The Nigerian economy in the year 2016 in retrospect

Channels Television had given me 30 day notice to join in the now traditional review of the economy in retrospect and I had done the usual diligent tracking of developments in the economy in preparation for this discussion even including adjusting the calendar of my Christmas visit to my home base Asaba only for the event to turnout as a veritable anticlimax as the platform was over populated and there was pressure of time and hardly any opportunity to get in a word. And by Jove I did feel wrong done by and have decided to take my destiny in my hands by undertaking this review.

When you cast your mind on developments in the year 2016 one is reminded of the outburst by the Queen of England in the year when Prince Charles, that gadfly and heir to the throne left his wife, Diana to follow his original heart throb and flame Carmela Parker Bowles and if I recall there were other marital issues in the Royal family when the Queen in her usual new year address to the citizens referred to the year as; ‘Annus horibilis’; a horrible year. It will not be farfetched if one refers to developments in the Nigeria economy in 2016 in similar terms! It was a year in which anything that could go wrong did so and the citizens were plunged into excruciating pain and hardship. It was not possible that anyone was exempt from the anguish and pain which the year unleashed on the generality of the population.

It is in order to quote an excerpt from the President’s Budget 2017 speech; ‘We continue to face the most challenging economic situation in the history of the nation. Nearly every home and nearly every business in Nigeria is affected one way or the other.’ But he also reassured us by informing us that; ‘I will stand my ground and maintain my position that under my watch, the old Nigeria is slowly but surely disappearing and a new era is rising in which we grow what we eat and consume what we make. No doubt we are all at one with the President in his characterization of the situation of the economy in 2016 and that he has our unalloyed support and good wishes as he undertakes the arduous task of delivering his promises to Nigerians.

I had gone home to spend the Christmas holidays at Asaba and one of the striking developments that forcefully reminds one that things are no longer the same was the absent of the usual gridlock at the Niger Bridge head. In the past it is not unexpected that commuters spent nights at the Bridge head waiting to cross into Onitsha. This time what was striking was the unbelievable free passage of vehicular traffic. One cartoon which I read in the Guardian captioned, ‘things have changed’ recounts how someone had asked his friend after the Christmas celebration how it was and his retort that it was boring; there were no bangers, no knockouts, no wild and loud parties and free booze and food where noticeably missing.

Even going by reports in the social media women of easy virtue were not spared the scourge of the downturn as they reported drastic reduction in patronage even against the background of discounts that were offered on services. I am still waiting to find out if the report of nascent resort to dog meet in Ekiti state with almost twenty new outlets in Ado Ekiti is also as a result of the ravaging recession. Dangote, Africa and Nigeria richest man, in the heat of this development was dealt a bad blow as his ranking on the Bloomberg Billionaire list cascaded from 46 to 121 which was rationalized as due to the recession and developments with regard to the exchange rates.

With regard to development with the exchange rates there is continued clamor for further deregulation of the Naira. Some of us who are familiar with the mindset of the Governor of the Central Bank as well as the President know that both of them share an avowal for allowing the Naira to depreciate as that is exactly what will happen if we further deregulate. And it is axiomatic to note that a large measure of the problems of the economy arose from dollar scarcity which resulted from the fall in the price of crude petroleum which commenced since about the middle of 2014 when oil sold for about 60 dollars a barrel down from the over hundred dollars it has been hitherto for several years. And the price of crude fell steadily reaching as some point to a low of around 30 dollars when it became uneconomic to keep some of the shale oil rigs operational and some inevitable went into temporary shutdown reducing supple thereby giving a shot in the arm to the price of oil.

The argument is that if we allowed market forces to determine the rate of exchange that it would find its market clearing value which will encourage investors who now convinced that the prevailing value is now better aligned to the economic fundamentals to come rushing in with their inflow of dollar investments augmenting the supply of the Greenback which would result to a moderation in the rates as it responds to the boost in supply. But that was exactly what the Central Bank attempted to do with its introduction of the flexible approach to the determination of the exchange rate which commence at the middle of the out gone year. The expectation of dollar inflow has at best been a mixed result.

But for the records I am known to have argued severally that there is no market in foreign exchange in the Nigerian economy. What sort of market is that whereby there is one single dominant supplier with a deluge of unsustainable number of those wanting to buy often for speculative purposes even adopting blackmail in the process to try and force the hands of the authority? I do not believe that any government in this country would want to commit political suicide by allowing market forces to determine the value of the exchange rate. The bottom will fall off the economy and the current hardship would be a child’s play. We must continue with the managed float which we have done so far for in point of fact there is no economy in the world where the determination of the exchange rate of the currency is left entirely to market forces. Witness the recent accusation by America that the Chinese are manipulating the exchange rate in order to gain balance of trade advantage.

The other matter is the attempt to describe the Nigerian recession as already depression. But that is not correct. What we have could at best be characterized as Stagflation; which is the unusual development whereby contraction in the economy is accompanied with ravaging supply side constraint resulting in rising inflationary spiral. Technically for the situation to be properly described as depression the recession must have been there for an unduly long period of time say two years and the contraction in GDP must have been at least ten percent; both of which conditions would appear to be still far from our shores. Questions have often been asked regarding when the country will get out of recession. I thought this is obvious. If the authorities have projected a growth rate of 2.5 per cent; that signals the end of recession. And there is no authority that has not projected a positive growth in GDP for the country in 2017 including the IMF. And therefore it is no brainer to conclude that the recession should depart our shores come the end of 2017 if we do the right things. The fact remains that the recession could not have persevered if Budget 2016 was diligently implemented.

It is good omen that we have commenced in earnest the implementation of some of the social program content of Budget 2016 such as the N-power program which has given employment to the first batch of 200 graduates to be deployed in education and agriculture boosting extension services. And we also understand that we have commenced with the conditional transfer of N 5,000 stipend to targeted beneficiaries. We hope also that in keeping with the promised made by the Senate President that the Senate would cooperate with the fiscal authorities to ensure that we commence the implementation of Budget 2017 by ensuring that we minimized the incidences of rancor in undertaking its approval. And that the Senate will proactively make its contribution in support of fiscal efforts with the passage of appropriate laws to facilitate the growth and development of the national economy. The challenge of successfully facilitating economic growth and recovery can only have a good chance of success if embarked upon under a joint venture frame of reference.

 

Boniface Chizea