The economy has exited recession. But it will take some time for its effect to rub off on Nigerians’ living conditions. Many, including President Muhammadu Buhari, are cautiously excited by the development. Economists appraise the ‘out of recession’ verdict in the latest report of the National Bureau of Statics (NBS), report LUCAS AJANAKU, OKWY IROEGBU-CHIKEZIE and COLLINS NWEZE.
The economy is out of recession, the National Bureau of Statistics (NBS) announced yesterday.
But the NBS’ verdict is drawing reactions from various quarters. Many describe the report as evidence that the Federal Government is working hard to improve the economy.
Others have disagreed with the verdict with reservations. They will rather wait until its effects trickle down on ordinary Nigerians. To them, it is unsafe to say the economy is out of recession when the prices of products were still out of the reach of the people.
In its Gross Domestic Product (GDP) Report for Second Quarter 2017, released in Abuja yesterday, the NBS stated that the nation’s GDP grew by 0.55 per cent (year-on-year) in real terms in the quarter, indicating the emergence of the economy from recession.
It also stated that the figure indicated the economy was out of recession after five consecutive quarters of contraction since the first quarter of last year.
An economy is said to be in recession after contracting for two consecutive quarters.
The economy slipped into its first-ever recession in three decades, last year.
But the NBS bureau stated that the growth recorded in the quarter was 2.04 per cent higher than the rate recorded in the corresponding quarter of 2016 (–1.49 per cent).
It stated it was higher by 1.46 per cent points from rate recorded in the preceding quarter, (revised to –0.91 per cent from – 0.52 per cent).
Quarter on quarter, the bureau stated that real GDP growth was 3.23 per cent.
It stated that during the quarter, aggregate GDP stood at N26, 986,005.20 million resulting in a Nominal GDP growth of 14.60 per cent.
It stated that the growth was higher relative to growth recorded in the second quarter 2016 (3.01 per cent)
The report also showed the economic recovery was driven by improved performance of oil, agriculture, manufacturing and trade sectors of the economy.
It is expected that the rebound would spur local and international investors to double their investments and commitment to the local economy.
The belief within the business sphere is that access to more foreign exchange, growth in the oil and non-oil sectors, mining and quarrying, agriculture, construction as well as the manufacturing, accounted for the exit of the economy from recession.
The economic experts are urging the government to sustain the development, which they described as positive.
A former Executive Director, Keystone Bank, Richard Obire, described the NBS verdict as good news that will trigger more investments from local and international investors.
In a chat with The Nation yesterday, he said the psychology underpinning economics is that if people had a positive outlook about the economy, they are more likely to invest in such economy.
He, however, said the growth recorded was slim and needs more hard work to be sustained. “Being out of recession gives the people positive boost that there is hope for the future and that hope will bring about more capital inflows into the economy,” he said.
Obire said the economy, being out of recession, will lead to more investments, which in turn will trigger a rise in production and subsequently, job creation. The rise in jobs, he said, will lead to more income and subsequently, drive consumption and that consumption leads to better production because economic activities go in cycles.
Saying the effects of the loss of jobs that occurred during the five quarters of the recession are still there, so, is the high inflation rate, he insisted that now is the time for the people and economic managers to work hard to ensure the economic indicators get better.
Obire said: “We’re out of recession because we registered two-quarters of positive growth. But that does not mean we are out of the woods yet because we could slip back into recession if the growth indicators are not sustained.”
According to him, the improved access to forex by manufacturers has been a boost to the economic recovery, warning that: “We can still slip back very easily. We need to liberalise policies. Let’s avoid political statements that would destabilise the economy, especially as the 2019 election approaches.”
Managing Director, Financial Derivatives Company Limited, Bismarck Rewane, said Nigeria finally turned the economic corner into a positive growth of 0.55 per cent after five consecutive quarters of negative growth and a deep recession.
Rewane said the challenge is that the growth is anaemic and pale compared to the population growth of 2.7 per cent.
He, however, described as cheering that growth was driven by solid performance in oil, energy, financial services and trade.
Surprisingly, growth in the electricity, gas & air conditioning supply sector increased from -5.04 per cent to 35.5 per cent which was spectacular, he noted but cautioned that output expansion is not enough to provide for the 14,000 births recorded daily in the country.
The Managing Director, Cowry Assets Management Limited, Johnson Chukwu, said the NBS report gives economic managers hope as the development would stimulate investors’ confidence in the country.
Describing the development as a morale booster for the economy, Chukwu said: “No foreign direct investors want to go into an economy that is in recession but the economy needs to grow at a higher rate. We need to ensure that inflation comes down to boost people’s purchasing power.”
He said the Central Bank of Nigeria (CBN) should bring out tools to cut inflation while the power supply also needs to be stable for meaningful economic growth to be achieved.
A one-time President of Chartered Institute of Bankers of Nigeria (CIBN), Mazi Okechukwu Unegbu, said although there is an improvement in forex supply, there is more to be done.
“There is still a lot of work to be done, including the states raising their revenue base. He said the excitement over the exit from recession should not be loud because more work needs to be done to keep the economic indicators positive.
CBN Governor Godwin Emefiele had predicted that the country will return to positive growth after about five quarters of negative growth since 2016. According to the NBS in its Quarter 2, 2017 GDP Report, the GDP grew by 0.55 per cent (year-on-year) in real terms.
The report shows that the GDP shrank by 0.52 per cent (year-on-year) in real terms in the first quarter, representing the fifth consecutive quarter of contraction since the first quarter of last year.
The GDP’s growth by 0.55 percent, according to the report is 2.04 per cent higher than the rate recorded in the corresponding quarter of 2016 (–1.49 per cent) and higher by 1.46 per cent points from rate recorded in the preceding quarter, (revised to –0.91 per cent from –0.52 per cent). Thus, quarter-on-quarter, real GDP growth was 3.23 per cent.
Emefiele had predicted on May 23 that at the end of the third quarter, Nigeria would be out of recession. He hinted the possibility of the exit based on the obvious positive economic indices such as downward trending inflation rate, improvement in the GDP growth rate.
The CBN chief noted that negative growth rate had decelerated quite significantly, coupled with improvement in the quantum of forex going to the real sector and industrial capacities.
In his prediction, Emefiele said: “We’ve seen positive signs in various economic sectors, I am very confident that at the end of the third quarter, we will be out of this and I still hold that position.”
The development, coming on the heels of more stable exchange rate regime, coupled with declining inflation rate, from 16.10 per cent in June down to 16.05 per cent in July, 2017, it is believed that these factors will provide salutary macro economic conditions for growth, as anchored on current monetary policy stance of the CBN, some analysts said.
The Director-General of Lagos Chamber of Commerce & Industry (LCCI), Mr Muda Yusuf, described the news as a welcome development signalling positive effects to the global investing committee.
He said the exit would improve the perception of the country, especially by foreign investors, as they would no longer see Nigeria as a country with an economy in recession.
According to him, it would also improve the status of the country as an investment destination, impact positively on investors’ confidence indicating that the end of the recession would engender.
Yusuf further stated that the exit from recession is an indication that some of the policy actions of the government have impacted positively on the economy.
He, however, argued that the GDP figures and the exit from the recession are not ends in itself but a means to an end.
Yusuf said: “What ultimately matters to business is the impact on the cost of doing business, the productivity of the economic players, competitiveness of firms and the sustainability of investment.
“At the level of the individual citizens, what matters is the welfare effect of the GDP numbers. The impact on food prices cost of healthcare, transportation cost, power supply and the purchasing power.
‘These are some of the ultimate outcomes that would determine whether or not the exit from recession will be celebrated.”
He listed the improvement in oil price and oil output, improvement in liquidity in the forex market, the commitment of the government to the ease of doing business and reforms in forex policy, as some of the factors that accounted for the rebound.
To sustain the recovery momentum and the prevailing positive outlook, he spoke of the need to ensure the reduction in a multiplicity of exchange rates, alignment of procurement policy at all level of government to support local investment and a policy that would protect domestic investors.
He also advocated for a tax regime and interest rate policy that is investment-friendly, including a trade policy that will reduce the cost of operations across sectors.
The Manufacturers’ Association of Nigeria (MAN) President, Dr Frank Udemba Jacobs, commended the NBS report, which he described as credible, coming from an agency statutorily equipped to undertake such study.
He confirmed that his members have had some cherry news since February as a result of the reversed CBN forex policy which favoured manufacturers in terms of forex allocation to aid the importation of the much-needed raw materials and machinery for their manufacturing.
He said the association will take its time to analyse its effect in the real sector.
