Slid­ing Back into Re­ces­sion?

Sunday Trust - - PAGE 3 COMMENT -

The warn­ing de­liv­ered last week that Nige­ria’s econ­omy could slide back into re­ces­sion sent shiv­ers down the spines of most Nige­ri­ans. The dooms­day fore­cast did not come from a for­eign “think tank” or a busy­body lo­cal NGO. In­stead, it came from Cen­tral Bank of Nige­ria [CBN] gov­er­nor God­win Eme­fiele. Speak­ing on Tues­day soon af­ter CBN’s 263rd Mone­tary Pol­icy Com­mit­tee [MPC] meet­ing in Abuja, he said Nige­ri­ans should not be car­ried away with un­ripe cel­e­bra­tions over the econ­omy ex­it­ing re­ces­sion be­cause re­cent in­dus­try fig­ures show it is still un­der threat of slid­ing back into re­ces­sion.

Ac­cord­ing to CBN, the econ­omy slowed to 1.95% and 1.50% growth in the first and the sec­ond quar­ters of 2018. Even though the gov­ern­ment claimed last year that we were of­fi­cially out of re­ces­sion, the or­di­nary Nige­rian hardly felt the im­pact. This was be­cause “emerg­ing from re­ces­sion” was only tech­ni­cal, with growth fig­ures just above zero and CBN now warns that they could drop be­low zero all over again. The 10-mem­ber MPC then voted to re­tain the mone­tary pol­icy rate [MPR] at 14%, the Asym­met­ric Cor­ri­dor at +200 and -500 ba­sis points around the PMR and CRR at 22.5 per­cent.

Fac­tors iden­ti­fied by CBN as con­tribut­ing to the grim fore­cast are ris­ing in­fla­tion and pres­sure on the ex­ter­nal re­serves cre­ated by cap­i­tal flow re­ver­sal. In­fla­tion­ary pres­sure, Eme­fiele said, has started re­build­ing and cap­i­tal flow re­ver­sal has in­ten­si­fied as shown by the bear­ish trend in the eq­ui­ties mar­ket, “even though the ex­change rate re­mains very sta­ble.” MPC, he said, “ex­pressed con­cern over the po­ten­tial im­pact of liq­uid­ity in­jec­tion from elec­tion re­lated spend­ing and in­crease in FAAC [Fed­er­a­tion Ac­count Al­lo­ca­tion Com­mit­tee] dis­tri­bu­tion which was ris­ing in tan­dem with in­crease in oil re­ceipt.” It is a bit dif­fi­cult for lay­men to see why in­creased spend­ing in the elec­tion sea­son, as well as higher FAAC al­lo­ca­tions to states in re­cent times due to rise in in­ter­na­tional oil prices, should lead to a slide back into re­ces­sion when pop­u­lar ex­pec­ta­tion is that it should do the re­verse. After­all, the col­lapse of oil prices in 2015 and the re­sul­tant dip in FAAC al­lo­ca­tions was the ma­jor fac­tor in our slide into re­ces­sion the last time around.

More un­der­stand­ably, MPC urged the gov­ern­ment to fast track im­ple­men­ta­tion of the 2018 bud­get in order “to help jump start the process of sus­tain­able eco­nomic re­cov­ery.” We all agree that some­thing must be done about this coun­try’s chaotic bud­get process at the fed­eral level, be­gin­ning from next year. A sit­u­a­tion in which the bud­get does not be­come law un­til two thirds of the year is gone does not au­gur well for any kind of eco­nomic growth. CBN also urged quick pas­sage of the Petroleum In­dus­try Bill [PIB] “in order to in­crease con­tri­bu­tion to the over­all GDP”, some­thing we wholly agree with.

Among other things, CBN’s MPC also “urged gov­ern­ment to take ad­van­tage of the cur­rent ris­ing trend in oil prices to re­build fis­cal buf­fers, strengthen gov­ern­ment fi­nances in the medium term and re­verse the cur­rent trend of de­cline in out­put growth.” It also called “on the fis­cal au­thor­ity to in­ten­sify the im­ple­men­ta­tion of the Eco­nomic Re­cov­ery and Growth Plan (ERGP) to stim­u­late eco­nomic ac­tiv­i­ties, bridge the out­put gap and cre­ate em­ploy­ment.” We have long ar­gued that for the or­di­nary per­son, cre­ation of em­ploy­ment op­por­tu­ni­ties is the best ev­i­dence of eco­nomic re­cov­ery. With­out it, of­fi­cial claims that “we have ex­ited the re­ces­sion” ring hol­low.

We urge the Fed­eral Gov­ern­ment, to­gether with CBN, Na­tional Assem­bly and fi­nan­cial in­sti­tu­tions to take all nec­es­sary steps to pre­vent a slide back into re­ces­sion. This prob­lem is man-made and hu­man agen­cies must avert it.

This prob­lem is man-made and hu­man agen­cies must avert it

Newspapers in English

Newspapers from Nigeria

© PressReader. All rights reserved.