The federal government announced the members of the Economic Advisory Council on September 16, 2019. The new body which replaces the Economic Management Team that was headed by Vice President Yemi Osinbajo is to be led by Prof Doyin Salami as Chairman; Dr. Mohammed Sagagi, Vice-Chairman; and Dr. Mohammed Adaya Salisu, Secretary, who happens to also be a Senior Special Assistant to the President on Development Policy. Other members are: Prof. Ode Ojowu, Dr. Shehu Yahaya, Dr. Iyabo Masha, Prof. Chukwuma Soludo, Mr. Bismark Rewane. The team is no doubt a top rate one.
The team, however, has a female member, Dr Iyabo Masha, who was until August 2019 the IMF Representative for Sierra Leone. The percentage of female is about 12.5%, a ratio of 1 to 7. Perhaps, President Buhari should have appointed more females for a more gender-balanced composition.
The EAC appears to be modelled after the United States’ National Economic Council, though the Council of Economic Advisers model would have been more institutionalised because the latter was established by the Congress and the members’ appointment is subject to the Senate approval.
As stated in a report by the President’s spokesperson, Femi Adesina, this advisory council, which will be reporting directly to the President, will advise him on economic policy matters, including fiscal analysis, economic growth and a range of internal and global economic issues working with the relevant cabinet members and heads of monetary and fiscal agencies. In addition, the EAC will have monthly technical sessions as well as scheduled quarterly meetings with the President. The chairman may, however, request unscheduled meetings if the need arises (I like this part because it fosters flexibility). One thing is missing: its tenure. We don’t know for how long the EAC will be in existence.
From the face of it, the EAC composition appears to be pro-growth and can kickstart a bullish run on the Nigerian economy, other key factors being equal. It is a good signal and confidence-boosting. And the administration will attract more attention and respect from the international market. We must however face the fact that this administration has about 30-36 active months to consolidate on its recent gains and lay a solid foundation for higher economic growth and create more jobs. Time is running out fast. So, let us take a look at the economic statistics staring at the EAC:
-Gross Domestic Product grew by 1.94% (year-on-year) in real terms in the second quarter of 2019. On a half-year basis, real growth in the first half of 2019 stood at 2.02%. The Federal Government’s growth estimate for the 2019 fiscal year is 3.01%. But the IMF is projecting a 2.1% growth for 2019.
-Unemployment rate was at 23.1% (Q3 :2018) up from 18.1% a year earlier. The African countries having higher rates than Nigeria are Namibia (33.4%), Angola (29 %), South Africa (29%) and Mozambique (25%). Countries such as Libya (17.3%), Tunisia (15.30%), Rwanda (15%), Kenya (9.30%) have lower rates compared to Nigeria. More details are contained here
-Underemployment was at 20.1% (Q3: 2018)
-Inflation rate at 11.02% (August 2019). The Federal Government’s estimate for 2019 fiscal year is 9.98%
-The key benchmark interest rate (monetary policy rate) is 13.5% with asymmetric corridor at +200/-500 basis points
-Out of the actual 2018 FGN budget of N7.455tn, the debt service was N2.152tn, which represented a 28.8%. The FG also recorded a variance of 23.9% (shortfall) in the total expenditure- N9.120tn vs N7.455tn. The actual amount of debt service was even more than capital expenditure (N2.152 trillion vs N1.743 trillion)
-The key projections contained in the Draft Medium Term Expenditure Framework /Fiscal Strategy Paper 2020-2022 released on September 10, 2019 by the Federal Ministry of Finance, Budget and National Planning are shown thus: The real GDP growth is projected to be 2.93% (2020), 3.35% (2021), 3.85% (2022). Using an official exchange rate of N305/US$, the real GDP is projected to be US$458bn (2019), US$468bn (2020), US$522bn (2021) and USD588bn (2022). If an exchange rate of N350/US$ which mirrors the actual rate available to much of the population is used, the real GDP will be lower than the projected figures.
So, what should we expect from this EAC? For one, most if not all the members of the council have a market ideological bent. But they will be reporting to the President who seems not to have a soft spot for free market. Perhaps, the President’s mindset is now changed. Secondly, it is important the apparent ideological differences are resolved from the onset.
Nigeria has been running perennial budget deficits and keeps increasing. It is equally troubling that much of the public debt goes to recurrent expenditure. Eventually, Nigeria will have to adjust. As I mentioned, the EAC does not have much time but a lot can be done. I guess the council will work with the Economic Recovery and Growth Plan of Buhari’s administration. It is its major economic blueprint. The ERGP objectives are to: restore and sustain growth; invest in our people and build a globally competitive economy. Given the ERGP, the EAC would likely tilt towards stabilisation policies for the remaining duration of the administration. This administration ends in 2023. The first 90 days of the EAC will either confirm a good signal or a bad one. It will show whether the initial optimism will be sustained or will fade away quickly.
The federal government will have to decide on what it wants to do with Government Enterprise and Empowerment Programme and other intervention schemes on the one hand and the new Ministry of Humanitarian Affairs, Disaster Management and Social Development on the other. Does it want to merge them and why?
Ogunniyi, a risk advisor, writes from Lagos.