirus 2019 (Covid-19) is one of the most resolute (more tenacious than the #EndSARS protest which led to the death of a yet uncertain number of youths) challenges the country has faced. 

About a week ago, one in every 2,337 Nigerians had been infected with the nebulous Covid-19. That was bad but not so terrible when one ponders on the fatality rate – only one out of 57 recovered victims (not sure the extremely-sensitive world would accept this usage) gave in to the strange virus.

 You would probably appreciate how fortunate Nigeria has been when you realise that one in every 26 recovered persons globally died. The global average infection rate is one in every 95 people (or 1.05 per cent) as against Nigeria’s 0.04 per cent.

 And the curves are not flattening anymore. Over a dozen countries have confirmed a new strain of the virus, which is putting additional pressure on the relief that came with the breakthrough in vaccination. 

So much about Covid-19! Of course, it is understandably getting all the attention as economies take stocks and preview 2021. A virus that started as a medical challenge is altering the global economy as the world knows it. While the medical aspect barely touched Nigeria, the economic impact seems to have sapped any grain of hope in the tottering economy, pushing the economy to the cliff.

And if the economy does not fall off the cliff in the next couple of months, it is not because the government has done anything ingenious to save the situation. Perhaps, the gods have decided once more to show kindness. 

The Covid-19 economic malaise has run its full circle, exposing the underbelly of an economy that has been on life support inadvertently. The reports about the escalating inflation rate, worsening employment figures, dwindling manufacturing, rising exports and retreating imports, closing businesses and tumbling naira as the year ended only reminded Nigerians of an economy that was not in a hurry to make a U-turn. Indeed, people, not the economy, change. 

‘Inflation in constant rise’

The deadline inflation opened the year with 12.13 per cent and remained on an upward trend month-on-month through the year to hit 14.89 as of November, gaining 2.76 percentage points. The increase was much steeper than the 0.48 point gained in the corresponding period last year. 

For the first time in recent times, the headline inflation maintained unbroken month-on-month positive growth throughout the year. The closest was in 2015 but the upbeat retreated in November when the inflation retreated from 9.4 to 9.3. Untamable inflation index, thus became the second rarity of the year, following Covid-19.

Food inflation became a thorny issue in the Consumer Price Index (CPI). At the turn of the year, it was 14.85, almost 100 basis points higher than the composite figure. A month to the close of the year, the difference between the two parameters was 250 basis points plus as food inflation stood at a three-year high (18.30 per cent).

If the rise in prices of food was shocking, the pattern and character of the rise were most absurd. For several months, northern states traditionally known for food production took the lead. Food inflation in Zamfara, Jigawa, Kwara and Taraba, states, who are not only famous for farming but far below purchasing power national average, were consistently above most of its peers in the south.

‘Naira receives regular thrashings…’

Arguably, galloping food inflation was driven by closed land borders and currency crisis. The Central Bank of Nigeria (CBN) during the year devalued the naira twice. The investor and exporter (I & E) window was adjusted at least three times. The devaluation saw the CBN official exchange rate rising from N305/$ to 380/$, implying that the value of the local currency fell by over 24 per cent in a single year.

But that is as far as official figures have shown. It was worse in the parallel market, where the dollar traded 30 per cent higher than the naira. The greenback traded for N362 on January 1, 2020, climbing to as much as N502/$ before declining to N470/$ at the close of business last year. 

The situation was worse for other currencies. Against Euro, the naira lost about 40 per cent of its value, trading at N570/€ compared with N409/€ it opened exactly a year ago. The naira traded for N455/£ while Nigeria welcomed 2020, which later turned awry, with excitement. The pound moved up the ladder to N628//£ on the last day of the year, translating to a 38 per cent gain in favour of the former colonial master’s currency.

The naira was worthier against most currencies on January 1, 2020, than it was on December 31, 2020. Almost all Asian and African currency was ahead of the naira in terms of value appreciation. There was no ‘better way’ to sign off the year for a tumbling naira than a last-minute haircut on the last day when it fell further and was reduced to N410.25/$ at the Nigerian Autonomous Foreign Exchange (NAFEX). It similarly fell to N410/$ at the Investors’ and Exporters’ (1 & E) window.  

‘Unemployment… 44.7m almost or fully jobless’

In 2019, there were no acceptable figures on the country’s labour market but last year, the National Bureau of Statistics (NBS) gave the country some figures to work with. The unemployment rate jumped from 23.1 per cent it stood the previous time a survey was conducted (Q3 2018) to 27.1 per cent Q2 2020. The underemployment was even higher as 28.6 per cent, up from 20.1 per cent two years earlier. 

According to the figures, 55.7 per cent of those in the labour market estimated at 80,291,894 were either jobless or not fully engaged. By implication, 44.7 million individuals who were willing and able to work were either almost or fully jobless. 

But the problem was much deeper. The number of persons in the economically active or working-age population (15-64 years) during the reference period of the survey was 116,871,186, 46 per cent higher than the size of the labour market. There could be different reasons why such a high number of people are not participating in the labour market. Several individuals could be in school or preoccupied with other responsibilities. But in Nigeria’s case, exhaustion and despair are probable reasons. 

‘The debt impasse… overstretched fiscal capacity’

Last year also, Nigeria overstretched its fiscal capacity and got up to the cliff. The country entered the year with a total debt profile of N27.4 trillion. As of September, the debt stock had grown to 32.2 trillion, growing by approximately 18 per cent in nine months.

On the last day of the year, President Buhari signed the N13.59 trillion 2021 budget into law. The nominal deficit is about 40 per cent of the figure. With so many spurious parameters such as oil production benchmark, which exceeds the current OPEC quota with about 300,000 barrels per day, and unrealistic revenue generation targets, the budget seems to signal the country’s commitment to deficit expansion and burrowing.

When you consider that there are countries whose debts to GDP ratio is over 200 per cent, you really will not see how Nigeria’s less than 30 per cent debt to GDP ratio is a big issue. But the devil seems to be in the cash flow. The public revenue base is still very narrow, a reason. 

The World Bank recommends a debt service to revenue ratio of not more than 22.5 per cent. Nigeria’s debt service to revenue, in recent years, has been above 50 per cent. In Q1 2020, it was 99 per cent. Nigeria incurred a total sum of N943.12 billion in debt service whereas the federal government retained revenue was estimated at N950.56 billion, suggesting that almost all the revenue generated from both oil and non-oil earnings was used to frittered on debt service obligations.

This year, the Federal Government hopes to spend N3.12 trillion or 23 per cent of the entire budget servicing existing debts while it hopes to finance the N5 trillion deficit with “fresh borrowing”. Dr. Chiwuike Uba, a development economist and consultant to the World Bank told NaijaTimes that the weak revenue mobilisation capacity of the country, wasteful spending, corruption and unrestrained borrowing are pushing the fragile fiscal position to disaster level.   

A glimpse of hope!

Last year, the Nigerian Stock Exchange (NSE) soared by 50.03 per cent to emerge as the best performing equity market globally. From a negative return of 14.6 per cent in 2019, the All-Share Index (ASI), which stood at 26,842.07 basis points at the beginning of the year closed at 40,270.76 points as of December 31. 

Also, market capitalisation increased by N8,098 trillion to N21,056 trillion, up from N12.958 trillion it opened trading last year. For the first time, the market capitalisation crosses the N20 trillion mark. That is cheering enough of an economy burdened with so many shortcomings and staggering towards the precipice.    

LAST year has gone but the burden of its scaring statistics could continue to weigh on the economy and livelihoods as another year unfolds. The current recession is the most sickening hangover of last year’s recklessness and poor decision. The speed and depth of the recovery will not depend on the global attitude towards the second wave of COVID-19.