29.11.2020 Views

29112020

You also want an ePaper? Increase the reach of your titles

YUMPU automatically turns print PDFs into web optimized ePapers that Google loves.

SUNDAY VANGUARD, NOVEMBER 29, 2020, PAGE 7<br />

COMMON MAN:<br />

How this<br />

recession<br />

will affect<br />

you<br />

By Dele Sobowale<br />

“To know that which before us lies in daily<br />

life is the prime wisdom…” -John Milton,<br />

VANGUARD BOOK OF QUOTATIONS,<br />

VBQ, p 275.<br />

Nigerians now know the truth. Nigeria is<br />

in a recession. The dreadful result was<br />

summarized for us this way in PUNCH,<br />

November 22, 2020.<br />

“The NBS, in its Gross Domestic Product<br />

report for Q3, said the GDP, the broad<br />

measure of economic prosperity, fell by 3.62<br />

per cent in the three months till<br />

September…For the first time in more than<br />

three years, the Nigerian economy shrank<br />

in Q2 by 6.10 per cent..”<br />

The World Bank (WB) added two bits<br />

of information to make the situation<br />

more depressing. First, the bank<br />

pointed out that this is the worst recession<br />

in 36 years. Second, WB followed that up by<br />

telling us that per capita income in 2020<br />

and 2021 could fall to 40-year low. For<br />

Nigeria, acknowledged world poverty<br />

capital, things cannot possibly be worse. It<br />

means that we will not soon relinquish the<br />

title of poverty capital; we only have our<br />

own dismal record to beat.<br />

A RECESSION FORETOLD<br />

IN MARCH 2020<br />

“For every folly of their [rulers], Nigerians<br />

feel the lash” - Horace, 65-8 BC, VBQ p 61.<br />

Grim as all these revelations might appear<br />

to Nigerians, they represent a tragedy<br />

already foretold, as usual by VANGUARD.<br />

While the rest of Nigeria was still<br />

wondering what would be the repercussions<br />

of COVID-19 on our economy, we<br />

presciently made the forecast of a recession.<br />

Read:<br />

“COVID-19 HAS CLOBBERED BUDGET<br />

2020 INTO A COMA<br />

‘Coronavirus: FG Considers Reviewing<br />

2020 Budget’ - DAILY INDEPENDENT,<br />

March 5, 2020, p 1.<br />

‘55 Nigerian oil cargo unsold as demand<br />

tumbles’ - PUNCH, March 6, 2020, p 23.<br />

Shakespeare, 1564-1616, must have had<br />

a situation like the one in which Nigeria<br />

now finds itself before pronouncing: ‘All<br />

things do help the unhappy man to fall.’<br />

President Buhari, during one of his many<br />

trips abroad, once described himself as the<br />

most unhappy leader. He has a right to claim<br />

that title. Nigeria under him became the<br />

poverty capital of the world and that is a<br />

title that will not be relinquished soon. On<br />

four indices included in the Misery Index,<br />

MI — children out of school, maternal death,<br />

infant mortality and per capita income –<br />

Nigeria is ranked first in all of them. Nigeria<br />

is also home to two of the world’s five worst<br />

terrorist groups: Boko Haram and<br />

herdsmen.<br />

Although it is the poorest country among<br />

the Organization of Petroleum Exporting<br />

Countries, OPEC, and it is only the eighth<br />

largest producer, more crude oil is stolen in<br />

Nigeria than any other country. Thus, the<br />

Federal Government of a nation, which<br />

needs every dollar it can get from oil, stands<br />

and looks on while a few selfish but powerful<br />

crooks consign the rest of Nigeria to<br />

prolonged poverty and endless destitution.<br />

None of the big oil thieves has been<br />

apprehended and prosecuted. Instead of<br />

protecting our own most important source<br />

of funds, we are contented to make requests<br />

for $22 billion loan package.<br />

These observations are meant to provide<br />

background to what will follow in this article<br />

because Nigerians need to understand the<br />

disaster that awaits us on account of COVID<br />

– 19 and our near total dependence on oil.<br />

Perhaps the place to start is what was<br />

predicted last year when<br />

the 2020 Budget was<br />

presented to the<br />

National Assembly,<br />

NASS. Unfortunately<br />

for us, the demand for<br />

crude was less than<br />

expected from January<br />

1, 2020. It remained low<br />

throughout February<br />

and, as we move into<br />

March, we discover that<br />

COVID-19 has rendered<br />

Budget 2020 totally<br />

untenable.<br />

BUDGET<br />

OF SELF-<br />

DELUSION<br />

“The most obstinate<br />

illusions are ultimately<br />

broken by facts” - Trevor<br />

Round two<br />

of global<br />

lockdown<br />

means that<br />

Nigerian<br />

recipients of<br />

money from<br />

abroad are<br />

in for a<br />

tough time<br />

Roper, VANGUARD<br />

BOOK<br />

OF<br />

QUOTATIONS, VBQ, p<br />

100.<br />

“Budget of Continuity<br />

was based on a<br />

benchmark oil price of<br />

$60 per barrel, oil production of<br />

2.3mbpd…government projected a deficit<br />

of N1.91tn. The revenue performance is only<br />

58 per cent of the 2019 budget’s target due<br />

to the underperformance of both oil and<br />

non-oil revenue sources. Specifically oil<br />

revenues were below target by 49 per cent<br />

as at June 2019" - President Buhari, Budget<br />

2020 presentation to the NASS, October 8,<br />

2019.”<br />

That was the 2020 Budget summarized.<br />

Below was my own reaction to it.<br />

STARTING ON THE<br />

WRONG FOOT; STAYING<br />

ON THE WRONG TRACK<br />

‘Morning shows the day’ according to an<br />

old adage.<br />

The disaster of the 2020 Budget actually<br />

had its origins in 2015. The first three<br />

appointments every modern Head of<br />

Government makes in today’s global village<br />

are: the Ministers of Defense, Finance and<br />

External Affairs. Those are the people other<br />

countries appraise most critically. And the<br />

appointments are made very quickly after<br />

elections are over. Bearing in mind that “a<br />

week is a long time in politics” (Harold<br />

Wilson, British Prime Minister 1970s),<br />

Buhari waiting for five months to make those<br />

key appointments had already sent a signal<br />

to the global community; and<br />

not a good one. To then turn<br />

around and hand the economy<br />

to people totally unknown in<br />

global financial institutions<br />

for the five months sent<br />

another signal. Mrs. Adeosun<br />

might be a good accountant;<br />

but, she is not and cannot be<br />

an excellent Finance Minister.<br />

The results showed very<br />

quickly. A recession followed<br />

in 2016.”<br />

The rest of the analysis of the<br />

2020 Budget went on to predict<br />

that it will never be<br />

implemented as it is. That was<br />

before COVID-19 gatecrashed<br />

into our lives and is<br />

now going to cause a lot of<br />

havoc to the budget of every<br />

country on the planet. The first<br />

signal of the problems ahead<br />

is the turmoil in global oil<br />

trade. OPEC is now in<br />

disarray. Saudi Arabia, the<br />

largest exporter, after failing<br />

to get Russia, a non-member<br />

to agree to a cut in production<br />

and supplies, had unilaterally<br />

reduced crude price and is now<br />

set to increase output. Those steps spell<br />

economic doom for countries like Nigeria<br />

which are more heavily dependent on oil.<br />

From the evidence available at the moment,<br />

the average price of crude oil on the global<br />

market is unlikely to exceed $50 per barrel<br />

for the next three months unless an<br />

emergency meeting of OPEC is held to<br />

establish a new quota and production level<br />

acceptable to all members.<br />

Even then, any agreement by OPEC<br />

members will not be binding on nonmembers<br />

– who now control a larger<br />

percentage of global oil output than OPEC.<br />

The cartel has lost the clout which in the<br />

past made it possible to dictate global oil<br />

prices. While there are several uncertainties,<br />

there is one certainty, which cannot be<br />

ignored. COVID-19 has devastated<br />

Nigeria’s 2020 budget. It was not realistic<br />

before COVID-19; it is totally in shreds now.<br />

It requires no high intelligence to realize<br />

that a budget review is urgently needed.<br />

BUHARI APPOINTS<br />

BUDGET REVIEW<br />

ADVISERS<br />

For once President Buhari did not waste<br />

time in approving a budget review<br />

committee of advisers. That is a step in the<br />

right direction. Other steps must necessarily<br />

follow – and quickly too because time is one<br />

of the variables they must bring into<br />

consideration. In that connection the most<br />

important matters to be decided include the<br />

following:<br />

•Bench mark crude price to adopt in the<br />

recommendations for the budget review<br />

•Time to start operating the new budget.<br />

•The impact on the Federal and State<br />

Governments<br />

•How to handle the inevitable recession<br />

In the second part of this series, I will<br />

elaborate on the four issues listed above.<br />

But permit me to be the bearer of bad news:<br />

ANOTHER RECESSION IS LOOMING<br />

ON THE NIGERIAN ECONOMIC<br />

ENVIRONMENT.”<br />

That was published in the second week of<br />

March – long before the FG started to<br />

address its mind to the possibility of a<br />

recession.<br />

If the Federal Government had reached<br />

out for information, it would have been able<br />

to reduce the decline in GDP growth<br />

considerably. Second quarter might not<br />

have slumped to -6.10 per cent and Q3 not<br />

as bad as -3.62.<br />

WHERE WE STAND NOW<br />

“Hell hath no limits; nor is it<br />

circumscribed in one self place, for where<br />

we are is hell…” - Christopher Marlowe,<br />

1564-1594, VBQ p 89.<br />

Food insecurity and famine in 2021 now<br />

certain.<br />

For Nigerians living today, the closest<br />

Continues on page 10

Hooray! Your file is uploaded and ready to be published.

Saved successfully!

Ooh no, something went wrong!