Still bleak out there: Nigeria’s economy is far away from a full recovery

The US dollar, the Euro and the Pound, exchanged at the parallel market over the weekend at the rates of N380, N410 and N490, respectively, but on Monday, the Central Bank of Nigeria, announced that Nigerians can now get the dollar at N360 across all commercial banks within the country.

According to the CBN directive, banks will now sell the dollars to their customers at N360/$1 for invisibles (BTA, medicals, fees, etc), in another round of interventions in the interbank market which according to the Apex bank will help keep the momentum in the forex market to make dollar accessible for genuine end users.

While the various intervention policies by the Apex bank to arrest the naira’s slide from N550/$1 in January to N360/$1 have received commendations, it has cost the country a total of $1.9 billion, through forward sales as well as targeted intervention for invisibles in five weeks. This amount does not include its daily intervention of $1.5 million on the interbank market from the $30billion external reserves.

However, the Apex Bank says the gains made by the local currency in the last five weeks have inched the country closer to achieving one of the Nigerian government’s key policies towards reviving the economy.

But experts worry if it could be sustained in the long run, with growing uncertainty in the Global Oil markets from which Nigeria derives foreign exchange.

Last week, Mrs. EmeEssien-Lore, the country manager for International Finance Corporation, a member of the World Bank Group, announced that the group has endorsed Nigeria’s Economic Recovery and Growth Plan (ERGP).

She further asserted that Nigeria would soon recover from its economic recession; “if the plan, which is comprehensive, ambitious and thoughtful, is put into action, Nigeria could be on the rise again to economic stability.”

Even Nigeria’s GDP performance improved slightly in the 4th quarter of 2016, and showed us a route to recovery.

Not yet time for celebration

However, it is not yet time to celebrate despite the scintillating announcements, economic boom is still some way off as analysts are beginning to doubt the prospects of a 2017 recovery and are reverting to their pessimism.

According to the Nigeria Chief Executive Officer, Financial Derivatives Company Limited, Mr. Bismarck Rewane, economic recovery in Nigeria would be slow and painful, due to the country’s continued search for the right policy prescriptions to lift her economy out of recession and warned that Nigeria will be caught between the desire to reform and resistance to change this year.

Rewane, speaking at the Lagos Business School’s executive breakfast session titled: “Economic Reform: Resist Now and Regret Later”, evaluated the probability of an early and sharp recovery as against the possibility of a slow and painful upturn in economic activity in 2017

He opined that the economy was strangulated by pricing distortions in the forex market, which was exacerbated by delayed and inadequate policy decisions, inconsistency and political interference in monetary policy environment of investor confidence and dwindling capital inflows.

The report predicted that in 2017, there will be numerous of forex market policies geared towards strengthening the naira, but structural deficit in the country put Nigeria’s coming out of recession by 2018 a big doubt.

He further warned that Nigeria’s recovery plans would be dented by various forces, especially Trump’s deal by deal approach which will put Nigeria under pressure and unappealing (anti-American) deals will be rejected. Also the volatility in the oil market likely to weigh on fiscal revenue projections, threatening fiscal stimulus packages for economic recovery.

In addition, the report anticipated that a supplementary budget could be introduced if revenue projections fall below expectations, that government may explore sale and repurchase agreements on selected assets, seek funds from multilaterals, export credit agencies & launch concession programmes, increase VAT rate from five per cent  to 7.5 per cent, improve compliance and effectiveness of revenue collecting agencies and also broaden the tax base.

It will be recalled that the International Monetary Fund (IMF) predicted a slim rise in Nigeria’s Gross Domestic Product (GDP) to 0.8 per cent in 2017, however, the World Bank only sees a one per cent GDP growth for Nigeria in 2017. Although, the IMF was more bullish in its 2018 economic growth expectation from Nigeria as it predicted a 2.3 per GDP growth for the country.

A lecturer with the University of Lagos, who spoke with TheNerveAfrica over the weekend via email, said the root cause of Nigeria’s economy quagmires are deep, and must be addressed if the economic recovery team is to build a more sustainable and competitive economy. We must understand the causes of our economic malaise in order to implement solutions that are sustainable, not bail out.

For Kalu Aja  a finanical expert called on  the federal Government on its twitter handle, to do more in attracting more investment into the country, rather than bail out

The sad reality

Nigeria’s Crude oil output increased the most in the world at 58.0%, while production in Saudi Arabia, Iraq and China plummeted, thanks to production cut according to the OPEC March Monthly Oil Market Report.

However, Nigeria’s oil exports are still low, compared to Asian countries according to the January and February of the report report, and this is likely to persist.

While the ERGP, an initiative of the Nigeria Government is believe will lead to the growth of the nation’s economy by 2.19 percent in 2017 and 7 percent by the end of the plan period in 2020, but with politics taking the center stage by 2019, only time will tell.