should be of great concern to everybody. All the indices seem to
have gone haywire. Last week, the naira, once the nation’s pride,
nose-dived further in both the parallel and inter-bank markets. The
local currency went down to an all time low of N375 to US$1 at
the parallel market on Thursday and crossed the N300 to the
dollar mark at the inter-bank market due to dollar supply
shortages. Inflation rate for June 2016 is a huge 16.5 per cent, an
11-year high.
This is against the backdrop of an official announcement by the
Minister of Finance, Mrs Kemi Adeosun last week, acknowledging
that the economy was progressing into recession. Central Bank of
Nigeria (CBN) had earlier come out with this verdict. Another
scary doom prophecy came Wednesday last week from the
International Monetary Fund (IMF) which disclosed that the
economy was likely to contract by -1.8 per cent this year. This is
against the international lenders April 2016 growth forecast of 2.3
per cent for Nigeria. It also reduced next year’s growth projection
from 3.5 per cent to 1.1 per cent. Nigeria’s Gross Domestic
Product (GDP) growth contracted to -0.36 per cent in the first
quarter of this year compared to 2.11 per cent in fourth quarter of
2015.
The CBN two weeks ago came out with the report that Purchasing
Manager Index (PMI) for June showed a decline in economic
activities in the country with manufacturing sector production level,
new orders, employment level, raw material and inventories
decelerating at a very fast rate.
The report also indicated that the non-manufacturing sector did
not fair better as business activity, new orders and employment
level slowed down at a faster rate while raw materials inventories
declined at a slower rate.
According to the apex bank, the manufacturing PMI dropped to
41.9 index points in June 2016, as against 45.8 points in the
preceding month. The composite PMI for the non-manufacturing
sector recorded decline for six consecutive months as the index
dropped to 42.3 points, showing a faster decline than in the
previous month of May.
Unemployment is at a nerve-breaking level while food prices have
gone beyond the reach of the poor, even as local and international
debts are climbing higher.
All these miseries are being poured on Nigeria because crude oil,
once the country’s poster commodity has suffered massive
setbacks both in production and price level.
Analysts agree that something urgent has to be done to
resuscitate the economy, with many calling for a Marshal Plan,
something akin to the treatment given to the economy of Germany
after the second World War.
What is suffocating the economy is nothing but paucity of foreign
exchange, caused by the fall in the international price of crude oil
and the recent onslaught on oil pipelines and fields by Niger Delta
Avengers.
However, one way of tackling the crisis is for the Federal
Government to seek other sources of generating foreign exchange.
It is not enough for the government to trumpet nonexistent efforts
it claims to be making to diversify the economy, while on ground,
nothing seem to be happening.
Government’s economic managers should begin to think out of the
box in order to bring lasting solutions to the myriads of problems
plaguing the economy. Government should go beyond parochial
partisan and ethnic interests and set up an economic team
comprising of eminently qualified Nigerians from both the private
and public sectors to act as a think tank on the economy. The
team should come up with practical answers to the country’s
numerous economic woes. Government should also enunciate the
right policies and implement them properly.
Some financial analysts are of the opinion that a way out of the
quagmire is for government to pour money into the economy. This
is the view of the Director -General, West African Institute for
Financial and Economic Management, Professor Akpan Ekpo. He
said “the economy is in recession, what we need now is a robust
fiscal policy. Government has to spend, pour more money into the
economy, not just on capital projects. The recession is a special
type, it has effects on both the supply and demand sides, so the
way to solve that is massive government capital and recurrent
expenditure. Monetary policy will not be effective.” He, however,
expressed the fear that the country may not have enough money
to inject into the economy. This has given rise to a suggestion
that the country should create a conducive environment for Ni
gerians in the Diaspora to be involved in the sourcing of foreign
exchange for use at home.
This view tallies with the current plan by the government to
borrow up to $10 billion offshore from the third quarter of this year
to help make up the budget shortfall heightened by massive oil
price slump.
The Minister of Finance last week intimated reporters of
government’s plan to borrow offshore. She said “we have been
borrowing largely from the domestic market,because we needed to
get the exchange rate sorted out to enable us to borrow from the
international market. The international borrowings will begin to
come in Q3.” Government said it wants to change the balance of
its debt portfolio so that 40 per cent of its borrowing could come
from offshore lenders, compared with 16 per cent now. It also
wants to extend the average maturity of its debt profile.
Adeosun met international investors in June on a non-deal road
show in London as Nigeria explored fund-raising options to
finance its budget deficit. This is cheery news, but government
should exercise great caution while plunging into the murky
external borrowing terrain, a road the country has passed before.
All hands, however, should be on deck as Nigeria grapples with
this economic asphyxiation of a kind.
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