Economy risks depression as negative growth lingers

Government plans four-year economic roadmap in December

The nation’s economy is at the risk of depression – a sustained, long-term downturn in economic activity – as the National Bureau of Statistics (NBS) announced a third negative growth in three-quarters.

The data agency said Gross Domestic Product (GDP) for third quarter (Q3) of the year again shrank by -2.24 percent after recording -2.06 per cent in the preceding quarter ending June 30, 2016. The GDP is one of the primary indicators used to gauge the health or size of a country’s economy. It represents the total dollar value of all goods and services produced over a specific period.

The persistent decline in growth means that government’s fiscal and monetary policies are failing and its promise of returning active trade and industrial activity to the economy will not be achieved soon.

Labour and the organised private sector operator blamed persistent negative growth on a lack of clear fiscal and monetary policy direction and urged the Federal Government to resolve the challenge of access to foreign exchange by the productive sector of the economy.

The government yesterday said it would soon present a coherent summary of the country’s short- and medium-term economic plans between 2017 and 2020. The Minister of Budget and National Planning, Udoma Udo Udoma, disclosed this during a breakfast meeting for Chief Finance Officers (CFO) of companies in Lagos.

Udoma noted that “putting government strategies, directions, policy priorities and intended plans together in a single document will enable stakeholders in various sectors to make strategic economic decisions.”

“We (now) have three (if not four) quarters of consecutive negative growth and this is really a disaster,” Leo Ukpong, a Professor of Business Administration at the University of Uyo, Akwa Ibom State, told The Guardian last night.

“The presidency needs serious economic advisers and there should be at least two standard senior economic advisers attached to the Presidency now.

“And a non-partisan economic team of five experts should be created,” Ukpong, a United States-trained economist said.

A currency analyst at Ecobank Nigeria, Kunle Ezun, said the challenge for banking and real sectors’ contribution to the GDP was basically driven by foreign exchange crisis that has lingered due to falling oil prices.

According to him, 2016 growth numbers have been all about contraction and there may not be enough reason to expect a positive outcome in the fourth quarter, especially one that can pull the country out of the recession. “Businesses are closing in reality because of the foreign exchange issues,” he remarked.

Research and Investment Advisory of SCM Capital Limited, Sewa Wusu, also noted foreign exchange challenges and insisted that government’s fiscal policy has failed, especially with regard to funding capital investments to stimulate the system.

Dr. Frank Jacobs, who leads the Manufacturers Association of Nigeria (MAN), noted that the contraction in the manufacturing sector was expected considering the continuous drop in capacity utilisation due to lack of access to raw materials.

The President of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), Bassey Edem agreed with Jacobs and emphasised scarce foreign exchange as major challenge for local producers.

They expressed the fear that the negative growth may prevail in 2017, except government addressed concerns relating to access to raw materials and forex.

The Nigeria Labour Congress (NLC) urged government to introduce policies that encourage spending to take the economy out of recession.

The General Secretary of the Congress, Dr. Peter Ozo-Eson, told The Guardian that the new growth numbers showed that “government has been doing so little in taking Nigeria out of the economic recession.”

Details revealed in the GDP report for the third quarter show that between January and March this year, the nation’s GDP shrank by -0.36 per cent ,while it dropped by -2.06 percent in the second quarter and plummeted again in the third quarter (July to September 2016) by -2.24 percent.

In spite of the gloomy outlook, the presidency said that the third quarter GDP figures reveal a consistent growth in agriculture and solid mineral sectors, indicating the success of the administration’s economic policies even as the overall economy remains in recession.

The Senior Special Assistant to Vice President Yemi Osinbajo, Laolu Akande stressed yesterday that the over-riding impact of the oil and gas sector, where vandalism and sabotage of critical installations have negatively affected production output, explains the persistence of the recession, as the non-oil economy posted a very slight growth in the period under review.

He said efforts to resolve the Niger Delta situation are continuing with the Federal Government opening several channels of communication with all relevant groups in the Niger Delta.

“Also, urgent fiscal and monetary measures to spur the economy back to overall positive territory are in the offing including those targeting manufacturing,” he assured.