Nigeria economy no longer in recession

Kemi Adeosun
Kemi Adeosun

World Economics, a London-based organisation, declared yesterday that after a few quarters of negative growth that saw the death of businesses, the Nigerian economy has wriggled out of recession.

According to the organisation, which focuses on producing financial analysis on world economy, Nigeria’s “Market Growth Index grew to 58.5 in April as the monthly Sales Growth Index ticked up to 56.7, its highest value since 2015 and representative of rapid growth”.

Although the organisation acknowledged that Price inflation for April, which is tracked by the Prices Charged Index, remained high at 58.7 – indicative of high levels of inflation, it added however that “a slowing trend has developed for the past 9 months”.

Whereas conditions remain difficult for businesses in the country, World Economics said, “The challenges and the recent changes to the Naira’s FX rate are aiding sales transactions.

“Overall, conditions in Nigeria have improved further over the past month and managers are expressing renewed optimism that the economy will continue to grow and regain strength after the recession”, it added.

Similarly, the International Monetary Fund (IMF) has forecast 2.6 per cent growth for sub-Saharan Africa in 2017.
It projected Nigeria’s economy to grow by 0.8 per cent this year, despite current economic realities, even as it also said the expected growth will be modest recovery in large economies led by Nigeria, South Africa and Angola.

“Output in Nigeria is projected to grow by 0.8 percent in 2017 as a result of a recovery in oil production,” so said IMF chief economist, IMF’s Maurice Obstfeld who unveiled the fund’s World Economic Outlook in Washington yesterday.

Pointing out sustained growth in the agricultural sector. IMF said, “In sub-Saharan Africa, a modest recovery is foreseen in 2017. Growth is projected to rise to 2.6 percent in 2017 and 3.5 percent in 2018, largely driven by specific factors in the largest economies, which faced challenging macroeconomic conditions in 2016.

“After contracting by 1.5 percent in 2016 because of disruptions in the oil sector coupled with foreign exchange, power, and fuel shortages, output in Nigeria is projected to grow by 0.8 percent in 2017 as a result of a recovery in oil production, continued growth in agriculture, and higher public investment”.

In the 2017 Global Financial Stability Report, the fund claimed that Momentum in the global economy has been building since the middle of last year.

On the basis of this, the world body affirmed that earlier forecasts of higher global growth this year and next were feasible.

It also projected that the world economy might grow at a pace of 3.5 per cent up from 3.1 percent last year and 3.6 per cent in 2018.

Also, in its Global Financial Stability Report for 2017, it claimed that economic activity has gained momentum, amid broadly accommodative monetary and financial conditions which have spurred hopes for reflation.

It said that this has given rise to longer term interest rates which, in turn, have helped to boost earnings of banks and insurance companies. Remarkably, the fund insisted that gains in many asset prices reflect a more optimistic outlook.

To retain such optimism, realise stronger growth and sustain the improvements in financial conditions, it urged policymakers to see the need to implement the right mix of policies, including a reinvigoration of economic risk taking, addressing domestic and external imbalances to enhance resilience in emerging market economies, and responding more proactively to long standing structural issues.

IMF also identified policy uncertainty as key in the downside risk posing new threats to financial stability from elevated political and policy uncertainty around the globe.

On this, it warned that a shift toward protectionism in advanced countries could reduce global growth and trade, impede capital flows and dampen market sentiment.

The world body also said that a long period of low growth and low interest rates would challenge financial intermediation.

The report cautioned that emerging market economies has been facing trying times in global markets, just as it commended them for a continued enhancement of their resilience by lowering corporate leverage and reducing external vulnerabilities.

In the same report, the IMF said that their growth was expected to continue improving, driven by gains for commodity exporters and prospects for positive growth spillovers from advanced countries.

Meanwhile, mixed reactions yesterday trailed the claim by World Economics that Nigeria was out of  recession.
In a telephone interview with LEADERSHIP last night, managing director and chief executive officer of Financial Derivatives Company Limited, Bismarck Rewane, said the indicator to which World Economics based its projections was one out of other indicators like Purchasing Managers’ Index (PMI), inflationary trend, among others.

He added that until the Nigeria Bureau of Statistics (NBS) comes out with its statistics on whether the country is out of recession or not, it may be premature to jump into any conclusion.

Also, associate professor and head, department of banking and finance, Nasarawa State university, Dr. Uche Uwaleke said, “I do not subscribe to the view by World Economics that the country has already exited recession on  the basis of some indicators namely ‘Sales Managers’ Index’ and ‘Market Growth Index’ which at best represent a narrow view of economic performance. For all practical purposes, an economic recession is generally taken to mean a negative growth in GDP for at least two consecutive quarters.

“Nigeria’s economy has been in recession since end of Q2 of 2016, contracting by -1.51 in 2016 according to the National Bureau of Statistics. Only a positive growth in GDP will signal the end of recession in Nigeria. Till we hear from the NBS with respect to GDP growth, this report by World Economics should be seen for what it is- an expression of hope that those improved indicators will help to get  the country out of recession in no distant time”.
Analysts at FSDH Merchant Bank believe however, that the country is on its way out of recession and the improving economy will soon begin to show in the demand for goods and services in the country.

The analysts said the economy, which officially entered into a recession in Q2 2016, following the release of the Gross Domestic Product (GDP) figures showing two consecutive quarters of GDP contraction, is showing strong signs of recovery.

According to them, the recovery seems to be coming on the back of the recent increase in crude oil price, the increase in crude oil production in Nigeria and the Central Bank of Nigeria’s continued supply of foreign exchange to both retail and corporate users.

The Nigerian economy was severely hit in 2016 by the drop in the crude oil price and crude oil production, leading to the declaration by IMF that the country had been enmeshed in recession.

When the NBS said in August last year that the Q2 GDP had declined by -2.06 per cent, the federal government officially confirmed that Nigeria was in recession.

In Washington, Adeosun Seeks Repatriation Of Stolen Funds
Meanwhile, Minister of Finance, Mrs Kemi Adeosun has called for greater focus on collaboration in combating illicit financial flows from Africa insisting such was a core pillar of the federal government’s strategy to significantly enhance domestic government revenue and deliver sustainable economic growth.

Adeosun who is attending the World Bank and IMF Spring meetings in Washington DC, United States, said the federal government is focused on resetting the Nigerian economy by addressing her traditional over-reliance on oil revenues and establishing the basis for sustainable non-oil revenue growth.

“To improve non-oil revenues, we have to address illicit capital flows. When stolen money is transferred from Nigeria, or other African countries, there are too few questions asked by those countries that receive the funds, but when we identify those funds as stolen and seek to recover them, there are too many questions being asked”, Adeosun told the global parliamentary conference in the U.S.

She revealed that there are monies sitting in foreign bank accounts, which the federal government has spent over a decade trying to recover. “That is money that could deliver significant value for Nigeria as we seek to increase spending on critical infrastructure and establish a basis for long term sustainable growth”, she noted.

The finance minister expressed hope that the Automatic Exchange of Information scheme coming into force next year will be a step towards achieving greater transparency, saying “but we need more collaboration amongst parliamentarians in Africa, and across the World to ensure that this situation improves and that recipient countries are held to account”.

Commenting on the domestic agenda to ensure significant reductions in ‘leakages’ of public funds and improved efficiency in public expenditure, the Minister said, “We are going after those who have stolen our money. We have put in place a very successful whistle blower programme that is delivering results, and allows those who report illicit activity to receive up to 5% of any funds that we recover.

“We are also significantly improving our financial management controls to ensure that it is considerably more difficult for public funds to be diverted. We have to do more though and that means collaboration with the legislature. We need tighter tax and financial reporting legislation and to ratify bilateral agreements so that our enforcement agencies are empowered to deliver the results that we need”.

Addressing senior representatives from the World Bank and IMF, as well as over 150 parliamentarians, Adeosun noted that to create the basis for long term growth, “we need to invest urgently in our infrastructure”.

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