PRESIDENT Muhammadu Buhari and his economic advisers should closely study and leverage on Nigeria’s seemingly positive economic outlook for 2018. Key economic indicators suggest that the economy is off to its best start in about four years. Whether the government will take advantage of this bright start is another matter, but it will be in the nation’s best interest for it to do so.
The World Bank, the International Monetary Bank (IMF) and Fitch, the rating agency, have forecast economic growth in 2018 at 2.4, 1.9 and 2.6 percent, respectively, provided the Federal Government leverages on macroeconomic indicators such as higher oil prices, rising foreign reserve and lower interest rates, that are expected to boost the economy this year. These indicators, including the All Share Index of the Nigerian Stock Exchange (NSE), lower inflation rate and the Purchasing Managers Index (PMI), a leading indicator of economic activity and business confidence, are off to their best start since 2015.
For instance, Brent crude prices in the international oil market are hovering around $68 a barrel, one of the highest prices attained since May 2015. This will boost national revenue and improve budget execution, as crude oil export is the main plank on which government revenues for this year are based.
The benchmark for crude oil price in the N8.6 trillion 2018 Budget was fixed at $45 per barrel. The good news is that if the current crude price remains stable, it will boost the external reserve which, on December 22, 2017, stood at $37.92 billion, an increase of 10.1 percent over the November 2017 level, according to figures from the Central Bank of Nigeria (CBN). This is a boost that should strengthen the apex bank’s capacity to stabilise the naira, now at N364/$, against N500/$ at this time last year. The optimism is that the CBN’s continued interventions will sustain the stability of the Naira this year and maintain or even surpass the forecast economic growth, which could in turn improve investors’ confidence in the economy and attract foreign investment.
Experts say that investor confidence has been restored after currency control measures put in place by the CBN reportedly fuelled capital flight two years ago. Also, figures from the NSE showed the All-Share Index at 38,000 points on the last trading day of 2017, with stocks up by 42 percent, its biggest gain since 2013. Stock traders are optimistic there will be a further rise in prices, other macroeconomic indices being equal.
While these indicators raise expectations that the economy is on the rebound after exiting its longest recession in 25 years, we advise cautious optimism. This is because the encouraging signs could be undermined by a number of factors. First, among these, is a possible delay in the passage of this year’s budget by the National Assembly; the way it is implemented and our complicated foreign exchange (FX) market. Any failure by government to narrow budget deficit could also throw spanners in the works.
But crucially, the positive economic growth indicators will be meaningless if they do not improve the well-being of the vast majority of Nigerians who have been experiencing economic woes as they were assailed on all fronts by high unemployment, poverty, high prices of goods and services, unstable power supply, poor wages and irregular salaries.
According to the National Bureau of Statistics (NBS), unemployment rate increased to 18.80 percent in third quarter (Q3) of 2017, from 14.20 percent in the corresponding period in 2016. This is a challenge that the government should speedily address if it wants to confidently claim that it is turning the economy around.
Dividends of democracy will only be felt if there is improvement in the welfare of the people and there is greater ease in doing business, improvement in security and access to credit at reasonable interest rates.