Economist proffers solutions to recession
Condemns hike of MPR by 200 bps, fiscal indiscipline
To fasten recovery of the Nigerian economy, renowned economist, Dr. Biodun Adedipe, has suggested that individuals and corporate entities in the country turnsed inward for development strategy design and funding initiated by locals, to overcome the boom-bust cycle, saying that it is what the 56-years historical performance and the trajectory demands.
Adedipe who spoke on the theme: “Challenges in the Nigerian Economy: Change and the Anti-Corruption Fight” at the 2016 Nigerian Institute of Management (NIM) Members week, Ikeja Chapter, explained that by discarding redundant assets, getting everybody involved in cost savings strategies, joining the fight against corruption as well as restrategising on the population and its distribution spatially, socially and age-wise, the economy could be prepared for recovery and normalisation.
“Business is about buying and selling, there a few questions to ask as pointers; what were Nigerians buying up until end-July 2016? What are they buying now? What will they be buying going forward? Are there demographic patterns in what they buy? Are there differences in public and private consumption? What determines what they buy, how and where they buy? And how can we produce or buy and sell profitably in the evolving environment?”
He told the gathering that nothing remarkable happens until someone has paid the price for it;”If you want to see real change in your company’s performance, you and your people MUST PAY the price. An economic outlook is based on two premises; the structure and trajectory of the key sectors and the direction of government policy. My expectations for the rest of 2016 include; GDP growth rate of 0.54percent caused by delayed implementation of budget, interest rates at double digits, Inflation rate will remain double digit and exchange rate will remain top N320/US$. Slight Improvement in power supply, renewed road infrastructure development and the revival of rail transportation and start of privatization of viable airports”, he stated.
Fadipe recalled that the economy started slowing down in Q3 2014 and began to shrink in Q1 2016 noting that apart from dampened GDP growth rate, real income was on the decline as inflation was rising, unemployment rate was rising, industrial production declined, wholesale/retail trade slowed and capital importation has dropped significantly, blaming the thwarting of high expectation for early recovery in 2016 on the National Assembly delayed processing of the reflationary Budget.
On global economic trends, he said Brexit yes-vote has increased uncertainty that compounds the already weakening global economy; at a time the Nigerian economy was struggling with its own peculiar risks. He explained:” The International Monetary Fund (IMF) in July 2016 projected the Nigerian economy to contract by 1.8percent this year due to: Foreign currency shortages following lower oil receipts. Low power generations and weakened investor confidence. There are uncertainties and geopolitical tensions all around the world, and there is a lot of experimentation in policy formulation and sequencing.”
On policy rates of most central banks aimed to stimulate growth, he revealed that out of the 28 OECD/G20 countries only seven which include; Argentina (13percent), Brazil (14.25percent), Chile (3.5percent), Iceland (5.75percent), Mexico (3.25percent), South Africa (6.75percent), and USA (0.5percent) raised their policy rates from 2009 till date adding that among the 76 countries surveyed, only 12 countries (including Nigeria) have policy rates in the double digits.
“It is thus spurious to argue that central banks have no business with economic stimulation, and the CBN has done well towing this global, sensible line. The CBN has however, raised MPR by 200 bps, contrary to all rational expectations during a recession.”
He stated that the economy is troubled for several reasons, and the signs began to show since early 2013 with the following indicators; economy is diversified by GDP contributions, but over dependent on hydrocarbons for foreign earnings and government revenue, threatened source of foreign earnings (77percent) and government revenue (74percent).
In addition, he listed other indicators to include; bloated government recurrent expenditure, high unemployment rate (12.1percent) and 19.1percent underemployment), dominated by youth (42.4percent). Low, but stable external reserves ($25.78b), high cost of doing business and high cost of living and (inflation at 16.48percent in June 2016).