Nigeria’s economic fragility: Issues, challenges

Reports by the National Bureau of statics (NBS) shows that the country’s economy has sustained growth trajectory in two successive quarters, just as global economy experts say otherwise.

As the February inflation index report by the NBS is expected on Thursday this week, it would further add to the discourse on the strength and weakness of Africa’s largest economy.

Recently released Central Bank of Nigeria’s (CBN) Purchasing Managers’ Index (PMI) report for the month of February, manufacturing and non-manufacturing activities sustained expansion during the month, at 56.3 and 56.1 , respectively, however at a slower pace compared to the month of January.

The February PMI compared with January’s data, strengthens expectation for sustained output growth in the first quarter of 2018;

Irrespective of the reported growth of the Nigeria’s economy, experts have said that the country’s economy remains fragile , as no nation could hinge its growth on factors not controlled by the state, creating anxiety across the system.

Foremost financial analysts and research institution, SBM Intelligence recent report revealed that economic growth of Africa’s most populated country remains fragile, hence the celebrated progress is driven only by increase in oil price, as other economic development indices continue to weaken.

The report released by the body , which took into consideration growth posted by the economy in February 2018, noted that expansion in oil price as indication of growth remains delicate and creating uncertain economic future.

According to the report, the country’s Gross Domestic Product grew by 0.83 per cent in 2017, after shrinking by 1.58 per cent in 2016, which was its first annual contraction in 25 years, “ but the recovery has been fragile since it is largely due to higher oil prices. The International Monetary Fund, said in December that, the economy remains vulnerable’’ said the report.

SBM Intelligence report on the week ahead, emphasized that tying economic development on oil price growth may not be sustainable as key fiscal growth drivers are neglected, a trend which could be doomed with shocks in global in pricing.

“Regrettably, the government of the day is more interested in politicking towards the 2019 elections, than in making real attempts to assuage the suffering of Nigerians. Disaggregated, the much touted recovery is driven by the rebound of oil prices. We agree with the IMF that the government will muddle through for now”, it noted.

It recalled that, the past few years have shown that, the fortunes of Nigeria’s economy are tied to global oil prices, something that is largely out of the government’s control “just as the amount of oil to be produced daily is within the government’s control, adding that Nigeria’s recession set in when oil prices dwindled.

”Now, the economy is out of recession, and the government is praising its “economic policies,” ignoring the fact that the recession ended on the back of increased oil revenues following the rise in both global oil prices, and Nigerian oil production.

“At some point, Nigeria will have to face up to the fact that we cannot continue to hang the entire economic fortunes on a single commodity.”

The report further emphasized that Nigerians are getting poorer despite the country’s slow recovery from recession, and economic reforms are urgently needed, according to the IMF n a new report.

SBM laid credence to the recent report by the IMF, saying that IMF expects the government to muddle through in the medium term, and any progress could also be threatened, if elections next year consume political energy, and resources, the report said.

Since emerging from recession in the second quarter of 2017, Nigerian officials have repeatedly boasted that they have set the economy back on track.

The IMF said in the report that the outlook for growth has improved, but remains challenging. In the report, it identified risks to growth, including additional delays to implementing policies, and reforms ahead of the 2019 elections, security tensions, and oil prices, a fall in which could see capital flows reversed.

IMF recently in a report said that Nigerians are getting poorer and that “coherent and comprehensive” economic reforms are urgently needed in the country.”

The GDP report released by the NBS last Tuesday showed that the economy recorded a growth of 0.83 per cent in 2017.

However, the Bretton Wood institution in its recent report said it expects the Nigerian government to “muddle through” in the medium term, and any progress could also be threatened if elections next year consume political energy and resources. IMF said that “although the outlook for growth has improved, the climate still remained challenging”

The IMF pointed that “Comprehensive and coherent economic policies remain urgent and must not be delayed by approaching elections and recovering oil prices,” IMF said in its annual Article IV review of Nigeria’s economy.

The report pointed that higher oil prices would support a recovery in 2018, but a ‘muddle-through’ outlook is projected for the medium term under current policies, with fiscal dominance and structural constraints leading to continuing falls in real GDP per capita.

IMF noted that, “Further delays in policy action, including because of pre-election pressures — can only make the inevitable adjustment more difficult and costlier.”

The lender restated that Nigeria needs to simplify its complex foreign exchange system adding that the Central Bank of Nigeria (CBN) should stop its intervention activities in the foreign exchange market.

The IMF noted “Moving towards a unified exchange rate should be pursued as soon as possible. (IMF) staff does not support the exchange measures that have given rise to the exchange restrictions and multiple currency practices.”

Also, on the Nigeria economy, the Global anti-corruption watchdog, Transparency International (TI), in its latest report ranked Nigeria low in its 2017 Corruption Perception Index (CPI).

The latest ranking has Nigeria in the 148th position out of 180. The country, according to the CPI, scored 28 out 100, a figure lower than the average in the Sub-Sharan region.

In the 2016 rankings, Nigeria scored 28. In 2015, it scored 26. In 2015 Nigeria scored 25. In 2014, the country scored 27 and 25 in 2013. In 2012, the country’s score was 27 out of 100. According to TI, higher levels of corruption are common in countries where there is media and civil society repression.

former head, international and local cards, Finbank Plc, Akpabio John, reacting to the development in a public social media forum, noted that the statement by the IMF really pointed to the misery Nigerians are going through and should require appropriate approach by the government to address dwindling fortunes of the people, against the government’s tradition of devising moves to jettisoning dissenting voices including the IMF report.

He said, it is not strange to start seeing Nigerian economic analysis countering report of the IMF, ostensibly negating the IMF report.

Bonny Amadi