Oh Nigeria, What A Lost Decade!
By Enobong Udoh
As Nigeria’s government roll out drums to celebrate the country’s 60 years of independence, the research team of Economic Confidential decided to take an in-depth look at the soon to be ended decade to see how the country fared in economic terms.
For this analysis, we will behave like surgeons and x-ray the quarterly GDP from 2010 to 2020, after all GDP performance is still the best measure of the economic health of a country. So, imagine you put money in a savings account in 2010 with the terms that it can only to be withdrawn at sometime in 2020 (about a decade time), the only caveat being the interest rate is not fixed but varies with average economic productivity.
In reality such financial asset is not popular but still exists and it’s called variable interest products, with the interest rate tied to a benchmark rate. Imagine further that the initial money to be set aside in this savings account is Nigeria’s 2010Q1 income or GDP and the final amount to be withdrawn is GDP at 2020Q2. By now your rational guess will be that all the quarterly interest (even at 1 percent) paid and principal rolled over from 2010Q1 should balloon the final payout. You are very on point, as this concept is called compounding.
But our concern here is; what will be the value of this average (compounded) interest rate that will take our initial 2010Q1 savings to the final 2020 payout? Source, Nigeria Bureau of Statistics To properly fix ideas, Nigeria’s 2010Q1GDP (our initial savings) was about N12.5 trillion while payout was N15.8 trillion in a growth span of 38 quarters. Our analysis found the average interest rate to be -0.006%. In essence, if you had invested in this financial product you would have lost N6 for every N1000.
Since we are dealing with Nigeria’s economic performance see this average interest rate to mean average growth rate for the entire period. Herein lies the story of our lost decade, it is anybody’s guess how we got here. Some would say it is the Buhari factor, the argument to this line of thought is the saying that “old habits rarely go away”. What old habits? Nigeria suffered its first recession when this same president was head of state, second in 2016 and now in 2020. Supporters of this view argue further that given a possibility of a third term, another recession will be on the horizon. So there must be something about the man and his strategy. While it may be a lost decade for Nigeria, it is a big win for the privileged and well connected 1% elites (those able to get import waivers, dollar at CBN rate and so on). Proponents of this view believe in what is called ‘fallacy of composition’, after all as they say “what is bad for the group is good for the individual”.
Using game theory (of payouts and strategies) to buttress their point, they allude to the fact that what we have experienced in Nigeria is all a game (of many losers and very few winners). Therefore if your bank devise a way to outsmart the rational you, by paying you N994 (principal plus interest) of your N1000 investment. If this is all legal, meaning you don’t picket the bank, you don’t carry placards to demonstrate against the bank, the game theorists should rightly exclaim, what a game..! We conclude by saying sadly for Nigeria, if the last decade indeed was a game, then the game played by these one-percenters is very illegal, as the signed declarations of the United Nations, our constitution and the CBN Act provides as a necessity (full) employment, basic social goods like water, health, education, electricity; high growth rate, low and stable prices.
The rule of law is a necessary condition in any serious society. For instance New Zealand, a high inflation volatile country in 1990 adopted inflation targeting, according to their law the central bank governor can be sacked if inflation goes beyond the announced target of 5%. Guess what, inflation has not crossed a maximum of 4.1% for 30years! It’