Recession: It’s the worst possible time for us — Finance Minister

…FG advocates adjustment to monetary policy 

BY ODUNEWU SEGUN

THE Minister for Finance, Mrs. Kemi Adeosun described the present predicament of the country as very challenging, but assured Nigerians that the present administration is taking drastic steps to remedy the situation.

Speaking with State House Correspondents at the end of meeting of the Federal Executive Council, Adeosun said it’s the worst possible time for the government.

“It’s the worst possible time for us. Are we confused? Absolutely not. I think that we have a long way to go. We’re not confused and we’re not deceiving ourselves that everything is rosy. It’s not,” she said

“It’s a difficult time for Nigeria but I think Nigeria is in the right hands and if we can stick with our strategy… We still have some adjustments to make. I think we need to make some adjustments in monetary policy.”

She was reacting to the latest economic statistics released by the Nigerian Bureau of Statistics last week which showed that the economy is falling deeper into recession. It stated that Nigeria’s Gross Domestic Product (GDP) contracted by 2.06 per cent from the 0.36 per cent recorded in the first quarter of 2016.

The report also said annual inflation reached 17.1 per cent in July from 16.5 per cent recorded in June- a more than 10 year high- and food inflation rose to 15.8 per cent from 15.3 per cent.

Similarly, there was a decline in capital importation which at the second quarter of 2016 was put at $647.1 million, a fall of 75.73 per cent compare to that of 2015. This figure, the NBS said was the lowest level of capital imported into the economy on record, and also represent the largest year on year decrease.

According to World Bank data, the last time Nigeria had this magnitude of economic decline was under the regime of Ibrahim Babangida, when the economy recorded consecutive decline of 0.51 percent and 0.82 percent in first and second quarters of 1987.

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The oil sector experience a decline of 17.48 percent, while the agricultural sector grew by 13.24 percent within the quarter. Mining sector shrinking by 47.9 percent and manufacturing falling by 1.02 percent, the general non-oil sector declined by 0.38 percent.

To compound the woes, the naira has consistently been on the decline despite the jettisoning of the controversial Central Bank of Nigeria’s policy that pegged naira at N197-199, replacing it with a “flexible foreign exchange rate” that would be determined by market forces.

The naira has since went down to as low as N423 to a dollar at the parallel market while it has also shifted more grounds at the interbank market, exchanging for N370 despite assurances by the CBN that it would bounced back when it was floated in June, 2016.
External reserves has also fallen by 2.86 per cent to $25.45bn on August 29, 2016 as against the $26.2bn recorded at the end of July.

According to the Executive Director of the African Centre for Leadership, Strategy and Development, Dr. Otive Igbuzor, the latest economic indicators confirmed that Nigeria was in recession and the economic downturn in the country was worsening.

“For me, there are two main things that have come out clearly from these reports. First is the confirmation that we are now in recession. Secondly, it shows that the economic situation is worsening with increasing inflation and increasing negative growth,” he said.

Reacting to the dire situation, a professor of economics, and Director General of the West African Institute for Financial and Economic Management in Lagos, Akpan Hogan Ekpo advised the government to inject more money into the system before the situation degenerate to depression.

Prof Ekpo explained that this type of recession is too bad because the key sectors such as services and manufacturing are declining rapidly. He advised the government to gear more efforts in providing enabling environment such as fixing power and providing cheap loans to real sector.