Nigeria's economy is yet to reap the democracy dividend that was promised when the civilian regime, under President Olusegun Obasanjo (see left), took power. It may still be too early to try and draw conclusions and indeed there is a new momentum to the economy. Business confidence has revived but earlier hopes of a quick recovery and even growth seem optimistic.
Chief Folorunsho Oke, a former president of the Institute of Chartered Accountants of Nigeria (ICAN) believes it is a time for pragmatic businessmen, not dreamers. "I think we are stagnant at the moment, though we now have the ground prepared for us to be able to take off in one direction or the other."
The current stagnation, according to economists, is the result of inconsistent government policy and the wrong application of monetary and fiscal tools to fight perceived ailments in the economy. The wrong macro-economic policies have been particularly worrying because they treat the symptoms rather than the ailments.
Erastus Akingbola, managing director and chief executive of Intercontinental Bank stresses the need to urgently revive the economy. "The state of the economy at the beginning of this year was anything but encouraging and all the key performance indicators went crashing. Inflation again was on the rise, interest and exchange rates had resumed swinging like pendulums, while external reserves were being depleted just as the budget deficit started ballooning," he said.
"The picture, to put it mildly, is far from the one of economic recovery that we had earlier been promised under the policy of guided deregulation," he added.
However, the manufacturing sector, which normally gives a clearer picture of the strength of the economy, appears to be improving. Average capacity utilisation stands at 31% compared to 28.7% at the end of last year. Over the last four years average capacity utilisation has been swinging between 28 and 31%.
The Manufacturers Association of Nigeria (MAN) in its 1999 half-year report released in October, observed a decline in performance registered by food, beverages and tobacco subsectors. It pointed out that the continuing overall low level capacity utilisation in the industrial sector, which has remained below 40% over the last few years, is essentially the result of market constraint.
"There were also cash-flow problems as poor sales increased dependence on bank credit for working capital, even as such credit was extremely difficult to access," it...