In the end, the emerging image is of an economy that has run down the buffers without which it is poorly positioned to ride the impending global storm. A cost-to-benefit estimate of both fiscal and monetary policy over the last four years might counsel the reining-in of most of this government’s current initiatives.


Whether or not the Federal Government of Nigeria is able to pay off Process and Industrial Developments Ltd. (PID)’s judgment debt, from this vantage, the outlook for the Nigerian economy is dour. Lawyers are certain to continue splitting hairs (until the first attempt is made) over which of the country’s offshore asset may be properly attached to the debt — it would seem that to qualify, such asset must not be used for the country’s functioning as a sovereign state. Thus, while visa offices might be off bounds, asset belonging to the state oil company (the Nigerian National Petroleum Corporation – NNPC) might be vulnerable. All these nuances notwithstanding, it matters more that, depending on who you talk to, the US$9.6 billion granted PIDL by a court in the U.K. over a botched gas contract is about a quarter of the country’s external reserves.

The reserves will hurt from this new pressure. But in truth, the auguries for the reserves were poor anyway. A warming earth has meant a less than salutary environment for hydrocarbon exports. Consequently, along with improvements in the energy efficiency of the big economies (China, too) and the growing contribution of renewables to global energy supply, the medium- to long-term outlook for demand for the country’s main export earner has been troubling. Add the prospects of a contraction in global demand as the trade tiff between China and the U.S. (and Japan and South Korea) bites, and the picture has more dark edges to it, especially over the near term.

Having defined graft as the main existential challenge to the state, the Buhari administration has often prioritised disruptions to the economy in search of villains over efforts to strengthen the economy’s response functions. Almost inevitably, it has built up a large burden of debt…


In addition, the most important numbers have failed to brighten the domestic canvas. Output growth has been underwhelming. Factor in the rate at which the population is growing, and one could sustain the argument that it is, in fact, negative. The threat to the social fabric from large numbers of unemployed youth remains unabated — and, as the low-intensity wars in parts of the country show could, indeed, hurt the economy even more. Inflation continues to erode purchasing power across the economy, but with more deleterious effects at the bottom of the pyramid, where the economy is building up a large underclass that, again, threatens the social fabric. The recent stop-and-arrest by police in Lagos, of a truck carrying people from northern Nigeria into the State illustrates this problem vividly. Their subsequent release, on the other hand, illustrates how artisanal our collective response has been over the recent past to major policy problems.

Elected to do battle against “corruption”, the incumbent government has not paid enough attention to the economy’s other needs: for growth, for instance, nor for a stronger private sector, for that matter. Having defined graft as the main existential challenge to the state, the Buhari administration has often prioritised disruptions to the economy in search of villains over efforts to strengthen the economy’s response functions. Almost inevitably, it has built up a large burden of debt, without having grown much in the way of domestic capacity — whether in terms of rebuilding our decrepit infrastructure or improving health and education outcomes.

In certain places, concerns are growing over how bad the central bank’s books are on the back of its many initiatives. How much of the crowding out of private sector lending is now the result of central bank credit creation, rather than the federal government’s borrowing.


One result of all these is that at the fiscal level, the main challenge confronting the economy, today, is how to square poor receipts with our rising debt service obligations and the government’s belief in the state’s large role in the management of the economy’s commanding heights. This tension between the disparate aims pursued by our government and the scarce resources constraining policy implementation, incidentally, is no where more evident than in the monetary policy space, where a newly active central bank has pursued all manners of initiatives across a diverse range of activities, all designed to boost the economy’s output. In certain places, concerns are growing over how bad the central bank’s books are on the back of its many initiatives. How much of the crowding out of private sector lending is now the result of central bank credit creation, rather than the federal government’s borrowing. And how helpful the signals are to economic actors of the central bank’s rising non-performing loan portfolio.

In the end, the emerging image is of an economy that has run down the buffers without which it is poorly positioned to ride the impending global storm. A cost-to-benefit estimate of both fiscal and monetary policy over the last four years might counsel the reining-in of most of this government’s current initiatives. But given how bad the economy is, can we afford the shock to domestic demand from the withdrawal of the current government’s easy money policies?

Uddin Ifeanyi, journalist manqué and retired civil servant, can be reached @IfeanyiUddin.