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.

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  • Aristotle

    So finally after months of denial and falsehood, the FG has accepted we are in recession. But still don’t want to agree that the problem is not just about oil prices and pipeline vandalism but rather the result of some of the half baked economic policies being foisted on the populace. The future is bleak fellow Nigerians, because you don’t tackle an issue by denying it’s existence. While it’s in our best interest to fight corruption, these policies seem like we’re trying to cut off our noses just to spite the face. The already impoverished masses shouldn’t be sacrificed in the course of tightening the noose on the few kleptomaniacs in power. The full effects of certain policies must be weighed before implementation. Whilst I support plugging off all economic leakages, let’s not throw away the baby with the bath water!

  • Ujay

    This president is too old and too stubborn for the situation we are in. Six months no budget no ministers, cant trust anybody. Even now does not look like he even knows what to do. Life is about compromises,even Jonathan at a time acknowledged that boko-haram members were part of his govt.If that is what it takes move forward so be it, but what do we have now unlimited probing and witchhunting with no results.Unfortunately the people who caused this situation are right now in government. Rotimi Amechi was the chairman of governors forum when Okonjo Iwuala proposed to save the excess crude money and they want it shared.I hope it will not get to time Nigeria will demand for the sack of Ministers and National Assembly.End of democracy and back to square one.

    • Mr Abel Ighodaro

      Mr Ujay, of course Nigerians want corrupt Ministers to be sacked, they want one of the houses of parliament to be scrapped, the way things are going now in Nigeria, it can no longer afford the high salary of the legislators, I can smell something terrible will happen in Nigeria if this is not checked.

  • Bambam

    I shudder at times at the kind of economists we have in Nigeria..they are all paper economists..the fiscal policies of the government are being well taken care of by Kemi after the satanic years of Okonjo-Iweala..the evil woman..

    But with so much stolen wealth in the hands of few kleptomaniacs..who are not ready to support Buhari’s government..as his success would signal popular backing for him to destroy their stealing industry..the silver bullet is in changing our Monetary policy..if we don’t do that..all the brilliant efforts of Buhari’s govt on the Fiscal discipline side would not show..and this dark forces would keep covering the govt in darkness..and No floating the naira is not the solution..as we can all clearly see now..the silver bullet on our monetary policy is more fundamental and radical than that..

    • olayiwola

      You are wrong on all counts!!! Floating the naira is not a choice but compulsory!!! With low dollars inflow, the gap between the parallel and official rate will have been so much, thereby encouraging massive roundtripping!!! Blame game? The signs of the recession there all along, okonjo warned us all, but pmb accelerated it by the freeze on capital expenditures for 15months, bad body language to discourage FDI, policy somersaults.

      • Bambam

        Floating the naira is like putting the cart before the horse..yes it would be better than pegging it N197 and encouraging round-tripping..but it won’t merge the gap between the official rate and black market..because the saboteurs behind the black market set rates at prices they want and in any case there is a hoarding of dollars by those who have it..so the market isn’t floating..there is no willing seller willing buyers..because the thieves who have the dollars have hoarded it and not selling..

        You mentioned the criminal called NOI..the devil told us in 2014 that we would drink garri soon..but went on to do a budget of 90% Recurrent and 10% CAPEX..Buhari met the same budget..so what could he have done?..He’s done his own budget and increased CAPEX to 30% which is good..but the Fiscal aspects they are doing right won’t show until they sort out Monetary policy particularly the Forex exchange..

        To do that would not be by diversification that would save on imports and earn more forex inflows on export…that would be a long winding process at this time..as there is clearly sabotage and economic war going on..he has to use the silver bullet..and press reset on the economy..its the only option!!