Nigeria’s economic policy shift seen nearing delivery mode

All hope may not have been lost on the Nigerian economy despite the current hardship occasioned by fall in oil prices and regulatory headwinds, as the country’s trade balance is projected to return to surplus of $6.6 billion from an annual deficit of $6.9 billion, according to analysts.

This bright projection is coming from the current report by Bismarck Rewane, economist and managing director/CEO of Financial Derivatives Company Limited, on ‘A year of Hope, Change and Fear, released to BusinessDay last night.

“We project that the country will return to a trade surplus of $6.6 billion in 2017, from a deficit of $6.9 billion,” Rewane said.

The economist built his hope on  the new policy direction, indicative of economic turnaround, as he estimated Gross Domestic Product (GDP) growth at 2.8 percent in 2017.

He projected oil prices to increase to $55pb in 2017 and $67pb in 2018, while private consumption, gross fixed investment and Foreign Direct Investment (FDI) will spike.

According to Rewane, high scores on transparency and average grades on the economy seem to be the consensus opinion on the performance of the President Muhammadu Buhari team in its first year in office.

“The decline in economic activity is expected to turn into a recovery early in 2017. This is because of the budget stimulus package and the late adoption of market reforms. The new policy direction is indicative of an economic turnaround. We estimate a 2.8 percent GDP growth rate in 2017,” he said

Also, Dan Salter, head of equity strategy at Renaissance Capital, an investment banking firm, expressed his optimism that policy makers were indeed in a delivery mode.

“Policy makers do appear to be in delivery mode, with the authorities having a clear grasp of the economic challenges facing the country, the budget now passed and oil imports liberalised,” said Salter.

“There has also been progress in restructuring the Nigerian National Petroleum Corporation (NNPC), a focus on ease of doing business reforms, a biometric ID system having been rolled out, improved security in the North and the arrest of several members of the so-called Niger Delta Avengers,” he said

But the analysts agree that procrastination and delayed decisions have done more to hurt the economy than the fall in oil prices. For instance, the 2016 budget was delayed for six months, subsidy removal took 12 months, and while forex policy was 15 months delayed.

Nigeria’s economy is under pressure after the price of oil, which contributes two-third of government revenues, fell by more than half since mid-2014, and production dropped to a 27-year low of 1.4 million barrels a day following the re-emergence of insurgency in the key oil-producing Niger Delta region.

The economy shrunk by 0.4 percent in the first quarter, the first contraction in more than a decade, and Godwin Emefiele, Central bank governor said on May 24 a recession was imminent.

Nigeria recorded a trade deficit in the three months through March this year, as exports of crude oil slumped, adding to the nation’s economic woes.

The trade balance of Africa’s largest economy swung to a deficit of N184.1 billion naira from a revised surplus of N364.6 billion in the previous quarter, the Abuja-based National Bureau of Statistics (NBS) said on its website, Tuesday.

Ayo Teriba chief executive officer of Economic Associates however said, “Export value decline resulted from depressed crude price, not quantity decline. The decline in import value in Q1 2016, relative to Q1 2015, comes down to the fall in oil price that forced the forex restrictions.”

Buhari was elected president a year ago, on a wave of optimism that he could revive a nation battered by falling oil prices and decades of corruption. But he hesitated. The budget passage, petroleum subsidy removal and the foreign exchange policy were all delayed.

The delays were expensive and they brought Africa’s largest economy to its knees.

HOPE MOSES-ASHIKE & LOLADE AKINMURELE