The alarm sounded recently by the Central Bank of Nigeria on the economy effectively poured cold water on earlier optimism that the country was poised to emerge from recession to significant growth. Like the apex bank, the International Monetary Fund has also passed a less optimistic verdict on the economy. In its latest report, the Bretton Woods institution says that at 0.8 per cent (Gross Domestic Product), growth in 2017 will not be sufficient to make a dent in reducing unemployment and poverty. Unless a realistic stimulus plan is immediately implemented, the bank warned, a worse cycle of recession is imminent. But will the government heed this latest alert or allow the economic meltdown to continue?
Going by current form, one needs a lot of optimism to expect a quick response from the Muhammadu Buhari government, which, two years into its four-year term, has not been exemplary in managing an economy in a tailspin. Inheriting a battered ship headlined by crashing global oil prices, it failed to produce an emergency stimulus plan, which allowed the economy to slip into recession by the first quarter of 2016. But the government has run out of options: it must come up with a robust short-term stimulus and medium-to-long-term reform plans to turn the economy around, reboot the productive sectors and reverse the explosive unemployment rate. The CBN’s Monetary Policy Committee put it starkly: though the International Monetary Fund had forecast Nigeria emerging from recession in the third quarter of this year, the 0.5 per cent contraction in GDP in the first quarter of 2017 reported by the National Bureau of Statistics fell slightly short of predictions. Recovery at that rate, the MPC said, is fragile and is expected to remain that way by the time data from the second quarter of 2017 is reported. Growth at this rate, the IMF said, would not reduce unemployment and poverty.
The CBN has now publicly acknowledged the absence of a well-coordinated economic plan to tackle the dysfunctional contraption this government inherited. Acting President Yemi Osinbajo should get to work post-haste to address the bank’s complaint of dire risks posed by weak financial intermediation poorly targeted fiscal stimulus and absence of structural programme implementation.
The urgent need for stronger fiscal and monetary policies is obvious. Oil prices that account for over 90 per cent of our export earnings have failed to rebound to pre-August 2014 levels of $90-$100 per barrel, hovering in the last few months at between $40 and $55 per barrel; this translates to keeping foreign reserves down as well as other fiscal buffers like the Excess Crude Account and the Sovereign Wealth Fund that stood at $2.29 billion and $2.9 billion respectively by May. The economy is still running on a meagre 4,000 megawatts of power, crippling industry and social services, while the national currency has been battered.
