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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