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Can IMF Save Prez Mahama?

the economy

Photo Reporting: President John Dramani MahamaCan IMF Save Prez Mahama?

This report was first published in The Al-Hajj on 23rd January 2014 but, with slight modification to the headline. The purpose of recapping this story today is in respect to the outcome of the recent Nigeria 2015 general elections.-Editor

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Embattled Presidents Mahama and Goodluck Jonathan may have to change gear towards the management of their various countries’ economies, deal with the issue of dogged youth unemployment and intensify the fight against graft, sleaze and corruption or honorably give way to fresh leaders to head the West-Africa’s most influential countries.

In addition to that, the two West Africa leaders who are already grappling with party-government relations in their respective countries would also have to urgently address the creeping arrogance of power that is fast gaining root in their various governments if they should remain politically relevant between now and beyond 2016.

The two leaders have over the past year been buckling under intense pressure from their compatriots to reign in corruption and distribute evenly the benefits of economic growth in a manner that would reduce the widespread poverty in their countries.

Not only do they have striking similarities in their style of governance, President John Dramani Mahama of Ghana and President Ebele Azikiwe Jonathan of Nigeria have similar economic problems to handle in their countries, deeply engulf in various allegations and perceptions of corruption.

While both Ghana and Nigeria have similar economic structures, having inherited raw-material-producing economies from the British imperialists, Nigeria’s economy is much more expansive and bigger than that of their Ghanaian counterpart, having discovered hydrocarbon resources much earlier than Ghana.

President Goodluck Jonathan’s Nigeria is currently Africa’s second largest economy after South Africa, and it is forecast to overtake South Africa this year when their rebasing figures are released in the first quarter of this year.

Both Ghana and Nigeria are Middle Income Countries with sizable reserves of oil and natural gas although Nigeria has a population close to six times that of Ghana.

President Mahama and President Jonathan are facing problems of widespread youth unemployment, crony capitalism, graft, sleaze and corruption.

It is estimated that only 1 per cent of the Nigeria’s population siphoned over 80 per cent of the country’s revenues coming from the oil and gas resources.

This has created massive poverty among a large number of the Nigeria population, exacerbating the crime situation in that country. In Dramani Mahama’s Ghana, the situation is not different.

Only last Tuesday, security group, The West Africa Network for Peace (WANEP) in its National Human Security Early Warning report says Ghana faces a future of violent demonstrations and general political instability if the government fails to deal with the worsening economic conditions and public discontent over corruption, though the government has since rejected the report.

Deputy Minister of Information, Felix Kwakye Ofosu, says the report falls short of any evidence of independent verification.

He noted that the issues raised, which are already in the public domain, is not enough to conclude the country would soon be consumed by violent activities. He described as worrying, when such serious issues are highlighted without being “backed by verifiable evidence”.

President Mahama won the 2012 elections on the back of numerous promises to the Ghanaian population of better days ahead.

Massive over-spending in the 2012 fiscal year as a result of the election has disturbed the nation’s fiscal arithmetic.

President Mahama and his economic management team led by finance minister, Mr Seth Terkper, according to opposition elements have little or no clues in reigning in the yawning budget deficit which stood at almost 12 per cent of GDP by the end of 2012.

Inflation has been galloping, moving from a single digit in 2012 to about 13.5 per cent currently and there seem to be no end in sight as fuel and utility prices continue to go up.

Cedi, the local currency, has been depreciating since the beginning of last year, and it looks as if there is no clear-cut remedial measure to stem this tide.

Available statistics indicate that the currency has depreciated by about 17 per cent last year and about 3 per cent this year so far.

But, Finance minister Seth Terkper has promised to strengthen existing foreign exchange laws to help halt the free fall in the value of the Ghanaian currency.

He told Joy Business news Tuesday “The Governor of Bank of Ghana and his team are already preparing some legislation that would go to Parliament to strengthen their regulatory control of the currency.”

Another worrying economic trend is that, Ghana is entering into a dangerous cycle of debt with public debt now hovering around USD23bn or 52 per cent of GDP and the opposition New Patriotic Party members are expressing fears the nation may slip back to HIPC (Highly Indebted Poor Country).

Currently, interest rates on government instruments are above 20 per cent, forcing the government to transfer a chunk of its resources towards payment of interest on government debts, a dangerous cycle that could threaten debt sustainability.

Again, the Mahama government although would not admit, it is forcing people to swallow the bitter pills of austerity with a cut in spending and massive imposition of punishing taxes on the general population it says will in the long term put the Ghanaian economy on a firm and sound footing.

Subsidies on both fuel and utilities were removed immediately the government was sworn in last year.

Whiles government says these so-called fiscal rescue measures are necessary and inevitable to save the economy for future prosperity, the general Ghanaian population say it has brought untold hardship on them leading to calls from many quarters including within the ruling NDC for the dismissal of the finance minister, Mr Seth Terkper.

Many in the ruling National Democratic Congress (NDC) party have in several conversations with The Al-Hajj bitterly complained about the finance minister’s management of the national economy and his unrepentant desire to force dangerous economic prescriptions on the people of Ghana without thinking about the political ramifications.

But, President Mahama not only agreed with his finance minister; he indeed reposed absolute confidence in Terkper’s austerity measures. He rebuffed all charges against him, insisting the finance minister is on the right course and, therefore, would not be dismissed.

The President recently told the new managing director of Barclays Bank that there is mounting pressure on him from within his own government and party to sack his finance Minister.

“I mean several times they’ve interceded with me to sack Seth because he’s hurting the politics. He doesn’t understand the politics. ‘If there’s no money he should go and borrow’, as if it were that easy…It’s a vicious cycle we need to break and that is why a lot of the reforms that Seth is carrying out in the Finance Ministry with regards to the GIFMIS and making sure we budget properly and MDAs follow budget discipline and all that are issues that we’re trying to introduce,” he stated.

Mindful of elections in 2016, President John Mahama believes his government would overcome the present economic hardship facing the people.

He assured SHS students in Wa, in the Upper West region during his last visit to the region that he will provide a focused leadership required to develop the country “and I wish to assure you that from where I sit and what I can see, by 2016, we will deliver on all the promises that we made to the people of Ghana.”

Apart from the economic challenges confronting the government, corruption allegations have also been pinned on the Mahama-led administration.

Under President Mahama, Ghanaian public especially the chatty members of the opposition NPP have been making massive complaints over issues of graft and corruption in government.

High-profile corruption scandal like issues of SADA, GYEEDA, Subah, have come to the fore.

While President Mahama is praised by some as instituting measures to fight the problem, especially with his directive for an official investigation to be conducted into the GYEEDA affair and the cancelation of certain suspected dubious contracts with the said agency, the opposition said they aren’t enthused.

Many anti-corruption campaigners have also showered words of praises to the President for his establishment of the Sole Judgment Debt Commission to unravel the thorny issues of judgment debt that have gripped the nation sometime in the past.

President Goodluck of Nigeria has similar problems although his country’s economy is much bigger than that of Ghana.

Mismanagement, corruption and graft have robbed the Nigerian people the benefits of their oil and gas revenue.

Nigeria may see its GDP increase to between $384 billion and $424 billion in 2014, according to projections by Renaissance Capital last month. That would compare with World Bank estimates that put Nigeria’s economic output at $263 billion in 2012.

Africa’s biggest oil producer is updating its GDP base year to 2010, from 1990 production patterns, to give a better reflection of the size and composition of its economy. The exercise which began two years ago may end in February this year.

Recalculating the data may result in Nigeria’s growth rate slowing between an annual 5 to 6 percent, from about 7 percent, and boost GDP per capita to $2,400 from $1,700.

However, the benefits of Nigeria’s economic growth over the past decade have not been shared equally with rampant report of widespread poverty across Africa’s most populous country.

Nigeria follows Ghana, which rebased its GDP data in 2010. The Ghanaian government said the economy was 75 percent larger than previously calculated, and it reduced the relative size of its fiscal deficit and current-account shortfall.

Nigeria’s statistics office is also in the process of re- weighting its consumer price index, used as Nigeria’s benchmark inflation measure. This follows similar exercise from Ghana.

Corruption has been Nigeria's biggest problem, and President Goodluck has constantly been verbally buffeted for what his critics see as his lack of commitment to fight corruption.

President Goodluck Jonathan is facing the biggest test of his three years in office after the central bank recently questioned the lack of accountability for $50 billion in oil revenue and a former leader criticized him for failing to tackle corruption.

Former President Olusegun Obasanjo, a stalwart of the ruling People’s Democratic Party (PDP) accused President Jonathan of failure to fight corruption and graft.

Obasanjo’s criticism came after Central Bank of Nigeria Governor Malam Lamido Sanusi wrote Jonathan a letter alleging that the Nigerian National Petroleum Corp. is withholding more than three-quarters of oil revenue earned from January 2012 to July 2013.

The cumulative effect has been to dim Jonathan’s chances of winning Nigeria’s election scheduled for 2015.

Nigeria’s Finance Minister, however, said, Nigeria can account for the $49.8 billion alleged to be missing, saying the number was a product of “misconceptions and misunderstandings.”

Sanusi, who was appointed by Jonathan’s predecessor and plans to step down from his post when his term expires in June, has said the central bank is bracing for public spending “shocks” in the approach to the election next year.

Nigeria law-makers recently accused the state oil company of colluding with Swiss traders to sell its production below the market price and deny the nation of vital resources to fight poverty.

A report alleged Geneva-based Vitol and Amsterdam-based Trafigura had profited from “corrupt market practices” in Nigeria, Africa’s largest crude producer.

A 2012 parliamentary probe in the country, which relies on oil exports for 80 percent of government revenue, recommended that 70 gasoline importers including NNPC refund 1.1 trillion naira ($6.9 billion) in fuel-subsidy payments, saying the process was rife with corruption.

Recently, the Nigerian President Goodluck had to grapple with the allegation of corruption and that he is training a death squad to kill his political enemies.

President Goodluck Jonathan, in a letter posted on his special adviser's website recently did not address charges that he is shielding a party financier indicted for drug trafficking in the United States and that drug barons are influencing politicians in Nigeria.

Jonathan, however, said, he has asked security agencies and the government-funded National Commission for Human Rights to investigate Obasanjo's suggestion that he is training a killer squad to assassinate some of the more than 1,000 alleged enemies. On specific corruption cases, Jonathan invites Obasanjo to clarify to the nation some spectacular cases that occurred under his watch.

Under his own administration, Jonathan says, several highly placed people and the sons of some ruling party leaders are facing trial for a $6 billion fuel subsidy scam.

Turning to the latest massive corruption in Nigeria, Jonathan called "a spurious allegation" the charge from respected Central Bank Gov. Lamido Sanusi that nearly $50 billion in oil receipts is missing from the treasury.

However, a flurry of meetings recently led to Sanusi telling legislators the missing amount was actually $12 billion, and the finance minister putting it at $10.8 billion.

To criticism that Nigeria's international friends are concerned about the state of the country and economy, Jonathan says Nigeria has won 18 percent of all foreign investments in Africa, attracting $25.7 billion in just three years under his leadership.

Nigeria is the United States' biggest trading partner in sub-Saharan Africa and the U.S. is the largest foreign investor in the country, according to the U.S. State Department.

The World Bank recently noted that despite robust economic growth and investment, more than 100 million of the country's more than 160 million people in Africa's most populous nation remain destitute — equaling 8.3 percent of all destitute people in the world.

Thus, Ghana’s President Mahama could avoid the looming political gloom if he is able to find remedial measures to the nation’s sinking economy, widespread youth unemployment, sleaze and corruption in government and the creeping arrogance of power.

Source: The Al-Hajj



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