The Nation Newspaper

Tag: Economy

  • Despite difficulties, oil giants sink more money into the economy

    Despite difficulties, oil giants sink more money into the economy

    For some time now, oil giants, such as Shell, Total, ENI and Chevron, have been complaining about the difficulties of working in the Niger Delta, but as the Associated Press reports, they are sinking more money into the country

     

    Nigeria is something of a trouble spot for the oil industry. Though Africa’s largest oil producer, blessed with ample hydrocarbon resources and a large infrastructure network, security problems in the country’s oil-rich Niger Delta plague companies operating in the region, causing frequent supply disruptions.

    The earnings reports of Europe’s oil majors this quarter were littered with references to the difficult operating environment in the country and the impact oil theft and sabotage has had on companies’ production.

    However, a quick run-down of the figures suggest things aren’t actually that bad.

    Italian oil major Eni SPA (E) lost just 30,000 barrels a day of oil equivalent in the first half of the year as a result of oil theft and flooding in Nigeria, that’s equivalent to 2% of the company’s overall production in the period. France’s Total SA (TOT) said increased incidences of theft and sabotage in Nigeria had offset an increase in production as a result of better security in Yemen in the second quarter of the year, but at the same time, the restart of the country’s Ibewa field helped boost output by 2%.

    Even Royal Dutch Shell PLC (RDSB.LN), which said it lost 100,000 barrels of oil equivalent a day in the second quarter due to the deteriorating security situation in Nigeria, only took a $250 million hit to its earnings as a result of the disruptions. That’s peanuts when compared with the $2 billion write-down it took on the value of its shale assets in North America.

    Royal Dutch Shell posted a drop in its 2013 second quarter profit to $4.6bn, compared to $6bn in the same period of 2012, primarily due to oil thefts and gas supply disruptions in Nigeria and the weak Australian dollar.

    Shell CEO, Peter Voser, said oil theft and disruptions to gas supplies in Nigeria are causing widespread environmental damage, and could cost the Nigerian Government $12bn in lost revenues per year.

    “Higher costs, exploration charges, adverse currency exchange rate effects and challenges in Nigeria have hit our bottom line. These results were undermined by a number of factors – but they were clearly disappointing for Shell,” Voser added.

    In June, the company said it was considering the further sale of assets in the eastern Niger Delta, where it has security problems.

    “On a current cost of supplies (CCS) basis, the company’s earnings were $2.4bn for the second quarter of 2013.”

    Voser further said Shell could not solve its problems in Nigeria by itself and needs the support of the government.

    The company recently launched strategic portfolio reviews in both Nigeria onshore and North America resources plays.

    Cash flow from operating activities for the quarter was $12.4bn, compared with $13.3bn in the same quarter of 2012, while capital investment for the second quarter of 2013 was $11.3bn.

    The company has completed divestments worth $21bn in the last three years and some $4bn in the last year alone.

    Meanwhile, even as companies loudly publicise the difficulties of operating in Nigeria, they’re sinking more money into the country.

    In June, Total said it had got final approval to develop Egina, an oil field in deep water offshore Nigeria that the company predicts will produce 200,000 barrels a day.

    Shell, which has sold off several of its assets onshore Nigeria in recent years, has also made fresh commitments to the country. The company’s planning on spending $1.5 billion to build a new and more secure loopline for a major pipeline in the Niger Delta and a further $2.4 billion on five new gas projects in the country. It has also expressed interest in buying several oil licenses Chevron Corp. (CVX) has put up for sale.

    So despite the various difficulties, the European oil majors aren’t jumping ship. But they are looking to move their money into assets less easily targeted by oil thieves and saboteurs.

     

  • Ours is a jobless growth economy, says Utomi

    Ours is a jobless growth economy, says Utomi

    Respected economist Prof Pat Utomi speaks with ADEKUNLE YUSUF on the state of the economy.

    What are the best indices for measuring the actual health of any economy?

    There are many ways that you can measure the health of an economy. One of my favourite ways is to assess it through the quality of life of the people. Very closely tied to the quality of life of the people is the level of employment or unemployment, because if people are going to live decent, quality of life, they need to have income. And to have income, they have to be employed. There is the United Nations Development Programme (UNDP) Human Development Index (HDI). The HDI tells you a great deal about the quality of life of the people. UNESCO and UNICEF also have indicators that are generally tied around infant mortality, education of young people and all of those things. They matter a lot because in the modern world, you can look at the state of human capital by the quality of education in an environment and easily extrapolate it with the quality of life of the people because the better you are educated, the stronger the human capital, the more productive, the greater the output. So you can use all of those to measure the performance of the economy. But there are some old traditional measures for measuring the economy; they are based on output per person. That is what the GDP and co focus on.

    Which one better measures the status of the economy?

    One of problems of using GDP or output to measure the economy is that you can have a situation in a country where some individuals can have an unfair proportion of the output of the country. It is even more problematic when what they get is significantly disproportional to their input as a situation where you have people who have a lot of money without having a business that is creating wealth or employment. That kind of economy is likely to create a lot of social crises and tensions. Why? If you have no jobs being created as a result of growth, which is what we have in Nigeria now, the so-called jobless growth economy, the tendency that you will have many people who will become militants, insurgents and many people who will take to a lot of crime – obviously, when you have that kind of situation, we can also say that you don’t have development. The most meaningful development is the one that creates a lot of middle class. There might be a few people outstandingly rich and a few people very poor, but most people will generally be middle class people who can live decent quality of life, send their children to good schools, have the means of going to and fro places that are essential, and have their homes. A situation where a few people get very wealthy can be broken into two: a few people getting wealthy with production, as was in the case with Brazil, and a few people getting wealth with very little production where national revenue is mainly extracted as rent or stolen by the way of corruption, as is the case in Nigeria. So the use of GDP as the basis for evaluating economic growth has limited value in terms of issues that are before us.

    So is the national economy growing or what?

    Many years ago, I used to use the cliché saying there are lies, there are damn lies and there are statistics. There is iro (lies), and that is babanla of iro (big lies). With statistics, you can tell a lot of lies about anything because statistics is the father of lies. But the most important thing is the quality of life of the people. It is correct to say the Nigerian economy is growing at 7 per cent, but what is the value of the growth when the people cannot feel the impact of the growth? It is growth for those who are profiting from it, who are very few.

  • Nigeria’s economy in bad shape, says US-based economist

    Nigeria’s economy in bad shape, says US-based economist

    A UNITED States-based Developmental Economist, Mr. Odilim Enwegbara, yesterday said the nation’s economy is in bad shape. He urged President Goodluck Jonathan to overhaul his economic management team.

    The economist said the nation’s economy was better under former President Olusegun Obasanjo than under the present administration.

    He asked the President to drop the Finance and Coordinating Minister of the Economy, Dr. Ngozi Okonjo-Iweala, from his cabinet.

    The economist also urged President Jonathan to call the First Lady, Dame Patience Jonathan, to order on the Rivers State political crisis.

    Enwegbara, who addressed reporters in Abuja, noted that the present members of the nation’s economic team have hijacked the President.

    He said: “To manage the economy is not purely an economic issue. It requires politicians because they are emotionally attached to the problem and they have something at stake, if the economy is not moving well. But it’s not for all those so-called technocrats.

    “The people we have so far called in to manage our economy are incompetent and they have not demonstrated interest in the masses.

    “They come up with cooked-up figures, which I always challenge. But I can tell you that our economy is worse than during Obasanjo’s era.

    “Mr. President should overhaul his cabinet and bring in people who will really transform the economy. He needs such a minister who will tell him: ‘I want to create 10 million jobs in a year’ and he will be able to verify the workability of such proposals.”

    Responding to a question, the Massachusetts Institute of Technology (MIT)-trained economist said he was worried that some members of the Economic Management Team have hijacked the President.

    Enwagbara added: “I am one of those who say, ‘let’s close our borders so that the pressure to import will be closed’.

    “Our monetary and fiscal policies are disjointed and turned upside down. They are not developmental; they are anti-growth, anti-job, anti-everything.

    “But they have hijacked our honest President and clapped hands for him. The man has joined hands with them and also is also clapping.”

    The economist said the problem of the economy has nothing to do with borrowing but diverting the borrowed funds into private pockets and stashing such in foreign economies. He asked the President to drop the Minister of Finance, Dr. Ngozi Okonjo-Iweala, from his cabinet.

    Enwegbara said: “The problem is the person whom they made the Minister of Finance. I know her since years back. I invited her to MIT to a conference I organised; I respect her. But she cannot manage this economy. She has never managed any economy.

    “She has been a staff of the World Bank, running the politics of World Bank. To manage the economy needs people who are on the ground, who have gone through the process.

    “She has lived outside this country for too long and came back from a broken institution. The system they put in place (World Bank and IMF) is to plunder our economy. You can’t tell me when her children are Americans; she came from the headquarters of American imperialism. I don’t see that patriotism in her.

    “She has to prove to me that she is patriotic. Let her bring her children to the country so that they too will interact with others and they will tell them, see our situation.”

  • Experts: CBN’s projected drop in inflation rate will boost economy

    The ability of the Central Bank of Nigeria (CBN) to reduce inflation rate to seven per cent by September will augur well for the economy, experts have said.

    Such a drop in inflation rate from nine per cent to seven per cent will result in a growth of the treasury bills, bonds, equities and other traded financial instruments, they said.

    In line with its sound macroeconomic stance, CBN projected that inflation would fall from nine per cent to seven per cent in September.

    The development, which came on the heels, of the achievement of a single digit inflationary rate early in the year, according to experts, portends a good omen for the country.

    The Managing Director, BGL Securities Limited, Mr Sunday Adebola, said there would be positive real returns on investments once inflation falls to seven per cent in September. He said when investors made nominal returns and deflated them by inflationary rates; they achieved positive real returns on investments.

    He said: “Simply put a situation whereby inflationary rate is unable to affect the gains recorded from investing in tradable instruments could be described as positive real returns on investments.

    “When inflation falls to seven per cent in the third quarter of the year as projected by the CBN, real returns on investments in tradable instruments will increase.  A further decline in inflation means an increase in the prices of instruments. This is a good development for investors and the market in particular. This will lead to a corresponding increase in the aggregate turnover of instruments traded in the market.”

    Besides, he said the functionality of one rate is dependent on the other. “The moment the inflationary rate comes down, the interest rate moves in the same direction. When interest rate goes up, the prices of instruments will rise. If there is a decline in interest rate, investors would be able to move funds into the market.  When this happens, the prices of tradable instruments would increase. The market operators are going to be happy because they would make good returns on investments,” he explained.

    According to him, CBN has consistently been meeting its projections to encourage the growth of the economy.

    “If by September end, the rate of inflation falls to seven per cent, we should automatically expect a decline in interest rate. The Monetary Policy Committee would be compelled to adjust the benchmark interest rate, which has remained at 12 per cent in the past 12 months. I think this is a sign of good things in the nation’s financial market. What this means is that investors are going to get better returns. Whether it is headline or core inflation that experiences a decline, operators are bound to get positive real returns,” he said.

    Also, the General Manager, Treasury Department, Consolidated Discount House, Mr Bolanle Okunubi, said a fall interest rate would boost the bond and other financial market instruments. Okunubi said inflation and interest rate function together for the growth of the financial market. He said when there is a convergence of the two rates, the market is better for it.

    He said an average investor wants inflationary and interest rate to fall because that is the only way he or she can achieve growth.

    Noting that there are upside and downside effects in financial markets, Okunubi said the latter can be minimised when the market rates are favourable.

    He said high interest rates, inflationary rates, inconsistent economic policies, political crises; among other variables, affect the operations of the financial market, adding that they are growth inhibitors.

     

  • Nigeria’s move to become Africa’s biggest economy

    Nigeria’s move to become Africa’s biggest economy

    Gross Domestic Product (GDP) is a powerful political tool — but it hides more than it reveals. Mail & Guardian examines Nigeria’s quest to take over the position of Africa’s biggest economy from South Africa using the GDP baseline adjustment.

    Since 2012, the government of Nigeria has been working to revise the calculation of economic performance with a view to producing new measures for its gross domestic product (GDP). The central goal of this reform is to update the so-called base year, which is the benchmark for all calculations used in computing the GDP of a nation.

    The base year is of critical importance as it determines the year in which prices are held constant, (which enables statisticians to distinguish economic growth from inflation), the weighing of each economic sector with respect to the whole economy and, crucially, the type of data that is included in the final calculation.

    Although most higher income countries revise their base year every five years in order to account for changes in the nature and shape of their economies, the majority of low- to middle-income countries do so more sporadically, as they lack the technical resources to overhaul the national income accounts at regular intervals.

    Thus far, Nigeria has been no exception and its latest revision dates back to 1990, which means that some booming sectors such as information communications technology and entertainment (especially the Nollywood film industry) are systematically undercounted in official statistics. But what may appear to be a mere statistical endeavour may easily trigger a political earthquake in Africa, with repercussions on traditional power balances throughout the continent.

    Most estimates suggest that, as a result of the revisions, Nigeria’s GDP may increase by up to 40% in nominal terms, which means that the West African powerhouse would overtake South Africa as the continent’s largest economy in 2014. Similar leaps have happened in the past. In 2010, GDP revisions elevated Ghana to the status of a middle-income country thanks to a sudden 60% jump in nominal growth. In Turkey, the rebasing of GDP produced a 30% increase in 2008.

    As I show in my latest book, Gross Domestic Problem: The Politics behind the World’s Most Powerful Number, GDP is a powerful political tool. The most important global governance institutions, from the G8 to the G20, are based on GDP credentials. Thus far, South Africa has been the only African country represented in the G20 on the grounds of the scale of its economy.

    The Nigerian question

    What will happen if Nigeria claims this status? Would it affect South Africa’s membership of the Brics, and would Nigeria become the preferred counterpart of Brazil, Russia, India and China? There are many who believe Nigeria’s overtaking of South Africa would produce significant effects in the governance structures of the continent.

    In the past few years, Nigerian politicians have become increasingly assertive with respect to their role in the continent and they wait for the GDP revisions to do the trick. Several pundits already see the West African giant as the new continental leader.

    Arguably, this GDP battle may ruffle some feathers in Pretoria, where policymakers fear their country may lose its traditional crown as leader of the African continent in world politics.

    But the GDP battle hides more than it reveals. This is because GDP is a very misleading measure of economic performance, let alone social and political progress. Neither Nigeria nor South Africa is a healthy economy.

    For many reasons, however, the former is far worse than the latter, and the whole continent would be much worse off if Lagos were to replace Johannesburg as Africa’s economic hub.

    Both South Africa and Nigeria are among the least sustainable economies in the world. According to the World Bank, the depletion of non­renewable energy in Nigeria accounted for about 25% of its GDP in 2013.

    Decline in natural resources

    South Africa is Africa’s most polluting country and the 13th worst emitter of carbon dioxide in the world.

    According to the United Nations Development Programme, both South Africa and Nigeria have experienced a significant decline in natural resources since 1990. Although these countries enjoy relatively large pools of fossil fuels, their reliance on energy-intensive economic growth has imposed huge drawdowns on their natural capital base, with serious risks for human health, the environment and the subsistence of local communities.

    In most areas, Nigeria has been faring much worse than South Africa. The Inclusive Wealth Index (IWI) published by the UN measures the growth of produced capital (for example, GDP) against the stocks of natural resources that are depleted in the process. For the IWI, Nigeria is by far the worst performing country.

    When the gains in terms of GDP are offset against the depletion of human capital and natural resources, the Nigerian miracle evaporates altogether. Rather than increasing its overall wealth, the West African country has been accumulating economic losses at an average annual rate of 1.8% since 1990. Nigeria has also overtaken South Africa in the costs associated with environmental degradation: 2.51%, compared with the 2.24% of the Rainbow Nation.

    During the period 1990 to 2008, Nigeria destroyed 41% of its forest resources, one of the highest deforestation rates in the world. According to the Resource Governance Index, Nigeria falls at the bottom of the global ranking, with a very poor record in terms of transparency and accountability in the management of its oil riches, more than 20 places below South Africa.

    We all know about the dire effects of multinational companies’ systematic exploitation of oil fields in the Niger delta: environmental destruction, political destabilisation and human displacement.

     Role model for the continent

    But GDP regards these phenomena as “positive” for the economy, with paradoxical consequences for the way in which most African economies are designed and run. No surprise, therefore, that one of the world’s least ­sustainable societies is now touted as a role model for the continent.

    As the UN recognises, GDP focuses exclusively on the “cash” being generated by market activities (that is, present income and production flow) whereas alternative measures of inclusive wealth highlight the importance of stocks of assets and their changes over time.

    The politics of GDP makes countries blind by rewarding short-term consumption and wholesale exploitation of natural assets at the expense of social justice and sustainability.

    There is no economic success without sustainable progress, and African economies would be better off if their leaders realised that GDP-based frameworks are very misleading. If South Africa is serious about leading the continent towards a brighter future, it should develop a more comprehensive wealth-based accounting system and help the rest of Africa, including Nigeria, to do the same.

  • FAAC funds crises: Reps seek diversification of economy

    Due to the persistent crises in the allocation of funds between the three tiers of government by the Federation Accounts Allocation Committee (FAAC), the House of Representatives has urged the Federal Government to diversify the economy.

    The House has mandated its committee on Finance to interface with the Ministry of Finance and the representatives of the states in the Federation Accounts Allocation Committee ( FAAC) within two weeks, with a view to ascertaining the critical issues bedeviling revenue allocation.

    The committee is to make necessary recommendations to the House on alternative ways of revenue distribution in the country.

    Besides, the House also mandated its ad hoc committee on Legislative Agenda to work in conjunction with committees such as Industry, Agriculture, Commerce, Solid Minerals etc. and formulate a blueprint for the diversification of the economy “for the purpose of same to the Executive and the public.”

    This was sequel to the adoption of the resolutions of a motion sponsored by Samson Osagie, Minority Whip , in conjunction with 12 other lawmakers, under the title: Administration of Federation Accounts by the Federal Ministry of Finance and the need to diversify Nigerian economy.”

  • No cause for alarm on economy, says Presidency

    The Presidency has allayed fears over the nation’s parlous economic indices and their impact on the average citizen.

    At a press briefing in Abuja yesterday, Senior Special Assistant to the President on Public Affairs, Dr. Doyin Okupe said the situation is under control.

    Okupe was speaking against the backdrop of a tumble in the Nigerian crude oil earnings arising from a revelation of a discovery by the United States, of shale oil; signifying a possible loss of oil earnings from the US.

    He said the Nigerian economy is not in any way endangered by the apparent loss of the American market.

    The government, he said, had put in place the appropriate mechanisms aimed at not only cushioning the effects, but also blocking the various exit points for crude oil theft.

    Okupe said the Nigerian Navy and other maritime related security agencies have been equipped to stop the menace of crude oil theft.

    He added that an appeal had been made by the Federal Government to western countries to assist in blocking the sale of stolen crude from Nigeria in their various countries.

    According to him, the necessary reforms programmes are already in place in vital sectors such as agriculture and oil and gas.

    He similarly stated that phased reduction in the size of the public service had begun about three weeks ago, in line with the recommendations of the Steve Oronsonye Report.

    Okupe said the exercise, which is aimed at cutting down on the existing heavy recurrent public expenditure to the tune of N1 trillion, would be spread over a period of three years.

    Said the President’s aide: “Already, the Federal Government is adopting appropriate strategies to effectively mitigate the impact of decline in the US markets. The number and volume of term contracts with Asian refiners is gradually being increased.

    “Current term volumes to Asian refiners stand at 120,000 barrels per day. In both the short and medium term, a combination of market openings in Europe and Asia will effectively compensate the loss of US market and offer needed support for Nigerian crude oil exports.

    “Every discerning observer will notice that socio-economic challenges, which had existed for several decades and which the current Transformation Agenda is effectively tackling are clearly spelt out in the Mid-term report presented to Nigerians by President Goodluck Jonathan a few weeks ago.

    “These challenges include, among others, dependence on oil exports, high recurrent expenditure, high food importation, poor infrastructure, high inflation, falling reserve and rising domestic debt

    “The Jonathan administration has implemented key reforms to reduce dependence on oil and these reforms have resulted in the Agricultural sector alone contributing over 40% to the Gross Domestic Product in two years. Oil exports are now 69% of our total exports as against 91% in 2008”.

     

     

     

     

     

     

     

     

     

  • ACN to Fed Govt: come clean on state of economy

    The Action Congress of Nigeria (ACN) has urged the Federal Government to be honest with Nigerians on the state of the nation’s economy. It said from all indications, things are not as rosy as they are being painted by the government.

    In a statement in Abuja yesterday by its National Publicity Secretary, Alhaji Lai Mohammed, the party said coming clean on the state of the economy would enable the government to carry the people along in whatever measures it might take to avoid the collapse of the economy.

    “On February 24, we issued a statement in which we alerted the nation to ‘an impending collapse of the Nigerian economy, unless the Federal Government cuts the astronomical cost of running a bloated government and takes urgent measures to diversify the economy and shore up the production of oil, which remains the mainstay of the country’s economy’.

    “Although the Federal Government quickly denied that the economy was in danger, it is now clear that it (government) was being economical with the truth. The clearest indications yet of this choreographed deceit are the contradictory statements credited to the Minister of Finance, Dr. Ngozi Okonjo-Iweala, in recent time.

    “According to published report, on June 10 in Abuja, the minister said at a ministerial briefing that the fundamentals of the economy were strong and that the economy was buoyant beyond danger. However, a day later, the same minister was quoted as saying, at a closed-door session of the Federal Government Economic Implementation Team that the Nigerian economy is shaky despite the official fundamentals and that drastic steps are needed to save it from collapse.

    “She was further quoted as saying that there was an urgent need for ‘stringent budgetary measures’ to arrest the downward slide; that crude oil production now hovers around 1.3 million barrels per day (far lower than it was at the height of the protracted militancy in the Niger Delta); and that crude oil theft, which costs Nigeria US$6 billion annually, is now severely hurting the economy,” the party said.

    ACN said while it has no reason to doubt that the reality of the gloomy situation facing the country’s economy has now dawned on the government, it is still worried that those in authority are speaking from both sides of their mouths, publicly giving the impression that all is well while privately preparing to unleash belt- tightening measures on the same hapless citizens, who have borne the brunt of their poor governance.

    “When the falling crude oil production and massive oil theft are placed side-by-side the impact of the rising Shale oil production in the United States (which we also warned against in our earlier statement), the regular declaration of Force Majeure by oil firms, the fact that oil firms are divesting instead of investing in the sector and the freewheeling spending by a profligate government, one needs not be a Harvard-trained economist to know that the dark clouds are gathering over the economy.

    “Since it is a truism that everything revolves around the economy, a government that cannot get it right with the economy cannot get it right with anything else. This is why we are again raising the alarm, with the belief that the government will level with Nigerians and shun the same ‘political’ reactions that it is used to.

    “It is urgent to act now. As many concerned citizens have said, the highfalutin economic growth figures have not translated to development. Poverty has remained high while unemployment has become a time bomb. Therefore, against the background of a tottering economy, delay could be calamitous,” the party said.

  • Okonjo-Iweala mocks critics of economy

    Okonjo-Iweala mocks critics of economy

    …Liken GDP to sponge cake

    Finance Minister Ngozi Okonjo-Iweala held up a sponge cake representing the Gross Domestic Product to an audience of amused officials on Monday, as she sought to rebuff critics who say Nigeria’s strong economic growth has failed to lift millions out of poverty.

    Likening Nigeria to a household, she urged the country to focus on the government’s plan to become one of the world’s top 20 economies by 2020, which she said would be crucial to solving its other problems like high unemployment and poverty. It would mean doubling the current growth rate to 13 percent, she said.

    “Having this cake does not mean that every problem in your household is solved,” she said, holding up a sponge with figurines of a family on it, at a televised conference.

    “But you have one wife and three children and … if you have only this cake you’re going to be suffering. You want this cake to grow,” she added, swapping the sponge for a much bigger one, prompting a wave of laughter.

    Reuters says foreign bond and equity investors are taking a growing interest in Africa’s second biggest economy, and President Goodluck Jonathan’s decision to bring Okonjo-Iweala back to Nigeria from her World Bank job in 2011 was well received.

    But she has had a mixed reception at home, with some politicians complaining she is too aloof and technocratic.

     

  • State of the economy

    State of the economy

    After nearly 30 years of economic reform and financial orthodoxy, the economy is growing. But a new economic strategy is now needed to create more jobs.

    The Minister of Finance, Mrs. Ngozi Okonjo-Iweala, is upbeat about the state of the economy. In her report last week on the economy she reeled out figures showing that the economy is doing quite well. Current growth rate is 6.5%, the highest in recent years. Inflation is down to 9.5%, the lowest for nearly 30 years. Foreign reserves have increased significantly to nearly US$48 billion. There is greater stability in the exchange rate though the naira is gradually weakening against the US dollar. Non-oil exports are doing quite well. Earnings from this sector have increased to 30% of total export earnings, up from 10% for decades. Despite the grave security situation in the country, FDI has recorded its highest growth in recent years. The economic fundamentals appear quite strong and impressive. The economic reform programme and a large dose of financial orthodoxy in recent years have paid off. Altogether, there is macroeconomic stability and this should prime the economy for faster and higher growth in the short to medium term. All the multilateral financial institutions, including the WB and the IMF, have endorsed the favourable reports on the state and efficient management of the economy. And all this was achieved during a global recession and its negative consequences for the world’s economy. It has ravaged many of the rich and industrialised countries.

    But there is a flip side to these impressive economic figures that the Finance Minister is upbeat about. First, the impressive economic growth rate has not translated into more jobs for the vast number of the unemployed graduates from our tertiary institutions. The unemployment rate is still far too high for an economy that appears to be growing. The lag between economic growth and job creation has taken far too long. Second, there is very little evidence of the trickle down effect on incomes and the improvement in the general quality of life that economic growth should bring about. Average per capita income may have improved slightly, but the existing income inequality is widening. The rich are getting richer and the poor poorer. The nation is economically and socially increasingly polarised. In fact, very few people believe these impressive economic figures when all they see around them is seemingly greater poverty. Poverty levels in our country remain unacceptably high with devastating social consequences for our nation. This remains the Achilles heel of the economy. Average income levels remain lower than in many other African countries. There are still far too many unemployed youths in the country to justify the optimism of the Finance Minister on economic strategy and management. New jobs will come from more local and foreign investments in the economy.

    Job creation should remain the top priority of a sound rate structure with the huge arbitrage between savings and borrowing does not encourage lending for productive investments. The two rates will need to be better realigned to reduce the gap between them. The current interest rate structure is a disincentive to local investment in the economy.

    What is responsible for this slack in job creation despite the impressive economic growth rate and macroeconomic stability? Why do we have such a vast number of unemployed youths when the economy seems to be growing so impressively?Apart from the existing massive public corruption which constrains growth, the obvious reason is that current private sector investments are directed more towards capital intensive rather than labour intensive projects. In addition to an imperfect market the domestic economy has to contend with a wasteful and imperfect government as well. Of course, it would be wrong and counterproductive for the government to intervene directly in this regard by forcing private sector investors to invest more in labour intensive projects. This will turn them away. But this objective can be realised in two ways. First, the government can improve on the existing incentive structure by granting investments in labour intensive projects, such as agriculture, better incentives, including better access to loans. Labour is quite cheap and readily available in Nigeria. The future economic growth and prosperity of the nation depend on our ability to take advantage of these comparatively low labour costs particularly in manufacturing. This will make our domestic economy more competitive globally. This was how the NICS, such as China, India, South Korea, and Brazil achieved their impressive economic growth rates. Nigeria should learn from these countries’ hugely successful economic strategies by concentrating more on labour intensive projects for job creation and exports. The vagaries of the oil market make this strategy imperative. Already oil incomes are falling.

    Second, in view of huge resource constraints, public sector expenditure should focus more on sectors that have a direct impact on employment. Here, I am thinking of our woeful social and physical infrastructure which calls for massive investment. There is some ongoing attempt to reduce the budget deficits by cutting public expenditure. There is no objection to this as persistent budget deficits will impact negatively on inflation and this could undermine stability in the macro economy and future economic growth rate.

    But a dash of Keynesian economics through a modestly expansionary budget will, if appropriately utilised and directed towards the more productive sectors of the domestic economy, create more jobs and an even higher economic growth rate in the domestic economy. The financial orthodoxy, which we have practiced in our economic management for some decades now, with good effect, should be reviewed now and a new growth and exported oriented strategy involving higher public expenditure, particularly on the physical infrastructure, should be introduced. The economy will grow even faster and more jobs will be created if we invest more in developing public transportation, the roads, electricity, public housing, the ports, and other public utilities. But plans to start another national airline should be abandoned. It is wasteful. At the micro level it is this strategy of massive public construction that the Lagos State Government under Governor Fashola has pursued with astonishing success in terms of job creation. There is no reason why this strategy cannot be replicated by the Federal Government. A lot of financial resources are needed to upgrade these infrastructures. Some of these can be done through public-private-participation (PPP) to reduce the pressure on public spending. Whatever the attractions of a fiscal balance might be, it is vastly more important to keep the domestic economy running at an optimal level so as to create more jobs and overall prosperity in the nation.

    Despite our healthy foreign reserves, the Federal Government is resorting increasingly to foreign borrowing to finance infrastructure. The current debt stock is over US$15billion. At the same time it has created a US1billion SWF for foreign lending ostensibly to cushion the negative impact of a possible future decline in our oil income. But it hardly makes any economic sense for us to borrow abroad at a rate higher than what our SWF can earn in terms of interest rates. Why should we create a SWF when there is a crying and desperate need for more investments at home to modernise our woeful infrastructure? There is no reason why some of our healthy foreign reserves cannot be spent now in upgrading our infrastructure.

    The opposition parties are right in criticising the PDP Federal Government for the various contradictions in its economic strategy, particularly over the lack of job creation and the consequent deepening of mass poverty in our nation. But they should go beyond that and develop a credible alternative economic strategy that will remove some of the major constraints on job creation in the economy. At the moment it does not seem that the various opposition parties have alternative and coherent economic strategies that they can turn into an electoral advantage over the ruling PDP federal government. The failure of the Federal Government to create more jobs and the woeful infrastructure should be the central issues in the campaign for the 2015 elections.