Officially in recession
Minister of Finance Mrs. Kemi Adeosun confirmed last week what bankers and economists have been hinting at since early this year, that the Nigerian economy is in recession after three straight quarters of negative growth. Her remarks came a day after Governor of the Central Bank of Nigeria (CBN) Godwin Emefiele told a closed door session of the Senate that foreign currency inflow dropped from $3.4 billion per month to $400 million. This has led to the collapse of the value of the Naira against the dollar, which was put at about N375/$1 on the parallel market as at last weekend and above N300 to the dollar for the first time ever on the official inter-bank market.
On its part, the International Monetary Fund (IMF) predicted gloom as it stated that the country’s GDP contracted by 0.36 per cent, while the National Bureau of Statistics (NBS) emerged with a report that the country’s inflation rate was as high as 16.5%, the highest in over a decade. Mrs. Adeosun however qualified her gloomy confirmation with cheering news. She said, “Things are tough but we are not ignorant. I want to assure Nigerians the economy is in good hands and we are absolutely doing our best. We want to assure Nigeria we are on the right path. We are on the right track.”
Though the Finance Minister attributed the shortfall in income to the activities of militants in the Niger Delta coupled with the fall in the international price of crude oil, many experts think it is the Buhari regime’s policy response that aggravated the decline. Though the administration says it has an economic team headed by Vice President Yemi Osinbajo, the impact of this team is not being felt as its approach in battling the current challenges does not seem to be yielding positive results. For instance, the ban on rice importation has not been effective as the CBN Governor is complaining that rice, eggs and school fees still take a huge chunk of forex allocations every month. It is alleged that some of those who procure foreign exchange from the official market in the name of importing rice and agricultural equipment engage in round tripping by selling the dollars to Bureaux de Change at higher rates, thereby enriching themselves at the expense of those who genuinely need forex. It is necessary for CBN to properly scrutinize the activities of most of the dealers and penalize fraudsters. It is also time for government to take another look at the list of items on which forex should not be sold at the official rate.
It is time to stimulate and encourage local production, especially of agricultural products and ensure proper processing and packaging for export in order to diversify our sources foreign exchange. It in this regard that the complaint by non-oil exporters, who said government’s policies discourage rather than encourage them, need to be looked into. The Organized Private Sector Exporters Association claimed recently that government failed to provide incentives for its operation, hence non-oil export dropped from $3 billion to $1.6 billion in the last two years. It is feared that earnings from that sector could drop further in 2016.
The Buhari government’s focus on the fight against corruption is highly commendable. But with the poor state of the economy, high inflation, drop in GDP growth, unemployment, underemployment and mass poverty, it must complement that with urgent economic revival measures. Retrieving stolen money should not be the government’s only focus because if proper economic policy measures are put in place, the country could earn more than the stolen funds in a short time.
Now that the Federal Government has officially admitted that our economy is in recession, we expect to see the entire psyche, attitude and orientation of government change in order to meet the new challenge. President Muhammadu Buhari could make a good start in that direction by putting in place a real team of economic advisers.