THE ominous signs were glaring enough for anyone with a perceptive insight into how successful economies are run to see; yet, it still took many by surprise when the Central Bank of Nigeria announced recently that the Nigerian economy was on the brink of slipping back into recession. All the positive forecasts by the Bretton Woods Institutions are now being hurriedly reviewed, while figures from the National Bureau of Statistics are offering nothing to cheer.
At the beginning of the year, with the mood still upbeat after the recent escape from recession, the World Bank had a 2.5 per cent growth forecast for Nigeria, while the International Monetary Fund was a bit more conservative with its 2.1 per cent. But after the Gross Domestic Product growth of 1.95 per cent in the first quarter, followed by a fall to 1.5 per cent in Q2, it is obvious that things are not going quite the way they were expected. The World Bank’s forecast has now dropped to 1.9 per cent. Obviously, claims that the Nigerian economy was being steered along the right course can no longer stand up to scrutiny.
With the 2019 elections just months away, the country has been hit by a loss of foreign capital, with portfolio investors taking flight. According to data from the Nigerian Stock Exchange, about N435.41 billion was withdrawn from the market between January and July this year, compared to N236.32 billion for the corresponding period last year. For a country in dire need of foreign capital, this does not augur well. This is why Nigeria has to get it right with the 2019 elections in order to restore confidence in the economy.
While insisting that he would not give the final figures because his agency was still working on them, the Statistician-General of Nigeria and Chief Executive Officer of the National Bureau of Statistics, Yemi Kale, said the economy was “still struggling (to get) out of recession”, especially as a result of problems from the agricultural sector, which is “the biggest part of our GDP.”
A situation where farmers have had to abandon their farms and take refuge at Internally Displaced Persons camps can only worsen the food crisis situation now and in the future. In any other country where there is respect for the rule of law, the crisis affecting the agriculture sector would have been avoided or resolved, through a rigorous and unbiased enforcement of the law.
But there is still a tinge of irony in the turn of events: ordinarily, an economy that is heavily dependent on oil like Nigeria’s should be looking up now that the prices of the commodity are rallying back to $85 and above per barrel, up from below the $30 pb recorded in the recent past. In the main, however, the crash in oil prices and the lack of tactful management of other aspects of the economy actually precipitated the descent into a first major recession in 25 years.
As enumerated by the CBN, the other factors accounting for the bleak economic outlook include the late implementation of 2018 budget, which was only assented to by the President, Muhammadu Buhari, in June; weakening demand and consumer spending; rising contractor debts and low minimum wage, resulting in weak purchasing power. It is a disgrace that, due to protracted political feuding, the presidency and the legislature delayed implementation of a budget that was submitted in November last year and would have injected money into the economy until the middle of the year.
The situation is further compounded by the security challenge in the North East and North Central regions, both under attacks of Boko Haram and Fulani herdsmen, and the effects of flooding, which submerged houses and farmland in many states of the federation. These are what the CBN Governor, Godwin Emefiele, summed up in his observation that “the gains so far achieved appear to be under threat following the new data, which provides evidence of weakening fundamentals.”
From the turn of events, it is becoming increasingly clearer that Nigeria can no longer expect oil to solely bear the burden of the economy. For close to a decade, oil prices hovered at $100 and over. Yet, very little or nothing was invested in infrastructure, education and health. Then, it was easy for the Minister of Finance, Ngozi Okonjo-Iweala, to boast vainly that Nigeria had one of the fastest growing economies in the world, at 6.5 per cent.
Following that trend, it should be expected that, with the resurgence in oil prices, it should be the time to consolidate on the escape from recession, a time to build up healthy foreign reserves and a time for the Excess Crude Account to brim with extra cash. That these have not happened suggests the need for a change of approach. Nigeria should start walking the walk about economic diversification. No country can become an economic power by relying solely on commodity sale; Nigeria has to shift from an import-dependent economy to one that exports finished goods.
Portugal rebounded from recession that saw its GDP contract by 3.2 per cent and youth unemployment rise to 40 per cent, using bailouts and policies to reduce tax and stimulate consumer demand, a CNBC analyst said. The World Economic Forum credits easing of austerity for Spain’s rebound that saw one million jobs created and industrial production jump by five per cent. Nigeria needs adaptive policies to stimulate production, job creation and exports too.
The government has to come up urgently with a policy environment that will boost the real sector and create jobs. There is no point holding on to national assets like the four refineries and steel companies that have become a drain on the public purse. Emphasis has to shift to the refining of petroleum products locally, and that can best be driven by the private sector. Liberalising the rail sector would open up the economy; apart from facilitating the movement of goods and services, it is an area that holds promise for foreign investment and huge job creation.
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