Trends in the year that just ended do not indicate an optimistic outlook for Nigeria’s politics and economy in 2022 when general elections will only be a year away. The political temperature will rise exponentially, and the environment will also be more fraught with the reinforcement of prevailing trends. The year 2021 saw greater polarization and discordant politics in the country, with mounting tensions between the government and opposition and extremist forces calling the shots in confrontations with the authorities.
The economic challenge intensified. Inflation soared, and prices of food, essential commodities, and services multiplied. Financing gaps increased in the government’s budget and the country’s trade account, thus forcing the Federal Government of Nigeria to opt for more foreign and domestic loans to cover the deficit.
Perhaps the most unedifying aspect of 2021’s raging government opposition, especially the PDP-APC confrontation, was how it produced a political discourse in which invective and incendiary rhetoric eclipsed any meaningful discussion of policy issues. Political leaders spent more time vilifying their opponents than articulating their position and how to address the country’s challenges. Those in power seemed to equate government performance with demonizing rivals, while opposition leaders returned the compliment by using similar tactics. The tone and content of political discourse plunged to new depths of discourteousness. Bitter polemics and shallow and provocative narratives put an end to any reasoned debate. This evoked public disdain for both sides and degraded the country’s democracy.
If the national assembly’s role is deemed to be an important indicator of the health of democracy, this too did not inspire much confidence. The senate and house of representatives were mostly reduced to rubber stamps by the ruling party, with the major opposition party unable to mount meaningful resistance.
The overall lack of governance at the center also contributed to political setbacks faced by the country, especially on issues bordering on insecurity and social inequality. The APC-led government continued to muddle through and govern unilaterally without a clear direction. Morality lectures rather than focus on policy priorities seemed to increasingly preoccupy its leadership. However, a few initiatives by the government that were widely appreciated are the passage of the Petroleum Industry Bill into Law, the reforms in the maritime industry, massive investment in the rail system, and the launch of a national development plan among several others.
However, the most important and consequential issue that dominated 2021 was the deteriorating state of the economy, despite a modest recovery following the government’s COVID-related stimulus measures. Political uncertainty and looming elections complicate the economic situation, deterring both domestic and foreign investment. Inflation also became a politically explosive issue, rising significantly for a combination of reasons, including supply-side and monetary factors, while unrestrained subsidy schemes also contributed to it.
High inflation (double-digit) is likely to persist, undermining the benefits of the growth projection for the year 2022. The global dislocation of supply chains will also add to economic difficulties. All this will exact a political cost for a government going into elections. So will prior actions it is obliged to take-although necessary-such as raising electricity tariffs and removing petrol subsidies.
The year 2021 also saw mounting government debt, both internal and external. Power sector debt also rose exponentially, compounding the circular debt problem, which still awaits meaningful resolution. The fragile macroeconomic situation will continue to be challenging in 2022 with the persistence of negative trends, especially a high fiscal deficit, low foreign exchange reserves (due to debt service requirements), a growing current account deficit, and stagnant private investment levels. The use of bank credit to finance the public sector will continue to crowd out private investment, with detrimental effects on the economy.
I am an optimist that if the federal government sustains the pace of economic reforms and investment in physical infrastructure, we will be able to ease the country’s balance of payments difficulties, though more structural reforms will be needed to unlock funds from other multilateral and bilateral donors. That said, fiscal vulnerabilities will remain and will have to be carefully managed, as will domestic and external risks to the economy in 2022. It will, however, be the government’s ability to bring down inflation that will be the decisive economic factor in determining its political fortunes with elections approaching.