The Rich, The Poor and Buharinomics


Friday, November 23, 2018    04.15PM / By Economic Research Desk, Sept 2018 


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Executive Summary 

As the dust settles on the nation’s 58th independence celebration, we reflect on the last independence celebration prior to the 2019 general elections. 

An in-depth review / analysis of the ideological backbone of the current economic management of the sovereign was thus embarked upon, going beyond pinpointing the macro scorecard to show how best the current administration’s approach has fared, given the sheer number of social intervention headed policy options embarked upon.  

It soon became apparent from the review that the Buhari administration either underestimated the enormity of economic challenges it was up against at the time of take-over in 2015 or simply had a mis-read of the situation and its systemic impact. Either way; and despite clear and practical symptoms of an economy under pressure, we somehow moved in a direction that evidently decommissioned the economy. 

For good measure, external reserves had begun to dip with a consequent decline in the external value of the Naira and the nation’s inflation rate had also begun to back track, raising the short end of domestic yield curve (a measure of the return on money market investments) slightly.  In other words, short term investments were seeing higher marginal returns than longer term investments as investors scared by the riskiness of the local market preferred investment instruments with less than a year to go on their maturities. 

The short term bias of the market was as a result of the dampening of oil prices, which hurt domestic fiscal revenues at both national and state levels. 

In its reaction to the shrinking fiscal purse, the administration introduced a technology-led remittance bandage called the Treasury Single Account (TSA) in an attempt to stop the financial bleeding and ensure fiscal house cleaning.  

This was followed by the introduction of stiff capital controls (restricting the access of 14 businesses to dollars from the official Forex window) in an attempt to pull back the continuous slide in the external value of the local currency. However, the effectiveness of the controls gradually dissipated as the naira became more vulnerable to periods of excess demand for dollars and other convertible currencies. The bearwhale entered the waters.  

In reacting to the excess demand for Forex, the Consumer Price Index (CPI) as a measure of the domestic inflation rate, became entangled in higher cost of imports – riding on the back of the relative scarcity and lack of access of manufacturers and traders to dollars and other currencies of major trading partners.  

Rising wholesale prices equally adversely affected the cost of intermediate goods or raw materials thereby dragging up the Purchasing Managers Index (PMI), a barometer of the economic wellbeing of local manufacturers. In a sense, the rising PMI reflected growing input costs and the worsening of access to raw materials by local industries. 

Furthermore, the increasing backlog of unpaid salaries by states, coupled with delayed budgetary spending as at 2018 contributed to a disruptive downturn in growth in gross domestic product (GDP) output such that consensus estimates of real GDP for the country in 2018 is a slow 1.9 per cent. 

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In an attempt to jumpstart economic growth, the budgetary authorities began to increase fiscal spending and went on a borrowing spree thereby widening the budget deficit (debt service is currently over 50% of fiscal revenues) and putting upward pressure on domestic interest rates. This has since led to reduced lending to the private sector owing to the “crowding out" effect in the local money market. 

This was at a time the administration was also providing financial support to cash strapped state governments who could not meet monthly public service wage bills; way before the agitation for minimum wage increase. The fiscal bail-outs by the administration were funded by expansionary ‘ways and means’ interventions which placed additional pressure(s) on the domestic inflation rate; as loans to states unleashed pent up demand without an attendant increase in productivity. 

As a result of the insistence of international lending agencies such as the International Monetary Fund (IMF), a fiscal stabilization mechanism called the Economic Recovery and Growth Plan (ERGP) was put in place to cover the period between 2017 and 2020. 

The idea of an ERGP was to achieve a number of specific measurable objectives which included but we’re not limited to the following;

  • Increase Value Added Tax (VAT) from 6% to 19% of Gross Domestic Product (GDP) to raise government revenue;
  • Support an expenditure switch approach to public financial management;
  • Improve aggregate supply through inward seeking policies, especially in agriculture; and
  • Diversify debt structure by changing the domestic and foreign debt mix from 60:40 to a more desired 30:70 ratio in order to reduce domestic interest rates and avoid ‘crowding out’ private sector borrowing.

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Source: ERGP


The administration increased social developmental funding through its National Social Investment Programme (NSIP) which includes a Central Bank of Nigeria-guided anchor borrower’s scheme for farmers, an MSME clinic for small and medium-sized enterprises, and graduate employment programme (GEEP).  At the same time, it introduced the N-Power scheme to reduce frictional unemployment and provide hand-outs to the extremely poor (vulnerable) in the society through its TraderMoni scheme.  

The combination of increased access to financing and reduced unemployment through the N-power scheme was aimed at creating jobs.   

In reality, GDP growth of 1.5% has remained too small to have any meaningful impact on poverty and unemployment as the human misery index (HMI) remains high. Indeed, the rate of growth in GDP has during the period under review not kept pace with the rate of population growth.  

Leading economic indicators have stayed mildly positive but this masks rising weaknesses in a number of human development indicators. 

Furthermore, with slow and reluctant reforms in the power and gas, port, rail and roads sectors, coupled with delays in fiscal spending economic growth have been tepid. 

Weakness in economic growth, added to a poor response of the economy to large fiscal spending has created a general feeling amongst Nigerians of being worse off than they were four years ago. 

Therefore, households perceive themselves as not being lifted by fiscal expansion. 


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Generally analysts believe that to ensure that Buharinomics works successfully the following actions need to be taken:

  1. Proper alignment of projects and plans to achieve a congruence of intent, execution and outcomes; 
  1. Switching from a stabilization program to a developmental program i.e from interventions to investments;  
  1. The fiscal authorities need to adopt a balance sheet approach to fully complement the TSA, complemented by new fiscal rules, tariffs and duties to stimulate economic activities which the monetary side can use as a credible basis to guide decisions; 
  1. Unification of the exchange rate windows; 
  1. Proper incorporation of forward qualitative indicators such business sentiments and consumer confidence index’s in carving out policy. This would also require a proper focus/funding of the NBS to provide veritable data on which decisions will be based; 
  1. Effective population management as the myth of size and numbers is only as good as the quality of the citizens making up such numbers; 
  1. Addressing rural-urban drift, by ensuring economic inclusion in rural areas have become vital. The race to urbanization needs not be plural as rural dwelling equally offers its own benefits if adequately supported by human development enablers like education, health, security, technology and govt services/presence; 
  1. Widening the reach of the formal sector in the national account, by improving both human capital and accessibility to appropriate technology; 
  1. Leveraging in an efficient manner the stabilizing force known as remittances and foreign direct investments by improving on the justice system that supports sanctity of contracts, as well as the rules/laws that impede same; and 

  1. Opening up infrastructure space through Public-Private Partnerships (PPP) either through outright sale, concessions and build, operate and transfer options.


Foreign Direct Investment (FDI) has served as the right ammunition to reduce unemployment rate in most climes.  The inability to open up infrastructure, energy and power sector will remain a setback to FDI; and an issue there appears to be less clarity on from the Nigerian government.


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Previous Proshare Confidential Report (s)

1.       Nigerian Banks’ Performance – H1 2018Aug-2018

2.      AMCON and Financial Services Debt Burden in Nigeria – Jul 2018

3.      Poverty Tracker and Nigeria: Raising The Red Flag – Jun 2018

4.      POCKET Economics: Addressing Income Inequality – May 2018

5.      The Silent Drug Epidemic: A Gathering Storm - Apr 2018 

6.      Judging IMF’s Position on Development Indices – Mar 2018

7.      Money Market: The Folk Road – Feb 2018    

8.     The Headache of Missing Targets – Jan 2018

9.      2018 Outlook on the Nigerian Economy: The Need for an Even Keel – Dec 2017 

10.  Nigeria External Economy and the White Noise of Import Dependency – Nov 2017

11.   States and the Rising Weight of Debt – Oct 2017

12.  Money Supply: Reeling from Policy Response – Sep 2017

13.  How Rail and Energy Will Deliver a Robust Economy for Nigeria – Aug 2017

14.  Too Big Government: The Hysteria of Developmental Quagmire – Jul 2017

15.   The Nigerian Debt Conundrum and the Need for Automatic Stabilizers – Jun 2017

16.  Article IV vs. ERGP - The Third Way – May 2017

17.   Lifting The Veil off The Financial Sector – Apr 2017

18.  Towards An Economic Model for Nigeria; Going Beyond Symptomatic Responses - The Panama Model – Mar 2017

19.  FX Utilisation in January 2017-Symptoms of An Opaque Structure – Feb 2017 

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