Driving Diversification To Check Economic Recession

Nigeria’s economy slipped into recession to confirm data from the National Bureau of Statistics (NBS) that the country is in dire economic straits with hardship and poverty permeating the system. In this report, Cobham Nsa and Chinyere Obiora look at the possible ways Nigeria and Nigerians can quickly recover from this debilitating recession.

Take away the distressing poverty and hardship, occasioned by scare resources and spiraling prices of food stuffs in the land, Nigerians, typically would have easily forgotten about the economic recession crisis by now. For many, recent data by National Bureau of Statistics (NBS) declaring Nigeria as a country in recession would just have been common numbers, research figures and mere formalities of global economics. However, things have changed considerably with the reality hitting everyone that the hullabaloo about recession is not a child’s play. But many are in tune with arguments by some financial experts and government officials that the development is not a death sentence for the economy. To them, this development is a wake-up call for greater pragmatism and ceasing the momentum to turn visible pains into gains through right approaches by all stakeholders with the Federal Government leading the way. This school of thought believes taking the economy out of the woods and putting it on the path of sustainable growth should entail stimulating productive and inclusive activities in the Information Communications Technology sector (ICT) and other relevant sectors such as mining with a view to boost forex earnings and the Gross Domestic Product (GDP). Aside from scathing criticisms from the opposition camp, comments and suggestions have not been in short supplies on possible remedies aimed at taking Nigeria out of its current recession occasioned by the negative growth witnessed in Gross Democratic Product (GDP) in the second quarter for the second consecutive period. Importantly, there has emerged a plethora of criticisms, proposals, counsels and suggestions on how the country can come out of the recession. Among them are calls for the sale of some national assets, massive capital spending by government and adjustment in the Treasury Single Account (TSA) implementation that allows the return of funds to Deposit Money Banks (DMBs) at single digit rates but with strict supervision on the banks. In the league of those canvassing this position is a former President, Nigerian Bar Association, NBA, Olisa Agbakoba. According to the senior lawyer and rights activist, it is important to ‘Limit the CBN to monetary policy and take away banking supervision to new prudential regulatory authority’ with banking ethics assigned to new financial conduct authority. For him, “If banks focus on lending and not trading, money will flood the system for productive value” even as the development would act as an antidote to prevent the economy from sliding further from recession into depression. On the huge spending calls, Agbakoba said, “We must spend our way out of recession. When you go to the hospital and the doctor says you’re anemic, only one thing is done – transfusion. So, how can the government present an austerity programme?” Also, he said government must come clear on its economic policies to get the country out of its present economic challenges. Though the sales of national assets have not sit well with many Nigerians who suspect that a few greedy ones are planning to corner our commonwealth in pursuit of their selfish interest, financial minds are in agreement that the government must also check further devaluation of the Naira and evolve policies to attract Foreign Direct Investments and discourage capital flight. Worrying is the National Bureau of Statistics (NBS) data on the economy that revealed Nigeria’s Gross Domestic Product (GDP) at constant basic prices contracted in the second quarter 2016 by 2.06 per cent after declining by 0.36 per cent in first quarter’2016. It also portrayed the non-oil sector earnings that dropped drastically due to a very weak currency with lower prices dragging the oil sector down. But despite the hardship being experienced by Nigerians, the Presidency has continued to allay fears that the sharp drop in GDP, responsible for the current crises, would not persist for too long. The NBS report indicates the impact of low oil prices, a development compounded by militants’ activities on oil and gas facilities in the southern Niger Delta hub since the beginning of the year, has been adversely humongous on the nation’s economy. This is worsened by the sharp decline in crude production by over 700,000 barrels per day (bpd) to less 1.26 million bpd as against government’s 2016 budget assumption of 2.2 million bpd. Furthermore, NBS’ statistical data for the capital importation report for the second quarter on the unemployment statistics, the inflation rate for July and the labour productivity report for July painted a gloomy picture of the economy. This negative picture of the Nigerian economy is manifest in the inflation figure rising to 17.1 per cent from 16.5 per cent; the unemployment rate up to 13.3 per cent from 12.1 per cent; and investment inflows dropping to the lowest levels at $647.1 million from $710 million, representing 76 per cent fall year-on-year and nine per cent slide from the first quarter As usual, Presidential Economic Advisor, Adeyemi Dipeolu stated the now popular blame song that the recession is largely due to sharp tightening in the oil sector, caused by militant attacks. However, steering his submissions away from the typical blame game, Dipeolu delivered what most Nigerians wants to hear and see at this crisis moment; hope the economy will recover soonest. Hear him, “GDP figures for the 2016 second quarter by the National Bureau of Statistics, confirming a temporary decline, has indicated an hopeful expectation in the country’s economic trajectory. Besides the growth recorded in the agriculture and solid mineral sectors, the Nigerian economy in response to the policies of Buhari’s Presidency is also doing better than what the IMF had estimated, with clear indications that the second half of the year would even be much better.” “However, the rest of the Q2 data is beginning to tell a different story. There was growth in the agricultural and solid minerals sectors, which are the areas in which the Federal Government has placed particular priority. “Agriculture grew by 4.53 per cent in the second quarter of 2016 as compared with 3.09 per cent in the first quarter. The metal ores sector showed similar performance with coal mining, quarrying and other minerals also showing positive growth of over 2.5 per cent. Notably also, the share of investments in GDP increased to its highest levels since 2010, growing to about 17 per cent of Gross Domestic Product. “The manufacturing sector, though not yet truly out of the woods, is beginning to show signs of recovery, while the service sector similarly bears watching.“Nevertheless, the data already shows a reduction in imports and an increase in local produced goods and services and this process will be maintained although it will start off slowly in these initial stages before picking up later.” In one of her recent media outings, Minister of Finance, Mrs. Kemi Adeosun admitted the nation still has a long way to go dealing with the recession and government would not live in self-deceit that all was rosy. She identified diversification of the economy and investing in capital projects among some of the actions being taken to get the country out of recession. Dismissing the insinuations in the public space that government does not know what to do in the circumstance, the Minister’s assurance that the situation is under control came thus “I think that we have a long way to go but we’re not confused and we’re not deceiving ourselves that everything is rosy. It’s not. It’s a difficult time for Nigeria, but I think Nigeria is in the right hands and if we can stick with our strategy… We still have some adjustments to make. I think we need to make some adjustments in monetary policy.” Adding his voice to the desired hope of speedy economic recovery, Nigeria’s Minister of Trade and Industry, Dr. Okechukwu Enelamah, who spoke in far away China, said the federal government was taking advantage of the difficult economic conditions, arising from the sharp fall in oil prices, to restructure the economy. According to Enelamah, “Our principal economic policy direction in Nigeria is to diversify the economy, away from the longstanding traditional reliance on oil exports. We are taking steps to structurally transform the economy, so as to restore growth and create jobs.” He said among some of the steps being taken by the government to address the situation include: “Strategically aligning monetary, fiscal and structural policies, to engender much-needed investors’ confidence; creating a private-sector driven Presidential Council on Ease of Doing Business that will initiate and implement far-reaching business environment reforms; and repositioning the Nigeria Investment Promotion Council (NIPC) to enable it effectively fulfill its core mandate.” For the minister, NIPC would provide the needed incentives and ‘aftercare’ services to investors, as well as proactively create regular opportunities for investors’ engagement, just as he highlighted a number of “strategic” sectors for intending and potential investors in Nigeria to include: Agriculture and Agro-Processing, Automotive, Infrastructure (Roads, Rail, Ports and Power), Real Estate, Pharmaceuticals, and the Digital Economy. He praised the existing cooperation between Chinese and Nigerian governments as well as the private sector in both countries, saying, “The China miracle is one that provides very many useful lessons from which Nigeria can borrow, and is borrowing. Nigeria will continue to work hard and in close partnership with China for mutual benefits, growth and development.” But from the perspective of an outsider and private sector operator, a stockbroker, Mr Mathew Ogagavworia said part of measures to get Nigeria out of recession should see the federal government introducing policies to support the growth of Small and Medium Scale industries. Ogagavworia, who urged government to invest heavily in infrastructural facilities, especially on road network and power to reduce cost of production, said there was an urgent need to jettison legal capital control that involves fixing prices of petrol to encourage individuals’ investments in oil and gas. He maintained that the development will help create job opportunities for many people, adding that under the present situation, government should engage local manufacturers onissues affecting them and other measures that would help boost their production capacity to ensure improvement in export of locally produced goods, adding that using Nigeria market as a dumping ground for foreign goods should be discouraged in order for made-in-Nigeria goods to thrive and sell in our markets. Moreover, Ogagavworia said there should be deliberate policy by the government that would encourage people to buy made-in-Nigeria goods, stressing that Nigerians should only be allowed to purchase foreign goods that are not produce in the country. Another financial analyst, Mr Godwin Aneke forecast is that further drop in global oil prices, which remains Nigeria’s biggest revenue earner, as well as prolonged shortages of foreign currency and lack of power, could cause the economy to shrink further by the year end. Arguing that there is a limit to what the federal government can really do at an economy-wide level, with its limited tax collections and expenditures, Mr Aneke said one obvious area of improvement would be the power sector. “Government needs immediate fiscal action on improving foreign exchange supply to complement monetary policy and ease interest rates, because current high interest rate on government treasuries is counter-productive for real sector growth”, he added. The views of Mr Johnson Okigwe, an economist is not different as he maintained that though recession in the economy cannot be isolated from dwindling oil prices in the global market, the Federal Government must be seen to driving massive infrastructure development to attract investments in the system. He said in other climes, the governments are drivers of the economy by giving it focus and concrete direction, stressing that the President Buhari’s administration urgently needs to resolve the disturbing Niger Delta militancy issue and kidnapping, while also investing heavily in agriculture to increase food supply in the country. Okigwe believes that affordable consumable goods and food items in the country would ease the negative impact of the biting economy on the citizenry. He said recovering from the current economic recession will require the visible and tangible diversification of the economy from oil as well as an incentivized environment to attract Foreign Direct Investments (FDIs) in the solid mineral and other related sectors that can generate revenue on a sustainable basis for the country. “To revive Nigeria’s economy and put it back on the path of sustainable growth and development, we must bring in investors to process our minerals locally for value addition before exportation. We cannot afford to make the same mistake we made with the oil and gas sector where we export crude only to import refined products,” he warned He also joined the popular call for government to create an enabling environment for economic growth and development by ensuring there is peace and security in the country, especially in the North East and Niger Delta region, noting that no investor would be interested in doing business where there is low confidence in the safety and security of his investments. Equally, the calls for the President to re-jig what many see as his tottering economic team has reached a crescendo with the National Assembly supporting the popular position. Proponents of this arrangement argue that vital in liberating the economy from recession is for the President to without delay reconstitute the economic team into a robust bunch of experts, technocrats and stakeholders that would drive his mandate of thinking out of the box in tackling existing and emerging economic challenges of these tough times. Though it is true that succeeding administrations only paid lip service to the issue of diversifying the economy and providing credible alternatives to oil as our chief foreign exchange earner, many insist the country has to move past the stage of continuous lamentations and rumination over past failures. The consensus now is that the current situation leaves the country with no option than to cease the opportunity and momentum of ensuring this age-long dream of economic diversification finally comes true. So, the urgent task is how to evolve all-inclusive, inward-developing and sustainable policies aimed at enhancing production and mopping up the excess labour force in the market for sustainable productive gains to the economy.