- Since the threats are all too familiar, solutions should be easy
The latest dire prognosis coming from the Central Bank of Nigeria (CBN) governor, Godwin Emefiele, on the state of the economy has, no doubt, raised the fundamental question of whether the measures being applied to manage the economy are actually working. Rising from the Monetary Policy Committee (MPC) meeting in Abuja last week, the apex bank governor had announced that MPC members were worried that “the exit from the recession may be under threat as the economy slowed to 1.95 per cent and 1.50 per cent within the first and the second quarters 2018”.
Barely two months ago, the same apex bank had announced, rather gleefully, that the economy had regained stability. Among the key indicators it cited were relative stability in the foreign exchange market, a robust level of external reserves and inflation trending downward for the 18th consecutive month.
Now, the CBN says that these very gains “appear to be under threat of reversal following the new data which provides evidence of weakening fundamentals.”
Among other threats, the CBN chief cited “inflationary pressures” and “capital flow reversal” that have “intensified as shown by the bearish trend in the equities market even though the exchange rate remains very stable”. He spoke of “the potential impact of liquidity injection from election related spending and increase in FAAC distribution…rising in tandem with increase in oil receipt”. Above all, he raised the issue of potential threats to the food supply chain in major food producing states due to poor infrastructure, flooding and security challenges” leading to possible “rise in food prices, contributing to the uptake in the headline inflation”.
We couldn’t agree more with the apex bank chief that the situation is dire enough. But then, none of the so-called indicators can be said to be anything new, particularly since they have always been with us. Whether it is the electoral cycle and its associated cycle of unbridled spending, or the “capital flow reversal” that is easily its other companion; or even the cyclical swings in oil prices that although the country currently revels in its good fortune, yet it nonetheless carries the direct consequence of increasing money supply; or the perennial flooding and the infrastructure challenge threatening the nation’s food security situation.
To the extent that these are simply old, familiar faces of the development albatross that the country continues to grapple with, we would have expected thatthe economic management team, of which the CBN governor occupies a prominent seat, more so under the circumstances that the Buhari administration has found itself in the last three years during which the economy tanked, tohave figured a way to mitigate the problemsaway from the perennial fixationwith orthodoxies andthepenchant to skirt around problems that are of deep-seated and structural nature.
The question certainly bears asking – what has changed?
As far as we can see, the only difference is the modest recovery in oil prices. Even that itself could not guarantee that the economy would not shrink in the second quarter as the latest figures indicate. Overall, we still live with the paradox of a country whose politicians retain enough troves of cash to keep the monetary system awash with liquidity even when the government can’t seem to find the cash to execute the basic capital projects needed to rev the economy back to life. The budget, supposedly designed to turn the infrastructure tide has since become a luxury item for the executive and the legislature to tango over. To compound matters, the political class thinks little of taking the country to the brink hence the current so-called “capital flow reversal”.
Nothing of the aggressive programme of infrastructure renewal to stir small and medium scale businesses let alone a clear-headed initiative to foster the emergence of start-ups as one would expect; or a complementary programme to streamline access to credit for different categories of players in the economy; to be sure, nothing of a comprehensive programme to retool the hordes of our unemployed and unemployable youths through establishment of vocational institutions as the current situation would seem to demand.
Far from the warning indicators identified by Emefiele, it is the absence of these concrete measures that could go a long way to deepen the economy that makes the future so frightful.
