Ominous signals have continued to emanate from the nation’s economy. These include the rising rate of inflation and the imminent first full blown recession in almost 30 years. The National Bureau of Statistics (NBS), in the Consumer Price Index (CPI) for the month of May, released last Tuesday, said that inflation rate has risen to 15.86 percent, a record six-month high. This is an increase of 1.9 percent from the 13.7 percent recorded in April.

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According to the NBS, the increase in the inflation rate in May when compared to what was recorded in April was a clear indication of an overall rise in general price levels across the economy as all categories that contributed to the Headline index were growing at a faster pace. The report states that the highest increases in May were recorded in road transport, kerosene, fuels and lubricants, as well as vehicle spare parts.
It also shows that Headline index increased by 15.6 percent year-on-year. Electricity tariffs and other energy prices, as a result of the recent removal of subsidy on petroleum products, manifested as key drivers of the core components of the CPI.
Besides, NBS said that imported foods and drawdowns of inventories across the country continued to push food prices even higher. For example, the report noted that the food sub index rose by 14.9 percent in May, up by 1.7 percentage points from rates recorded in April. This, it explained, was driven by higher prices of fish, bread, cereals and vegetable. Urban and rural indices also recorded marked increases for the fourth consecutive month in May. All of these came even as the Central Bank of Nigeria (CBN) released its flexible foreign exchange policy last Wednesday.
Worse still, against the backdrop of the NBS report on rising inflation, came yet another bad news for the economy, that Nigeria faces the more profound economic problem of recession, the first full blown economic stagnation in 29 years. This is the ominous forecast of Mr. Mark Bohlund, chief economist for Africa and the Middle East with Bloomberg.
The recession forecast was as a result of Nigeria’s output contraction to a disturbing 0.4 percent level in the first quarter of this year. The first time Nigeria recorded similar dismal performance was in 1987. The Bloomberg forecast, seen by economists as an independent and true analysis of the Nigerian economy, was said to have used data from the National Bureau of Statistics (NBS), the CBN and other data agencies. All the data reportedly showed that the economy is on the vortex of a storm, at the risk of experiencing its first full-year recession due to the falling production and price of crude oil as well as paralysis in other sectors of the economy.
The gloomy forecast suggests progressive, negative economic growth for the rest of 2016. The report added that “naira devaluation is unlikely to help much”, especially as the “beneficial impact” canvassed by the proponents of devaluation cannot be expected until next year.
The ominous signs show that our economy is at the crossroads. Undoubtedly, for sometime now, all indices have shown a dismal direction for the economy. These include rising rate of inflation, unemployment and depreciation of the naira, which has seen the value of the naira exchanging at over N370 to the US dollar at the parallel market. The Gross Domestic Product (GDP) has also declined, just as productivity has fallen.
What makes the situation precarious, according to economists, is that Nigeria could be heading for stagflation, a combined state of rising inflation and unemployment. If the economic skylines remain unchanged, and if the present low oil prices in the international market do not rebound significantly, Nigerian economy may be in serious trouble with profound negative consequences.
As we have frequently advised, government should urgently constitute a sound and responsive economic team that can design policies to reverse these negative trends and stimulate the economy.
This is the time for government to move fast with its diversification efforts, by activating key sectors necessary for economic growth. The power sector needs to be put right.The government and CBN should put in place robust economic measures that can bolster the economy.