CBN, be honest with the recession
The statement credited to the Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, that Nigeria, Africa’s acclaimed largest economy, should exit its recession by the end of this year is ridiculous. There is consternation at home and abroad that such unfounded and baseless assertion could come from the CBN, Nigeria’s top monetary authority.
We are barely four weeks to the end of the year and the current recession, said to be the worst in more than three decades, has just erupted, so what kind of economic forecast is the CBN dishing out to Nigerians and the world?
Can the CBN miraculously decree the end of the recession by mere official rhetoric? Emefiele and his team know that this is not possible. Recession came by a process that failed to meet certain critical economic conditions over a period of at least two quarters.
For the recession to end there has to be a reverse process for at least another two quarters (six months), during which all the gaps that led to the recession are filled. That being the case, for anyone to say that the recession will end in four weeks is tantamount to dishonesty.
Nigeria’s central bank reportedly held its benchmark interest rate to allow previous cuts to flow through the economy. The pause followed two cuts of 100 basis points each in 2020, which informed the CBN’s confidence that the nation’s second recession in less than four years will be short-lived, echoing recent remarks by the Finance Minister, Zainab Ahmed. The economy contracted 3.6% in the third quarter from a year earlier after crude output dropped to the lowest since 2016. Africa’s top crude producer cut production in order to reach full OPEC+ compliance.
Is the CBN’s pronouncement based on concrete facts and figures or is it mere rhetoric? Coming from the highest monetary authority in the land, such statements ought to carry weight and be reassuring. Emefiele should refrain from making political statements on critical economic matter that ought to be taken serious. Elsewhere, such statement coming from the exalted office would be taken as gospel truth. But I doubt if that is the case here since no specifics were given.
Truth is that nothing has changed even the price of crude oil, Nigeria’s lone export commodity has nose-dived to about $40/barrel. Saying that the recession is ending before the end of the year without facts is totally misleading. The CBN should be specific; otherwise, it should not make such statement if it doesn’t have his facts.
As far as the recession is concerned, everyone knows that Nigerians are going through hell that, ordinarily, shouldn’t be. While it is better for Nigerians to be positive and believe that the recession will eventually end, no one knows when or how soon that would happen; nobody can say for sure, especially, when there is no certainty that the economic conditions will get better.
For instance, the presidency has blamed the 43 Borno rice farmers massacred by Boko Haram fighters over the weekend in Zabarmari, about 20 kilometres from Maiduguri, for not getting military clearance before going to their farm according to the Senior Special Assistant to the President on Media and Publicity, Garba Shehu told the BBC.
As increased agricultural production is one factor that would contribute to ending the recession, how can the recession end if farmers must get clearance from the presidency before venturing to their farm? It shows that rather than talking about an end to the recession, Nigerians should hope that the situation does not degenerate to depression.
Recall that Nigeria slipped into recession at the end of the second quarter of 2016, precisely in June. That was when the then Finance Minister, Kemi Adeosun, said that Nigeria was technically in recession. But it was obvious, at the time, based on the indicators that Nigeria was already in full blown recession. By August of 2016, Adeosun accepted that Nigeria was actually in recession. The same episode has recurred in the third quarter of 2020 barely four years after.
What are the indicators? Millions are unemployed; industrial production declined; banks in dire straits leading to lay-offs; fall in GDP; reduction in the income of the average family; over 60 per cent of the population classified as poor, etc. These same indices characterised the Great Depression in America in the 1930s.
According to experts, seven factors were responsible for Nigeria’s economic recession. They are: inability of the previous administration (led by Goodluck Jonathan) to save; Nigeria’s over-dependence on foreign products; economic policies of the present administration (example the border closure); the activities of militants and pipeline vandals, Boko Haram; the existence of wasteful and abuse-prone subsidies and the different actions (or inactions) of the Central Bank of Nigeria (CBN) in forestalling recession. To this list I must add epileptic power supply that has killed industrial production.
Therefore, before anybody could talk about the recession ending, there must be a thorough and unbiased assessment of the economic conditions that led to the recession to ascertain whether or not they have been resolved. Without such an honest assessment, any statement about the recession ending, would, at best, be propaganda.
Based on the foregoing, a cursory look at the issues will give some insight into whether or not the recession would end soon. The inability of the Jonathan administration to save was presented as a leading factor that led to the 2016 recession. The question is how far has this problem been solved? How much has the Buhari administration saved? The Buhari administration is not earning enough money to neutralise the mistake of the past?
Government ministries, departments and agencies (MDAs), have not cut their huge spending. Politicians are still spending money as if all is well. Rather than earn substantial income, the Buhari administration is in debts, borrowing huge sums of money from within and without to augment the budget. The administration is running a deficit budget as the price of oil is still low and unpredictable.
Next is Nigeria’s overdependence on foreign products. Is Nigeria less dependent on imported goods now? Is the country producing much of her agricultural and industrial consumables? The answer to all this is capital NO.
The economic policies of the present administration have been controversial; many Nigerians are not comfortable. Rather than improve the situation, the policies led to the collapse of the naira, scarcity of forex, high inflation and skyrocketing prices of all consumables.
The delays and controversies surrounding the 2016 budget may have been addressed since the same delays and controversies were not witnessed in 2020. The 2020 budget was passed faster than what transpired in 2016. The next is its implementation.
But the activities of Boko Haram and pipeline vandals are yet to abate. The militants have not stopped blowing pipelines and issuing threats.
Finally, the existence of wasteful and abuse-prone subsidies and the different actions (or inactions) of the Central Bank of Nigeria (CBN) in forestalling recession have not been resolved. After it was thought that the subsidy regime ended after the pump price of petrol was jacked from N160 to N179 per litre, government seems to have come back to subsidy as fuel importers face dire challenges due to forex scarcity.
To all of this must be added the lingering Boko Haram war that is sapping Nigeria financially. Boko Haram has become more vicious with the brutal massacre of 43 innocent farmers in Borno State.
The unending epileptic power supply persists. The resolution of the power supply issue alone is enough to turnaround the economy through increased productivity. Dead industries would be revived thereby creating employment.
Based on the foregoing, I don’t see how Nigeria would exit the current recession soon when the economic realities remain bleak. Besides, the corrupt public officials who are reaping a windfall from the recession would not want it to end. They will sabotage every policy geared towards exiting. That is why Nigeria is in perpetual recession.
The recession would end if the government is intact, without distraction and is committed to what it has mapped out to pull the country out of the economic quagmire.
Finally, America’s economy during the Great Depression was not confronted with insurgency/militancy and abrasive corruption and looting of the treasury as it is presently in Nigeria. How can the economy exit recession in a state of anomie?