By EMEKA OKOROANYANWU
NIGERIA’S economy is on a progressive slip downhill and this should be of great concern to everybody. All the indices seem to have gone haywire. Last week, the naira, once the nation’s pride, nose-dived further in both the parallel and inter-bank markets. The local currency went down to an all time low of N375 to US$1 at the parallel market on Thursday and crossed the N300 to the dollar mark at the inter-bank market due to dollar supply shortages. Inflation rate for June 2016 is a huge 16.5 per cent, an 11-year high.
This is against the backdrop of an official announcement by the Minister of Finance, Mrs Kemi Adeosun last week, acknowledging that the economy was progressing into recession. Central Bank of Nigeria (CBN) had earlier come out with this verdict. Another scary doom prophecy came Wednesday last week from the International Monetary Fund (IMF) which disclosed that the economy was likely to contract by -1.8 per cent this year. This is against the international lenders April 2016 growth forecast of 2.3 per cent for Nigeria. It also reduced next year’s growth projection from 3.5 per cent to 1.1 per cent. Nigeria’s Gross Domestic Product (GDP) growth contracted to -0.36 per cent in the first quarter of this year compared to 2.11 per cent in fourth quarter of 2015.
The CBN two weeks ago came out with the report that Purchasing Manager Index (PMI) for June showed a decline in economic activities in the country with manufacturing sector production level, new orders, employment level, raw material and inventories decelerating at a very fast rate.
The report also indicated that the non-manufacturing sector did not fair better as business activity, new orders and employment level slowed down at a faster rate while raw materials inventories declined at a slower rate.
According to the apex bank, the manufacturing PMI dropped to 41.9 index points in June 2016, as against 45.8 points in the preceding month. The composite PMI for the non-manufacturing sector recorded decline for six consecutive months as the index dropped to 42.3 points, showing a faster decline than in the previous month of May.
Unemployment is at a nerve-breaking level while food prices have gone beyond the reach of the poor, even as local and international debts are climbing higher.
All these miseries are being poured on Nigeria because crude oil, once the country’s poster commodity has suffered massive setbacks both in production and price level.
Analysts agree that something urgent has to be done to resuscitate the economy, with many calling for a Marshal Plan, something akin to the treatment given to the economy of Germany after the second World War.
What is suffocating the economy is nothing but paucity of foreign exchange, caused by the fall in the international price of crude oil and the recent onslaught on oil pipelines and fields by Niger Delta Avengers.
However, one way of tackling the crisis is for the Federal Government to seek other sources of generating foreign exchange. It is not enough for the government to trumpet nonexistent efforts it claims to be making to diversify the economy, while on ground, nothing seem to be happening.
Government’s economic managers should begin to think out of the box in order to bring lasting solutions to the myriads of problems plaguing the economy. Government should go beyond parochial partisan and ethnic interests and set up an economic team comprising of eminently qualified Nigerians from both the private and public sectors to act as a think tank on the economy. The team should come up with practical answers to the country’s numerous economic woes. Government should also enunciate the right policies and implement them properly.
Some financial analysts are of the opinion that a way out of the quagmire is for government to pour money into the economy. This is the view of the Director -General, West African Institute for Financial and Economic Management, Professor Akpan Ekpo. He said “the economy is in recession, what we need now is a robust fiscal policy. Government has to spend, pour more money into the economy, not just on capital projects. The recession is a special type, it has effects on both the supply and demand sides, so the way to solve that is massive government capital and recurrent expenditure. Monetary policy will not be effective.” He, however, expressed the fear that the country may not have enough money to inject into the economy. This has given rise to a suggestion that the country should create a conducive environment for Nigerians in the Diaspora to be involved in the sourcing of foreign exchange for use at home.
This view tallies with the current plan by the government to borrow up to $10 billion offshore from the third quarter of this year to help make up the budget shortfall heightened by massive oil price slump.
The Minister of Finance last week intimated reporters of government’s plan to borrow offshore. She said “we have been borrowing largely from the domestic market,because we needed to get the exchange rate sorted out to enable us to borrow from the international market. The international borrowings will begin to come in Q3.” Government said it wants to change the balance of its debt portfolio so that 40 per cent of its borrowing could come from offshore lenders, compared with 16 per cent now. It also wants to extend the average maturity of its debt profile.
Adeosun met international investors in June on a non-deal road show in London as Nigeria explored fund-raising options to finance its budget deficit. This is cheery news, but government should exercise great caution while plunging into the murky external borrowing terrain, a road the country has passed before. All hands, however, should be on deck as Nigeria grapples with this economic asphyxiation of a kind.