THE Statistician-General recently made public the unemployment rate in the first half of 2011, the growth rate of the Gross Domestic Product (GDP) for the third quarter and the Composite Consumer Price Index in October 2011. Officially, 'the unemployment rate, which is the percentage of Nigerians within the labour force willing and able to work but could not find work for more than 40 days on the average, in the first half of 2011 increased to 23.9 per cent from 21.1 per cent in 2010 and 19.7 per cent in 2009.' In absolute terms, from end-December 2010 to end-June 2011, there was an additional increase of 1.8 million unemployed people. In all, out of the total labour force of 64 million last June, 15 million were unemployed. The rural areas harbour most of the unemployed.GDP officially grew by 7.4 per cent in real terms. The development raises some issues. The difference between real growth rate of GDP and the population growth rate shows the rate at which real per capita income grows. Since GDP has been growing at more than double the population growth rate of 3.2 per cent for several years running, then given the simultaneously rising absolute poverty level, the conclusion would be that income distribution is dangerously and unacceptably lopsided. Also, the agricultural sector, which is predominantly rural, is reportedly the leading contributor to the growth in GDP. But there is no evidence by way of increased agricultural output. With manufacturing doing poorly, the agriculture-led non-oil sector propelled GDP growth rates have not translated into ample food supply nationwide as food prices continue to rise. Strangely, the food price index has been rising faster in rural than urban areas. There is no expansion in agricultural exports or enhanced processing locally of farm produce. In fact, food imports have been shooting up with time while imported food index is more often than not lower than domestic food index. And because there is no radical change in agricultural production techniques in the country, government data affirming that the unemployment and poverty incidence are higher in the rural than urban areas cast serious doubts on the growth rates attributed to agriculture over the years.The Composite Consumer Price Index (CPI), the measure of inflation, stood at 10.5 per cent in October. Owing to the lagged effects of monetary policy measures, the success or otherwise of the active attempts by the CBN to check inflation through its monetary policy rate may be gauged from the behaviour of the CPI over a period of time. Since January 2009, the All Items Index has risen consistently from month to month except for three months. The year-on change in the CPI (which denotes inflation) ranged from 9.3 per cent in August 2011 to 15.6 per cent in February 2010. Except also for July 2011 (9.4 per cent), the yearly rate of inflation was double-digit. Similarly, the 12-month average change (the alternative depiction of inflation) ranged from 11.1 per cent in October 2011 to 13.9 per cent in October and November 2010. For the apex bank to claim success in ensuring price stability, the rate of inflation should fall within the range of zero to 2.0 per cent.The persistent double-digit inflation regime is a mark of high price instability, the source of which is traceable to excessively high fiscal deficits and the attendant unrealistic naira exchange rate. Contrary to official claims, actual fiscal deficits in 2009 and 2010 were 17.5 per cent and 19.0 per cent of GDP respectively. From the Federation Account disbursements for January through July 2011, the fiscal deficit level this year may reach 20 per cent of GDP. Because budget expenditure by all tiers of government depends heavily on oil export earnings, the inappropriate origin of the naira funds shared among Federation Account beneficiaries and the naira/dollar exchange rate highly influence the level of fiscal deficits.The economic prospects are not particularly bright. The recent devaluation of the naira would worsen the fiscal deficit level and exacerbate inflation. Additionally, with the CBN standing lending facility rate fixed at 14 per cent since October 10, 2011 the existing high lending rates are set to solidify. On top of all this, government proposes to remove subsidy on petrol. Predictably prices of consumer goods as well as costs of transport and production would escalate. The end result of such fiscal and monetary measures would clearly spread economic pain and weaken the productive sectors. However, since the stated government objective is to create conducive conditions that would attract massive investment and boost employment, there is need for government to adopt sound fiscal and monetary policies as the foundation for national economic progress.
Click here to read full news..
