Nigeria’s economy exits recession but the masses suffer severe economic hardship throughout the entire year
By Anayo Ezugwu
IN THE beginning of 2017, the President Muhammadu Buhari-led administration with a N7.44 budget of recovery and growth, promised Nigerian that they will have a better life in the course of the year. Although the economy has exited recession, the year has been characterised with hardships and starvation especially for the masses living in internally displaced persons camps in the North East. This is made worse by the current scarcity of petroleum products across the country despite the increase in the pump price of fuel.
On Tuesday, November 7, President Buhari again raised the hopes of Nigerians and business operators that the government was ready to spend money come next year by presenting N8.612 trillion 2018 budget of consolidation to the National Assembly which is yet to pass the bill. The key parameters and assumptions for the budget with a deficit of N2.005 trillion include an oil benchmark of $45 per barrel, oil production estimate of 2.3 million barrels per day, exchange rate of N305/$ for 2018, real Gross Domestic Product, GDP, growth of 3.5 percent and an inflation rate of 12.4 percent.
The proposed budget aggregate expenditure comprises recurrent costs of N3.494 trillion; debt service of N2.014 trillion; statutory transfers of about N456 billion, sinking fund of N220 billion (to retire maturing bond to local contractors) as well as capital expenditure of N2.652 trillion which is the 30.8 percent of the entire budget. The proposal showed total federally-collectible revenue is estimated at N11.983 trillion in 2018. Thus, the three tiers of government shall receive about 12 percent more revenues in 2018 than the 2017 estimate.
Of the amount, N6.387 trillion is expected to be realised from oil and gas sources. Total receipts from the non-oil sector are projected at N5.597 trillion. The federal government’s estimated total revenue is N6.607 trillion in 2018, which is about 30 percent more than the 2017 target. In 2018, the federal government expects to generate N2.442 trillion as revenue from the oil sector while it expects N4.165 from non-oil as well as other revenues.
This notwithstanding, statistics from the National Bureau of Statistics, NBS, on Wednesday, November 15, showed that the Consumer Price Index, CPI, which measures the rate of inflation in the country further dropped to 15.91 percent in October from 15.98 recorded in September. According to NBS, the index made it the ninth consecutive decline in the inflation rate year-on-year since January.
The NBS had on September 5, announced that the country was out of recession. According to the NBS, in the second quarter of 2017, the nation’s Gross Domestic Product, GDP, grew by 0.55 percent (year-on-year) in real terms, indicating the emergence of the economy from recession after five consecutive quarters of contraction since the first quarter of 2016.
“This growth is 2.04 percent higher than the rate recorded in the corresponding quarter of 2016 (–1.49 percent) and higher by 1.46 percent points from rate recorded in the preceding quarter, (revised to –0.91 percent from –0.52 percent). Quarter on quarter, real GDP growth was 3.23 percent. During the quarter, aggregate GDP stood at N26,986,005.20 million in nominal terms, compared to N23,547,466.91 million in second quarter of 2016, resulting in a Nominal GDP growth of 14.60 percent,” the NBS said.
But before the economy started recovering, it witnessed massive cash crunch which began at the end of 2015 as a result of the Treasury Single Account, TSA. It also experienced high exchange rates leading to scarcity of dollar at the parallel market. On February 3, Naira, the nation’s currency suffered the greatest shock in the history of the country by trading more than to N500 to a dollar at the parallel market while the Pound Sterling and the Euro traded at N616 and N530, respectively at the forex market.
This ugly development which impacted negatively on the economy forced the Central Bank of Nigeria, CBN, to start dollar interventions at the interbank market to ease the difficulties Nigerians encounter in funding foreign exchange transactions. The apex bank on February 21, intervened in the interbank FOREX market by injecting $370.9 million to the wholesale market through 23 deposit money banks. The CBN said the intervention was to help the banks meet the requests of customers.
Isaac Okorafor, CBN spokesperson, said the bank’s intermediation effort in the FOREX market was the first wholesale intervention to ease the pressures by Nigerians to access foreign exchange towards meeting various obligations under visible and invisible needs categories.
In a similar move to rescue the economy, the federal government on April 5, launched the Nigeria Economic Recovery and Growth Plan, ERGP. President Buhari during the launch said that the ERGP would rescue the economy from high rate of inflation and recession.
The ERGP focuses on agriculture with a view to ensuring adequate food security as well as energy, industrialisation and social investment. The ERGP is an ambitious plan that seeks to achieve a seven percent economic growth by the year 2020. The aim is not just to remove the country out of recession, but to put it on the path of strength and growth, away from being an import dependent nation. “We must produce what we need,” Buhari said.
To ensure that the ERGP achieved the set target, the federal government, May 18, endorsed and signed three Executive Orders expected to give boost to the Nigeria’s concept of ease of doing business. Vice-President Yemi Osinbajo, who signed the executive orders, said the development will increase patronage for locally manufactured goods. He said the order would also remove all bureaucratic bottlenecks that stifled growth of businesses in Nigeria. The three executive orders touched on specific instructions on a number of policy issues.
The issues include the promotion of transparency and efficiency in the business environment designed to facilitate the ease of doing business in the country; timely submission of annual budgetary estimates by all statutory and non-statutory agencies, including companies owned by the federal government, and support for local contents in public procurement by the federal government.