The week ahead – Hard-pressed

The International Monetary Fund (IMF) downgraded Nigeria’s 2024 economic growth forecast to 2.9%, citing insecurity in oil-producing areas, flooding, and lower-than-expected activity in the year’s first half. This marks a reduction from earlier projections of 3.3% in April and 3.1% in July. Nigeria’s GDP per capita dropped to $877, lagging behind neighbouring countries like Benin, Togo, Ghana, and Ivory Coast. Floods, attributed to poor infrastructure, killed 185 people and displaced 208,000 across 28 states. Additionally, unrest in the Niger Delta region has affected oil production, the country’s primary source of revenue.

Nigeria’s GDP per capita halved in one year, falling to its lowest since 2004. Earlier in the year, there were expectations that the country would begin to see gains from fiscal reforms, leading the lender to forecast an improved economy. But reality has hit, and the IMF’s projection indicates a decline from 3.1 percent in July and 3.3 percent in April. Nigeria, which ranked Africa’s largest economy in 2022, has slipped to fourth place. This decline is largely due to a precipitous devaluation of the currency against the USD, the currency used to denominate the GDP per capita measure—the exchange rate fell from around ₦700 to over ₦1,700 per dollar. Compared to its immediate neighbours, Nigeria has fared poorly, with this decline beginning in 2014 (when per capita GDP was at its highest in the country’s history at $3,201) after 16 years of steady growth during the Peoples Democratic Party years, when it rose from $494 in 1999. This is a good proxy to measure the impact of APC’s administration, and the verdict is clear: it has been a time of thorough destruction of wealth for the country. After two naira devaluations in eight months, the currency has become more than 70% weaker against the dollar, fuelling inflation at record highs. While Nigeria is expected to see a decline in growth, its African peers, such as Ghana, Angola, Côte d’Ivoire, Cameroon, and South Africa, are projected to improve. These countries are intensifying efforts to drive consumption and economic growth. As Nigeria continues to experience slow growth, more people are becoming impoverished. Recently, the World Bank said that an additional 25 million people have been pushed into poverty in just six months. Another report from the IMF indicated that Nigeria’s GDP per capita has dropped by 46 percent to $877 as of October 2024. This illustrates that the average Nigerian is now poorer than 20 years ago. Nigeria’s biggest economic challenge is weak productivity. This means the majority of its working-age citizens are not sufficiently engaged to produce outputs that can be bought and sold to create value. Each individual’s productivity contributes to the country’s GDP, and with GDP per capita at $877, it suggests that the productivity of the average Nigerian is among the lowest in the world. This is surprising because Nigerians are well known for their entrepreneurial spirit and strong work ethic. This implies that many Nigerians lack opportunity and direction, which the government should provide. The conflicts and insecurity in various parts of the country have led to internal displacement, causing much of Nigeria’s predominantly farming population to become disengaged.

Nigeria’s capital expenditure (CapEx) for the first half of 2024 dropped by 25.3% to ₦1.99 trillion ($115.4 million), down from ₦2.68 trillion in the same period in 2023. Despite operating four budgets, January had zero CapEx allocation, compared to ₦379.1 billion in January 2023. Spending peaked at ₦893.9 billion in February but declined sharply in March and April and partially recovered in May and June. CapEx accounted for 53.35% of retained revenue, down from 96.06% in 2023. Meanwhile, President Tinubu has sacked five ministers and appointed seven new ones, reatining the largest in Nigeria’s history.

People often confuse potential with exploitation and mineral resources as sources of wealth. As a result, many Nigerians believe that the country is rich and should be able to provide social benefits and amenities for its citizens. However, it is important to clarify that while the government does earn some income, that income is a pittance compared to the sheer size of the population and the infrastructure that needs to be developed. The decline in capital expenditure suggests Nigeria has yet to reposition itself from relying heavily on revenue for debt servicing and recurrent expenses. It also reflects a reduced focus on infrastructure investment, which may constrain economic growth and job creation. Government capital expenditure has a multiplier effect on economic growth, and inconsistent monthly spending highlights growing fiscal constraints. Over the years, past administrations have focused more on recurrent expenses and debt servicing than on capital projects. The current administration says it wants to reverse this trend, as its reforms have boosted revenue and reduced the fiscal deficit. According to the Budget Office of Nigeria, the country’s fiscal deficit fell to ₦6.92 trillion last year from ₦7.03 trillion in 2022. This decline marks the first drop since 2018, when the deficit decreased from ₦3.81 trillion in 2017 to ₦3.64 trillion. A reduced budget deficit allows the government to spend more on capital projects and human capital, which are critical for spurring economic growth, creating jobs, and reducing poverty. However, it is undeniable that the government has perhaps prioritised foreign trips and certain frivolous expenditures rather than focusing on substantial capital projects, and this is where the cabinet rejig comes in. Sacking five ministers and replacing them with seven made no difference to the fact that the Tinubu cabinet was already the country’s largest. This has raised questions about the government’s priorities and whether the political elites are truly concerned about the country’s economic challenges.

The Dangote Refinery failed to meet its daily petrol supply target to the Nigerian market, delivering only 148 million litres between 15 September and 5 October, instead of the planned 575 million litres, according to the Dangote Evacuation Report seen by Premium Times. From 15 to 30 September, the refinery met just 26% of its target, loading 102.9 million litres out of a planned 400 million litres. Between 1 and 5 October, it achieved 32% of its target, loading 45.1 million litres out of 140 million litres. The shortfall highlights ongoing challenges in meeting the refinery’s petrol supply commitments.

The market is a respecter of no man. While constructing the refinery, Aliko Dangote and the Nigerian government, led by Muhammadu Buhari at the time, touted the refinery as one of the best things for the Nigerian economy and the game-changer for Nigeria’s oil and gas sector. After completion, Dangote engaged the NNPC in a battle of press conferences and statements. The NNPC was painted as the bad guy working against a Nigerian-owned refinery. Conversations about a blending plant in Malta and the petrol from his refinery being the real deal made Nigerians take his side over the NNPC. It is now clear to Nigerians that having a refinery in-country does not automatically translate to lower petrol prices. Combined with this is the acknowledgement that the refinery has only been able to meet 26% of the orders placed. It is still early days for the refinery, and it would have enjoyed some grace if its proprietor had not entered a war of words with other players in the market. Given the publicity around the refinery, it cannot afford to perform below expectations. It is the golden child that must remain at the top of the class, and the guinea pig signals to foreign investors about whether Nigeria’s business climate can support a refinery. It is time for Aliko Dangote and his employees to get to work and ensure that the refinery is in top shape. The market only sees numbers, not sentiments. Though every new project needs time to ramp up activities towards full operational capacity (and the refinery only began petrol production less than eight weeks ago), the country’s situation warrants urgent growth and high output from the refinery.

Ghana’s Parliament has implemented heightened security measures from 22 October due to the ongoing constitutional debate over four parliamentary seats. These measures, announced by Deputy Marshall Frederick Bawa, aim to protect the speaker, members, and staff during this sensitive period. Minority Leader Cassiel Forson invoked Article 97(1)(g) of the 1992 Constitution, questioning the status of the four seats. While the Speaker declared the seats vacant on 17 October, the Supreme Court intervened on 18 October, allowing the MPs to retain their roles until a final ruling. The country awaits further developments on this constitutional issue.

The backdrop to these security enhancements stems from a significant ruling on 17 October, when Speaker Bagbin declared four parliamentary seats vacant due to the occupants’ defection from their original party affiliations. However, this declaration was temporarily stayed by the Supreme Court on 18 October, allowing the affected MPs to continue their duties while awaiting a final resolution. This legal tug-of-war has created potential conflict between the Majority and Minority factions within Parliament. Ghana’s 8th Parliament has a Majority Caucus of 138 members and a near-equal Minority of 137. This situation is even more complex because the Speaker of the House, Alban Bagbin, belongs to the Minority, a first in Ghana’s Fourth Republic. The Speaker’s recent decision to declare four seats vacant threatens the delicate balance in Parliament. If enforced, the government’s slim Majority of 138 would be reduced to 135 while the opposition National Democratic Congress (NDC) would gain a new Majority with 136 MPs, giving them an edge by just one seat. This potential shift in power would significantly affect the government’s ability to pass legislation and conduct business. The NDC’s push for enforcing Article 97, which mandates MPs to vacate their seats if they switch political parties or run as independents, is not just a legal move but also a strategic one. With less than 50 days to the general elections, the opposition is using this as political leverage, signalling that they already control Parliament and calling on Ghanaians to complete the shift by electing former President John Mahama as the next head of state. The NDC points to a precedent set by the NPP in 2020 when one of its MPs lost his seat for running as an independent candidate after failing to secure the party’s nomination. The security measures demonstrate a proactive approach to maintaining order and safeguarding parliamentary processes during this uncertain period. Such heightened security is crucial to preserve the institution’s integrity as it navigates a highly contested legal and political terrain. This situation also underscores the tension between the legislative and judicial branches, raising questions about the separation of powers and the judiciary’s role in resolving legislative disputes. This development also has broader implications, especially with the upcoming general elections scheduled for 7 December 2024. Any decision made on these seats could influence the political dynamics in Parliament and potentially shift the balance of power, which is crucial as political parties gear up for the elections.