“Until coming out of recession translates into meaningful improvement in people’s lives, our work cannot be said to be done.’’With these words yesterday, President Muhammadu Buhari declared that despite the claim by the National Bureau of Statistics (NBS) that the country has exited recession, the real impact would be better felt when ordinary Nigerians experience a change in their living conditions. Ordinary Nigerians cannot see an end to the recession as long as the prices of food items are still high.
Buhari, who spoke in his country home in Daura, Katsina State when he received the President of Niger, Alhaji Mahamadou Issoufou, told reporters that he was “very happy’’ to hear the country was finally out of recession. He commended all the managers of the economy for their hard work.
The presidency said it welcomed the news with cautious optimism even as it pledged to vigorously drive the economic recovery and growth plan of the administration.According to the presidency, the overall economic plan of the administration has resulted, among others, in the sustained restoration of oil production levels occasioned by the enhanced security and stability in the Niger Delta, growth in agriculture, mining and the first growth recorded in industry as a whole in the last nine quarters since Q4 2014.
A statement by the Special Economic Adviser to the President, Dr. Adeyemi Dipeolu, on the second quarter of 2017 (Q2 2017) figures released yesterday by the NBS shows that “the economy grew in Q2 2017 by 0.55% from -0.91% in Q1 2017 and -1.49% in Q2 2016.” This in effect means that the nation’s economy has exited recession after five successive quarters of contraction.
“This positive growth is attributable to both the oil and non-oil sectors of the economy. Growth in the oil sector which has been negative since Q4 2015 was positive in Q2 2017.
“It rose by 1.64% as compared to -15.60 in Q1 2017, an increase of up to 17 percentage points. This improvement is partly due to the fact that oil prices which have improved slightly from the lows of last year have been relatively steady as well as the fact that production levels were being restored. “The non-oil sector grew by 0.45% in Q2 2017, a second successive quarterly growth after growing 0.72% in Q1 2017. This increase which was not quite as strong as it was in Q2 2016 reflects continuing fragility of economic conditions.
“However, given that nearly 60% of the non-oil sectors’ contribution to GDP is influenced by the oil sector, growth in the oil sector will help boost the rest of the economy,” the statement said.Dipeolu observed that the positive growth seen in agriculture when the rest of the economy was contracting was maintained at 3.01% which is encouraging especially if seasonal factors are taken into account.
“Manufacturing growth was also positive at 0.64% and although lower than the previous quarter’s growth of 1.36%, it was a noticeable improvement over the -3.36% experienced in Q2 2016 and a continuation of the turnaround of the sector.
“Solid minerals which remain a priority of the administration also continued to grow and in Q2 2016 by 2.24%. Overall, industry as a whole grew by 1.45% in Q2 2017 after nine successive quarters of contraction starting in Q4 2014,” he said.
Although the latest figures from the NBS show the country is out of recession, economists, like President Buhari, have warned that it may be too early to cheer considering the delayed impact at the micro-level and the need for sustainable economic programmes.According to the experts, economic recovery needs to be sustained through improved productivity and downward revision of the interest rates for a spiral effect on consumer goods and food prices.
Alluding to the fact that South Africa was able to come out of its recession by adjusting the interest rates and improving agricultural output, the economists told The Guardian that Nigeria’s recovery could be sustained by adjusting the rates to facilitate access of the productive sector to cheaper sources of funds.
The Chief Executive of Financial Derivatives, Bismarck Rewane stated: “This is the first recession in 25 years. Coming out of it is going to be a U curve rather than the V curve. It is going to be a slow, tortuous recovery. The reality is that oil production went up and it aided recovery, but it is still low.
“As long as we grow below two per cent, it is still low. South Africa is reporting 2.3 per cent growth. We have had five consecutive quarters of negative growth and we are reporting 0.55 per cent. Could it have been better? It tells you that it is time to bring down the interest rates. We cannot maintain the interest rates at this level because it will continue to tighten growth, thus slowing recovery. The productive sector needs funds to aid operations,” he added.
In his analysis, he noted that the three sectors that improved are power moving from 5.04% to 35.5%, trade went from-3.06% to -1.62 %, and financial services grew from 0.67 to 10.45%.“Why did this happen? A lot of efforts went into the GENCOs, DISCOs and the price of diesel dropped in the second quarter. That is in spite of insolvency. For trade, the availability of forex aided growth in the sector. The financial services improved as a result of T-Bills and high interest rates. Agric, manufacturing and real estate were the victims of high interest rates”, he explained.
The Director-General of the Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf, said: “Technically, we are out of recession when you relate the figures to the quarterly GDP performance. But we need to separate the technical perspective from the practical perspective. The empirical issues affecting the economy are still there. The latest figures show that there is improvement at the macro level and this gives positive signals to investors that the economy is turning around.
“It shows that some of the positive steps are taking effect at the macro level. However, the challenges of productivity, business environment, high cost of doing business need to be addressed. On the part of citizens, they are worried about their social welfare while businesses are worried about several hindrances and costs to doing business. Worries vary across board.”
The Managing Director of Cowry Asset Management, Johnson Chukwu, said the impact of pulling out of recession would not reflect on the economy unless the improvement in GDP is from the real sector, especially manufacturing, to create more jobs. He argued that the existing improvement came from the oil sector.
“For you to begin to see the impact, the growth in the economy must be above the population growth. There must be growth in every sector especially the manufacturing for people to get employment because the contraction in GDP led to job losses.
“Again, inflation must be single digit for income earners to feel improvement in the standard of living. It is when we lower single digit inflation rate that people will feel the impact of our exit from recession. “The Managing Director of InvestData Limited, Gabriel Omodion, described the exit from recession as technical, noting that it was only the Central Bank of Nigeria (CBN) foreign exchange intervention that brought about the recovery.
Omodion argued that because there was no direct policy intervention to consolidate the recovery, the impact would not be felt by the people.“Nigeria’s exit from recession is standing on one leg because it was only CBN intervention that brought about the recovery. Government has failed on its policies, it has not invested in infrastructure, no policy implementation, there is virtually no activity in the economy.
“CBN intervention attracted investment in capital market, foreign investors are accessing the market. The growth seen so far is only on the investment side, prices of goods and services are still up, government has not done any road, farmers are suffering, the issue of the budget is still there.
“Government has failed to implement their fiscal policies. They have not done the needful. If care is not taken, we will go back to recession,” he said.The Managing Director, Electronic Development Institute, Prof. Michael Ndinechi, said: “If they say that the economy is improving, they are right, but to say that the country is out of recession is a fallacy.”
A development scientist and professor of Technology Management at Obafemi Awolowo University, Francis Ogbimi, said that there was nothing on ground to show that Nigeria was out of recession.According to him, building a nation is not about day-dreaming and building hope on an uncontrollable factor like the world price of crude petroleum.
To Ogbimi, developing a nation is about doing the things that transform an economy from a weak agricultural status into a strong industrialised status. “Nigeria is not doing anything today that would facilitate the desirable transformation,” he added.