Why recession may persist
• What government should do, by experts
• Okays 2016-2018 external borrowing plan
From muted speculations to official confirmation, the message is the same: Nigeria is fully in economic recession.
The situation has already been described as the lowest economic performance in about 25 years with over four million jobs lost in one year. And it may take about three years to overcome, according to an expert.
The data released yesterday, after much hesitation by the National Bureau of Statistics (NBS), showed that the Federal Government could no longer continue to live a lie about the true state of the economy.
Nigeria has recorded a negative Gross Domestic Product (GDP) growth rate for two consecutive quarters in 2016, thus officially indicating a recessed economy, as the NBS released the second quarter economic report.
In his preface to the Q2 Economic Report, Statistician–General, Dr. Yemi Kale said: “The key attribute of Quarterly National Accounts (QNA) is that they provide a reasonable level of detail of the economy that helps government to assess, analyse, and monitor economic growth on a regular basis.”
In its immediate reaction to the NBS data, the presidency attributed the recession to the drop in government revenue on account of the fall in international oil prices, compounded by incessant attacks on pipelines and sabotage.
Specifically, the severe drop in crude oil prices, decline in government revenue, devaluation of the naira and surging inflation rates, in addition to the country’s high poverty (70 per cent) and unemployment (12.1per cent) rates have had a detrimental effect on the economic security of most citizens and households.
But more worrisome is the depth of the recession, with the GDP declining at -2.06 per cent, more than the expected growth for the entire year at 1.8 per cent, as projected by the International Monetary Fund (IMF).
According to the bureau, the GDP decline was dipped by 1.70 per cent points from the negative growth rate of –0.36 per cent recorded in the first quarter, and also lowered by 4.41 per cent points from the growth rate of 2.35 per cent recorded in the corresponding quarter of 2015.
Analysts predicted that the stagnation may be worse given the crises in the socio-political economy.
Chairman and Chief Executive Officer of International Energy Services (IES) Limited, Dr. Diran Fawibe, in an interview with The Guardian, said the country had been lying with statistics which negated the real situation in the country. He said Nigeria had been in recession long before it finally admitted to it.
Frontline economist and Chief Executive Officer of Financial Derivates Limited, Bismarck Rewane said though the official report came out yesterday, it was long obvious that the country was in recession. “The challenge is that the recession was deeper than we thought,” he said.
Deputy Managing Director of Afrinvest, Victor Ndukauba said the NBS report was expected. “There were no surprises; it was actually expected the GDP would have contracted further than announced based on what was happening in the economy.”
He disagreed that drop in oil revenues plunged Nigeria into recession, saying it had more to do with governance and fiscal policies, especially as there was “lack of spending from the public sector, no dollar inflow, therefore little investment.”
Under the circumstances, he said “there are no silver bullets, the only solution is for the government to spend its way out on infrastructure investments – education, healthcare, power, transportation, etc.”
According to Ndukauba, it may take up to three years before Nigeria can come out of the recession.
Rewane said: “We now have our work cut out for us. We need investor’s confidence now more than anytime else and all hands must be on deck. We must woo the investors now, but it is not a magic wand. We must first do our work.”
For President of the Chartered Institute of Bankers of Nigeria, Prof. Segun Ajibola, “we must go back to the root of the crisis and that is oil economy and pattern of consumption. We are exposed to external shock and it can be tamed as well.”
The Director-General of the Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, admitted that many Nigerians are exploring opportunities in the agric and informal sector because many workers have had their salaries slashed while many are being owed for several months both in the public and private sector.
“This is the time to produce what we need to save the crisis of foreign exchange and dependence on imported items.”
But the Federal Government assured the nation yesterday that it was making efforts to tackle the drift.
The assurance came as President Muhammadu Buhari announced a change of the name of the Ministry of Solid Minerals to Ministry of Mines and Steel Development during the Federal Executive Council (FEC) meeting in Abuja.
Minister of Finance, Kemi Adeosun, who answered questions on the report of the NBS which officially confirmed that Nigeria was in recession, attributed the economic predicament in the country to inadequate investments in capital projects over the years.
Adeosun said the recession of the economy was not an overnight phenomenon but started as far back as six years ago. She said the indices were available for discerning analysts to see as more money was spent on recurrent than on capital infrastructure, which the current administration is striving to correct.
“With the economy’s overdependence on oil earnings, the sharp drop in the commodity’s price only worsened the situation”, she pointed out, assuring however that though Nigeria has a long way to go, the country was “on the right hands”.
The minister also announced the FEC’s approval of a three-year rolling external borrowing plan (2016-2018) which will be forwarded for approval by the National Assembly.