ANY hope that Nigeria’s troubled economy will rebound anytime soon took a depressing outlook last week. This followed a third consecutive negative growth in the nation’s Gross Domestic Product (GDP). There are grave concerns that the economy is at the risk of depression, a far worse scenario than the current recession.
The latest figures released by the National Bureau of Statistics (NBS) may have validated these fears as the GDP has dipped further to -2.24 per cent in the third quarter (Q3) from the second quarter (Q2) figure of -2.06 per cent. This is lower by 0.18 percentage points from the negative growth rate recorded in the second quarter of this year. By all accounts, this is worrisome. The GDP is one of the major 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 in that country.
The NBS report may have confirmed the concerns of many economic experts that the Federal Government is not doing enough to address the present economic challenges facing the economy. The NBS report is damning enough and should be taken seriously. The report noted that the aggregate GDP in nominal terms stood at N26.5 trn. It also stated that the performance of almost every sector of the economy recorded a staggering decline.
Worse still, oil production, which accounts for over 70 percent of government’s total revenue on the average stood at 1.63 million barrels per day. This is about 600,00 barrels less than the projected benchmark per day, according to the 2016 budget. This represents a decline of 22.01 percent year-on-year in the Q3 as against -17.48 percent in the Q2. This also means that the oil sector contribution to the GDP dropped to 8.19 percent, from 8.26 percent recorded in the second quarter of this year. Manufacturing is one of the sectors affected by recession due largely to the drop in exchange rate, which has made inputs more expensive.
Altogether, the negative growth in three quarters in quick succession is a grim verdict on the economy. The ominous signals contained in the NBS report should be a wake-up call for an immediate retooling of the economy. It is a fact that Nigeria’s economy risks sliding into depression if urgent steps are not taken to get it back on track.
As we have noted in recent editorials, the contractions in the economy, which have persisted for sometime, should serve as a rude awakening for the managers of our economy to design realistic strategies that will drive economic growth. The blame game, which has consumed government’s efforts to rescue the economy, should stop. Living in denial as some government officials have indulged themselves in, is not an option. The truth is that our country is in perilous times and most Nigerians are groaning under this disheartening economic situation.
We believe that the way forward is for government to address all the structural challenges that hamper economic growth. These include the current forex scarcity that has forced many industries to close shop, resulting in loss of jobs, high inflation rate of 18.3 percent, and rise in prices of essential food items.
Though the strength of the fiscal policy rests on the ability of the Federal Government to adjust its spending levels and tax rates to monitor and influence the economy, undoubtedly, the CBN’s monetary policy instruments ought to have a calming effect on money supply and inflation as well as interest rates.
Settling debts owed to local contractors may help stimulate the economy as the MPC suggested. However, the benchmark interest rate of 14 percent fixed by the CBN will do the opposite, discourage borrowing and investment. It will also slow down economic growth.
There is, therefore, need for a robust and more keenly coordinated macroeconomic policy framework that will ginger output growth and stimulate aggregate demand and rein in inflation. While Nigerians eagerly await government’s 4-year economic road map next month, it bears repeating that the beleaguered economy calls for government steadfastness on how to get it out of the woods.