A former Deputy Governor of the Central Bank of Nigeria (CBN), Prof Moghalu has said that Nigeria is technically recovering from recession and not out of recession as being claimed by some people.
He said with economic growth of 0.55% in the second quarter of 2017, Nigeria seems headed out of its recession, the worst it has experienced in 25 years. “If we continue to record positive GDP growth, even from our current very low base and no matter how small this growth may be, we will have started recovering from recession — technically. No doubt, some of our leaders will flaunt such a meager performance as evidence of progress.”
The former CBN top shot said Nigeria has suffered economic destruction on a massive scale in the past two years with GDP down to $406 billion in 2016 from the $568.5 recorded in 2014.
“If you are using the official exchange rate of about 305 Naira to the dollar. If you calculate with the parallel market rate of N366 to a US Dollar, our GDP today is well less than $300 billion. That is a massive erosion of our national wealth.”
He also said foreign investment into Nigeria has consistently dropped in the last two years from $20.75 in 2014 to $9.6 in 2015 and finally $5.16 in 2016.
Prof Moghalu explained that the massive economic contraction has happened largely as a result of cumulative bad political leadership. He also blamed the economic crisis on both the state and federal governments who over time had depleted the excess crude account from about $22bn in 2007 to approximately $2bn as of December 2014.
“This left our country with no protection for the rainy day as oil prices began to decline in late 2014. We therefore had no fiscal buffers to help us defend our economy from the implications of the oil price fall for the naira. The value of the naira depends on external reserves built on the back of crude oil price sales that bring in more than 90% of our forex earnings.”
He also blamed the current administration of Muhammadu Buhari for refusing to make the necessary policy adjustments and has instead gone on a borrowing spree. “We have increased our external borrowing by 46% (from $9.46 billion to $13.81 billion) in the past two years. We now spend over 60% of all our revenues, weak as they already are, on debt servicing.”
He said for two long, wrong decisions by political leaders based on vested interest have kept Nigeria’s economy down. He there advises Nigerians to take their destinies into their hands and take the political actions necessary to ensure that Nigeria do not remain a poor country.