Nigeria’s economy is still wobbling two years after President Muhammadu Buhari was sworn into office

|  By Anayo Ezugwu  |  Jun 5, 2017 @ 01:00 GMT  |

DESPITE the launching of the Nigeria Economic Recovery and Growth Plan, ERGP, and the passage of the 2017 Budget of Recovery and Growth by the National Assembly, two years of President Muhammadu Buhari in office is still characterised by economic recession, hardships, starvation, and unfavourable economic policies.

The budget is expected to lead Nigeria out of recession when it becomes law. It is also expected to control the skyrocketing prices of goods and products and stabilise the exchange rate.

The budget identified that the most economically feasible way forward out of recession is through increased spending by government.  While 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 7 percent economic growth by the year 2020. Its aim is not just to end recession in the country but to put it on the path of strength and growth, away from being an import dependent nation.

But the latest Gross Domestic Product report released by the National Bureau of Statistics, NBS, on Tuesday, May 23, for the first quarter of this year, showed that the economy contracted by 0.52 percent in the period. With the negative growth rate of -0.52 percent, the Nigerian economy is still in recession.

The rate of growth for the first quarter of 2017 is, however, an improvement over the revised -1.73 percent GDP growth rate as of December 2016. This is the fifth consecutive quarter of contraction that the economy would record since the first quarter of 2016. “In the first quarter of 2017, the nation’s GDP contracted by 0.52 percent (year-on-year) in real terms, representing the fifth consecutive quarter of contraction since first quarter of 2016.

This is higher than the rate recorded in the corresponding quarter of 2016 and higher by 1.21 percentage points from the rate recorded in the preceding quarter.”

However, the rate of growth, which is an improvement over the previous quarter, appears to be in line with the expectations of the federal government that the country will come out of recession by the third quarter of this year.

Godwin Emefiele, governor, Central Bank of Nigeria, CBN, has assured Nigerians that the country would exit the biting economic recession sooner rather than later.

He stated that decelerating inflation and negative GDP growth, as well as increased capacity utilisation and agriculture output were all signs that the economy was on the path to recovery. Emefiele, who spoke at the end of the Monetary Policy Committee, MPC, meeting on Tuesday, May 23, reaffirmed his earlier projection that the nation’s economy would exit the recession in the third quarter of the year, predicating his optimism on emerging macroeconomic variables.

The CBN governor said with negative growth decelerating, increased capacity utilisation, and consecutive decline in the inflation rate, among others. His earlier forecast that the nation would exit the recession was valid. “My view is that with all the positive signs we see: inflation tending downwards, GDP improving to the extent that negative movement has decelerated greatly and we have seen foreign exchange going to the real sector and industrial capacity is beginning to improve, we’ve seen positive signs in various economic sectors. So I am very confident that at the end of the third quarter, we will be out of the recession,” he said.

Also the presidency, on Tuesday, May 23, said it was too early for anybody to attempt to assess the performance of President Buhari. It said the report card of the present administration could not be prepared when it was just midway into its four-year term.

Femi Adesina, special adviser to the president on media and publicity, said it would be wrong for anybody to assess the government based on its first two years in office and return a verdict that it had succeeded or failed.

“You cannot write the report card of this administration when it is just hitting the halfway mark; that will not be fair. The term is four years and the promises are going to be stretched over that four-year period. Like the minister of sports said recently, the APC did not promise to solve all the country’s problems in one year or two years. The mandate the party has is for four years and it is pacing itself as it goes along and I am sure that by the end of those four years, we will have a lot more to record.

“It is not by a sudden flight; it will not come by a snap of a finger; but will the promises be fulfilled? Yes, I believe they will be fulfilled. This administration will take Nigeria far beyond how it met it. “So, if anybody says the APC has failed, just tell them it is too early in the day because it is a four-year-term and this is just two years. You don’t reach definitive conclusions in two years.”

Irrespective of government’s defence and optimism of the economy rebounding in the third quarter, the price of crude oil still remains below $60 per barrel. As at today, oil is the primary source of foreign exchange for the country. And the difficulties in accessing forex are still evident in the country with the CBN having multiple exchange rates.

The Buhari administration took over when Naira was exchanging for N197 to a dollar until June 2016 when it floated it to around N300/USD officially. With this development the market became very fragmented with trades even at the official interbank market swinging between N305- N360 to a dollar.

With the firm control and management of the official interbank market, the parallel market, which seemed more transparent and responsive to demand-supply fundamentals, became a more popular reference point for the value of the Naira. Trades occurred at all-time lows of N520 to a dollar and a further depreciation was anticipated towards N600/USD levels.

But since February 20, the CBN has maintained a heavy and steady supply of dollars at both the interbank and parallel forex markets. This has resulted in a remarkable turnaround for the Naira which currently trades at N375 to a dollar at the parallel market compared to all-time low trades at N520 to a dollar just before February 20.

Isaac Okoroafor, acting director, corporate communications, CBN, recently said that the new forex, FX, policy has been strongly supported by the accretion in FX reserves as a result of higher oil prices and oil production levels, the successful $1 billion Eurobond issue and various inflows from multilateral agencies including the World Bank. Also, the high interest rate environment for fixed income instruments as well as aggressive open market operations by the CBN has helped to put a tight lid on liquidity and reduce the volume of money available at forex auctions.

That notwithstanding, the challenges of power supply still continue irrespective of President Buhari’s promises to fix the sector. Babaatunde Fashola, minister of power, works and housing, attributed the perennial electricity problems in the country to incessant gas pipeline vandalism. He said over 200 incidences of crude oil and gas pipeline vandalism was recorded in the past six months. He said the sabotage of the pipelines by vandals had constrained gas supply to the power plants, a development that had seriously affected electricity supply.

This, he said, was the major constraint to adequate power supply across the country, stressing that 81 percent of power being generated in the country was from thermal generation plants, which were dependent on gas.

Within the years under review, Buhari led-government has restored peace in the Niger Delta region. The administration through the Ibe Kachikwu, minister of petroleum resources for state, has pacified the Niger Delta militants to lower their guard. This singular effort has resulted in increased oil production and end to vandalisation of pipelines in the region.

According to Siky Aliyu, managing director, National Engineering and Technical Company, NETCO, Nigeria’s crude oil production capacity was between 1.9 million and 2 million barrels as at February 2017.  He told Realnews in a interview during the West African International Petroleum Exhibition and Conference, WAIPEC, in Lagos, that the intention was to go all the way to 2.4 million.

“Normally if everything is working and no vandalisation of the pipelines, we are likely to get like 2.4 million barrels per day. But the intention is to ultimately take it to about 3 to 4 million barrels per day. But right now if we are able to maintain the target of 2.4 million barrels per day, even at $50 per barrel is challenging but there is still money in it to run the industry and run the government.”

Whatever, Nigerians would want an urgent improvement in the economic situation in the country as President Buhari moves into his third year in office.