An economic compass for 2008

In 2007, the macroeconomic indicators show we have had a good 2007. The economy expanded by about seven percent, inflation in single digit, though witnessed upward trend in the last quarter, foreign reserves started to grow again, after slowing down in the later part of 2006 and early 2007. The Naira steadily appreciated against the US dollar and there was an increase in the inflow of investment, especially portfolio flows, and oil prices approached US$100. However, until all these indicators begin to reflect in the lives of the millions of Nigerians, they have very limited meanings.

In 2008, it will become very clear whether the government of President Yar'Adua will continue with the reforms we have witnessed in the last four years. In 2008, the actions of the government will not leave us in doubt about its position on the many vital areas of the management and direction of our economy such as privatisation, and general economic reforms.

In 2008, it will become very clear, if not already so, that the situation in the Niger Delta requires the utmost concentration and focus of this government. While oil prices have witnessed very steep increase in the last year, the situation in the Niger Delta meant that the economy could not take full advantage of the increase. At the peak of production in 2005, the country was producing 2.5 million barrels of oil per day. As at March last year, this had been reduced to 2.1 million barrels.

In 2006 and 2007, the situation in the Niger Delta adversely affected the performance of government revenue and budget. The signs are already there that 2008 will be another challenging year on this front. This shortfall narrowed the current account surplus and reduced the accumulation of oil savings and international reserves. Indeed, the country's projected reserve was supposed to be over $60 billion by the end of last year. The shortfall in production and the implication for international oil price and the revenue that accrue to the government has once again demonstrated the challenges involved in using oil revenues as the foundational basis of budgeting. The role of oil in the macroeconomic direction of the economy has not diminished. In 2008 and beyond, we will see how the government hopes to change the situation.

2007 has been a year of dismal economic policy initiative and making. Besides that the governments of Olusegun Obasanjo and that of his successor, Umaru Yar'Adua catching the Goldman Sachs vision of the possibility of Nigeria becoming a top 20 economy within the next 20 years, nothing much happened. Although the president has wrapped his seven point agenda around the vision, how these will be achieved was not made clear during the year.

Instead, what we saw in 2007 are signals towards the reversals of reforms that began under Obasanjo, and people are becoming suspicious and apprehensive. In the next few months, it is our expectation that the government, through its economic pronouncements and actions will leave no one in doubt about the direction it wishes to follow. In the meantime, we have the obligation to remind the government that the best means of achieving our national economic goals is to release the potentials in many businesses currently operating in the country and the ones to be established in an environment of private sector led growth and development.