Economy, Featured
Nigerians have rightly hailed the news of the technical exit from the recession of the country’s economy. The managers of the economy, especially the central bank, should continue with its laudable intervention programs, while the federal government should strive to improve on the security of lives and property so that the agric, sector and other sectors will operate without hindrance. And above all, the policymakers should ensure that output growth is lifted above population growth and avoid relenting due to this timid economic recovery.
By Goddy Ikeh
THE announcement last week that the Nigerian economy has technically exited recession shows that the economy was able to survive the ravaging impact of the twin shocks of the Covid-19 pandemic and the downturn in oil prices. The economy was also able to defy all speculations that the clog in the wheels of economic recovery will linger far into 2021.
Signaling the technical exit from recession, the National Bureau of Statistics, NBS, announced that “Nigeria Gross Domestic Product, GDP, grew by 0.11 percent in the fourth quarter of 2020, representing the first positive quarterly growth in the last three quarters.” “Though weak, the positive growth reflects the gradual return of economic activities, following the easing of restricted movements imposed to help contain the Covid-19 pandemic,” the NBS said in the statement on Thursday, February 18, 2021.
According to the NBS, the exit from recession was driven by the non-oil sector, especially the Information and Communications sector, the agriculture, real estate, manufacturing, mining and quarrying and other minerals, and the construction industry. On the contrary, the oil sector which had been the major driver of the economy could not be counted due to low oil prices and lower crude oil production, which stood at an average of 1.56 million barrels per day (mbpd) in the fourth quarter, lower than the daily average production of 2.00mbpd recorded in the same quarter of 2019 by -0.44mbpd and the third quarter of 2020 by – 0.11mbpd.
Although the Nigerian economy slipped into recession in the third quarter of 2020 due mainly to the twin effects of Covid-19 and the low oil prices, the minister of finance, budget, and national planning, Zainab Ahmed, was optimistic that the country would exit recession in the first quarter of 2021.
The announcement of this unexpected exit from recession attracted reactions from both economists and stakeholders in the country.
For instance, Adori Ochai, an economist said: “For me, the exit from recession is not a surprise, I saw it coming after the lockdown, the Nigerian economy is still highly dependent on crude oil whose international price fell due to low demand during the lockdown. With the increase in demand of crude oil pushed by the ease of the lockdown, I saw the country’s economy moving out of recession.”
Ochai noted, however, that the growth is minimal, and may not be sustainable with poor international crude oil price. And with the steady rice in the international price of crude oil and the delivery and administration of Covid-19 vaccines, it may be sustainable.
“In all, we still need to do more to curtail insecurity to help improve food production that will bring down inflation to a manageable level. The Nigeria recession situation has always been a peculiar one with rising inflation, that on its own could end up being good for the country as producers will be encouraged to produce more, and that will create more employment – that is why economists describe inflation as a necessary evil.”
He urged the managers of the economy to make efforts to diversify the country’s economy, as continued dependence on crude oil will always produce a volatile economy as a result of fluctuations in the price of international crude oil price.
Speaking on the impact of the exit from recession, Ochai said that the impact might not be felt immediately, but that the exit from recession was an indication that something good was happening, that would give investors more confidence on the economy that would lead to more investment and subsequently increase in the production of goods for consumers.
He warned that inflation will reduce the value of money, especially to fixed income earners and that this will create more poor people in the country. “The hike in fuel price and electricity tariff will also make Nigerians poorer as they have to spend more for energy. Of course, the money will lose its value as you will need more to spend on these items with a steady income.
And for some members of the Organised Private Sector, OPS, including the Lagos Chamber of Commerce and Industry, LCCI, the news of the exit was received with cautious optimism as they said that the output contraction recorded in the year 2020 further highlighted the country’s weak macroeconomic fundamentals and the persistent structural, policy and regulatory issues in the economy.
“Apart from declining growth, the economy is currently confronted with several challenges, including rising consumer prices (inflation now at a 45-month high of 16.47 percent in January 2021), weak employment level, persisting liquidity concerns in the foreign exchange market, high poverty incidence, weak investor confidence, and insecurity, among others.
“These challenges, which had been part of the country’s economic narrative prior to the pandemic, were amplified by the COVID-19 induced disruptions.
“We, however, recommend clarity in government’s policy direction is critical in deepening investor confidence. Mobilizing efforts in making the business environment more conducive for MSMEs and large corporates by addressing structural bottlenecks and regulatory constraints contributing to the high cost of doing business,” the Guardian report quoted the director-general of LCCI, Muda Yusuf, as saying.
The report also said that the chairman, Mobile Software Solution, Chris Uwaje, stated that it was instructive to ascertain if the value of Diaspora Remittance was a factor of the growth since the global economy is shrinking at a fast rate.
“Although the economic side of ICT is up and beneficial, this trade benefits accrue to ICT, manufacturers and solutions providers and not ICT consumer nations. Nevertheless, Nigeria ICT infrastructure, network solutions providers, and related ecosystem players must be commended for their ability to withstand the tough challenges of COVID-19,” he said.
Uwaje noted that world merchandise trade volume was forecast to fall 9.2 percent in 2020, adding: “the projected decline is less than the 12.9 percent drop foreseen in the optimistic scenario from the April trade forecast. Trade volume growth should rebound to 7.2 percent in 2021 but will remain well below the pre-crisis trend.
“Many ICT SMEs have gone under with erased employment. Indeed, only the mega ICT companies have tried to survive. Unfortunately, we don’t have those types of mega ICT entities out here. The global business was indeed held together by the business side of COVID-19 and investment in PCR tests and Vaccines,” he said.
But for the Presidency, which has been contending with numerous security challenges, the news was a great relief. It noted in a statement that Nigeria’s prompt exit from recession is a key indicator of the success of the ongoing Economic Sustainability Plan, ESP, approved by the federal government.
Laolu Akande, Senior Special Assistant to the President on Media and Publicity in the Office of the Vice President, told journalists at the weekend that Nigerians should expect more as the implementation of the Plan is gathering even greater momentum.
“The President and the Federal Executive Council had approved the Plan last June and the Vice President was asked to lead the implementation of the Plan. The plan is aimed, among others, at preventing a deep recession and putting cash in the hands of Nigerians after the economic fallouts of the pandemic,” Akande said.
He noted that right from the 2020 third quarter, the economy was already on a rebound adding that the latest fourth-quarter figures show that indeed, the recovery of the Nigerian economy is a steady one.
“Like we explained late last year after the release of the third-quarter figures, the Economic Sustainability Plan, which was a calculated intervention by the Buhari Presidency, is driving the Nigerian economy in the right direction-upwards, and Nigerians can expect more because the administration is unrelenting in its determination to pursue the steady recovery and growth of our economy,” local media reports quoted Akande as saying.
According to Akande, the Economic Sustainability Plan is entering into an even more potent phase with the revving up of plans to install 5 million solar installations across the country and the social mass housing plan that will result in hundreds of thousands of affordable houses for ordinary Nigerians. Both aspects he noted, will yield several hundreds of jobs besides giving the national economy a significant spur-like never before.
He explained that so far, the Survival Fund is making waves with MSMEs, artisans, transport workers, hundreds of thousands receiving cash stimulus, and the payroll support where an equal number of people running into hundreds of thousands employed by businesses are collecting N50,000 monthly, adding that the payroll support covers three months’ salaries for beneficiaries.
He explained that about 311,000 employees have received the payroll support coming from 64,000 businesses nationwide and over 165,000 artisans have also benefited from the Survival Fund.
The spokesman further stated that in all, the Survival Fund is on course to safeguard at least 1.3 million jobs. According to him, there is the Government Off-take Scheme, GOS, where the federal government will pump an additional N15 billion to support Nigerian-owned businesses by off-taking a number of products in a bid to keep businesses alive and create jobs.
In his own reacting, the minister of information and culture, Lai Mohammed, said Nigeria did not exit the latest recession by accident, but with “hard work, foresight and deliberate planning by the government”.
Mohammed told the News Agency of Nigeria, NAN, on Saturday that President Muhammadu Buhari had last year set up the Economic Sustainability Committee, which came up with Economic Sustainability Plans to mitigate the effects of COVID-19.
“When you talk of GDP, it is the total sum of the value of your services and goods. Clearly, if there is a lockdown, you cannot go to work, and there is bound to be a recession.
“What we did was that we pumped money into the system by creating jobs. The first is the 1,000 jobs through public works given to each local government and we have 774 Local Government Councils. So, we have 774,000 workforces engaged on public works like road and this goes a lot in boosting the economy,’’ he said.
Mohammed said the government equally introduced the Survival Fund which the federal ministry of industry, trade, and investment supervised to prevent loss of jobs and create new ones. “About 500,000 MSMEs benefitted from this program,’’ he said.
The minister said the government also gave One-Off-Grant whereby N10,000 was given to each of 233,000 artisans, including hairdressers and mechanics, while other programs introduced by the government included Conditional Cash Transfers with 3.6 million beneficiaries as well as N-POWER, TRADERMONI, FARMERMONI, MARKETMONI which reaches millions of people.
Besides the survival plans and economic sustainability plans, he said the government was investing heavily in infrastructure and employing more people. The minister also said that the government was doing more with fewer resources, adding that the effects of the pandemic were not peculiar to the country but a global affair.
Although, the Presidency and the minister of information and culture have every reason to rejoice over the news of this technical exit from recession, especially when it came shortly after the confirmation of Ngozi Okonjo-Iweala as the new director-general of the World Trade Organisation, economic analysts have warned that this timid economic recovery may not be sustainable in the face of worsening security challenges, rising inflation, high unemployment, weak local currency, and high debt profile.
– Feb. 23, 2021 @ 15:16 GMT
A.I
Tags: Chris Uwaje Laolu Akande low oil prices Nigerian Economy: Exits recession President Muhammadu Buhari survives twin shocks of pandemic
