Recession: Nigerians reeling under prolonged economic downturn —Investigation

*No, our economy is recovering fast –Buhari

No doubt, Nigeria is going through one of its worst economic crisis in the past decade. Virtually all areas of the economy are haemorrhaging, challenged by macro and micro issues, such as hyperinflation, poverty, infrastructure deficit, etc.

Indeed, many households are finding it increasingly challenging to survive; they are contending with high food prices and other difficulties.

It is also a tale of woes for manufacturers, who are contending with a number of issues, such as, infrastructure, multiple taxations, unbridled importation, stifling competition against foreign products, Forex, high-interest rate charged by bank, security crisis such as kidnapping, armed robberies, etc.

Indeed, due to a prolonged economic downturn in the country, Nigerians, who are into Micro Small and Medium Enterprises (MSMEs) have bemoaned its continued negative effects on their businesses and livelihood, an investigation by The Daily Times has revealed.

An economic recession is a period of general economic decline; and is typically accompanied by a drop in the stock market, an increase in unemployment, and a decline in the housing market. Even though, financial experts at a point believed that the Africa’s largest economy was experiencing a depression, which is more severe than a recession.

As the scourge of economic recession continues to bite harder in the country, finance professionals are optimistic that the right economic reforms would set the nation for a rebound, as macro narratives change, while re-positioning towards a path of sustainable economic growth.

For example, small business operators, including traders, transporters and petty good sellers have again lamented the incessant poor turnover of sales, which they claimed, had made it difficult for them to sustain their finances and uphold their homes.

Also, one of our correspondents who visited different market hubs in Lagos and Ogun states observed that the situation has gone from bad to worse, as business owners decried inadequate money in circulation, saying that the situation has led to a significant drop in consumption level; as well as decline in the spending power of Nigerians.

Nigerians react

While sharing her experience with one of our correspondents, a trader said, “Let me tell you the truth, a whole lot of us had packed off, even some of us that are still struggling to sustain our businesses are not finding it easy at all.”

Another trader, who gave her name simply as Iya Niyi, and sells pepper at the popular Ile-Epo Market, Agbado-Oke-Odo Local Council Development Area, told our correspondent that even though Ileya (Eid-el Kabir) celebration is fast approaching, turnover of their sales remain poor.

She further explained that the rate at which the price of tomatoes rose up this year is nothing to reckon with, compared to the past years, where turnover sales were very good.

She said, “Between the first quarter through the first six month of this year was really poor, because the price of a tomato basket rose to N20,000, compared to N8,500 the same commodity was sold previously. In fact, we have to shade five pieces of tomato that used to go for N50; now it sells for N200.

She, however, confirmed that prices have in the recent time, gradually reducing, but she wants the Federal Governmentto regulate the price to what to we used to have before, so that they can make decent gains, while ensuring Nigerians get such essential agricultural produce at cheaper rate.

At a market in Shomolu area of Lagos, food stuff sellers also groaned over the effects of the poor state of the Nigeria’s economy, but urged the government to quickly intervene.

“Nigerians are really suffering, money is no longer circulating, the cost of food stuff in the market is really high; imagine we now buy a bag of beans for N48,000 to N50,000, what we normally use to be N28,000 to N30,000.

At the popular Obafemi Awolowo Way, Ikeja, it was a tug of war between a Keke Napep operator and street urchins, popularly called ‘Area Boys’, who were seen fighting after the rider refused to pay a certain amount of money as a daily union fee.

He said, “I had spent a lot of money to get this tricycle working normally, he hadn’t realized the money he spent on it, because that is his only source of income to feed his wife and children and even pay school fees; and he is yet to make enough sales for the day.

Effects on banks

The first half (H1)of 2017 financial statement of some TIER 2 commercial banks have shown that they suffered a whopping total sum of N233 billion, owing to demand higher deposit rate by customers.

Banks’ customers were said to be pressurizing for higher deposit rate against the backdrop of the high-interest rate regime created by the monetary policy of the Central Bank of Nigeria (CBN) in its quest to curb inflation and reduce demand for foreign exchange.

Looking at six Tier-2 banks, namely, Diamond Bank of Nigeria Plc, Wema Bank Plc, Unity Bank Plc, FCMB, Sterling Bank Plc and Union Bank of Nigeria Plc revealed that four of the banks recorded decline in total customers’ deposit during the six months period. The results also revealed that five of the banks recorded decline in current account deposit and four recorded decline in term deposits.

However, five of them recorded increase in their savings’ account portfolio. Total customers’ deposit Wema Bank led the decline in customers’ deposits, losing 10.9 per cent or N31 billion of its total deposit, which fell to N252.7bn at the end of June 2017, from N283.3bn recorded in the preceding half (at the end December 2016, H2 2016).

Unity Bank followed with 10 per cent or N10bn drop to N254bn from N264bn; FCMB recorded 3.7 per cent or N25bn drop in deposits to N633bn at end of June 2017, from N658bn, as at December 31st, 2016; Diamond Bank, on its part, recorded 1.8 per cent or N25bn decline in deposit to N1.39 trillion, as at June 30, 2017, from N1.42 trn as at December 31st, 2016.

However Union Bank recorded 15.3 per cent or N101bn increase in deposits to N759bn from N658bn during the six months period. Similarly, Sterling Bank recorded 4.2 per cent or N25bn increase in deposits to N609bn from N584bn.

Giving a statistical analysis on the economy, the Statistician General of the Federation, Dr. Yemi Kale, in a recent interview, disclosed that barring any further hitches, the economy will be out of recession next year, 2018.
In an interview with the Economic Confidential in Abuja, Kale said noted that, “If all prices do not collapse including Niger Delta crisis, by 2018 we would have recovered.

Speaking on the economic situation currently deviling the nation, Kale said, “It was an extremely difficult period; and we all felt it. I will say that most of the indicators suggest that we are coming out of it.”

“We have not come out of it yet. As if the worst has already happened and it’s a low process of recovery. Now, there is what we call technical recovery as different from the recovery Nigerians would prefer,” he said.

“When you tell somebody, the economy is coming out of recession, they would say what do you mean. After all, prices are still high. Coming out of recession means positive growth. And your positive growth can be plus zero point one (+0.1). That does not mean everything is fine. It technically means you are no longer in negative again”, said Kale.

But in her own view, the Minister of Finance, Mrs. Kemi Adeosun, believed that the Africa’s largest economy is partially out of recession “to an extent.”

“We are out, we’re out to an extent, and we hope that the figures will reflect the fact that we’re out. We shouldn’t focus too much on when what we should focus on is growth. Getting out of recession is not enough, we have to grow and grow aggressively.

“The Economic Recovery Growth Plan, ERGP, has plans that will have us seeing seven or eight percent growth and that is the kind of growth we need for our population growth and I’d like to focus less on when we’ll get out of recession,” Adeosun said in an interview on AIT.

The Minister also added that President Muhammadu Buhari’s administration recovers loot daily.
“I’m confident that very soon we’ll put out updated figures of course recovery changes day to day because on a daily basis, money is being recovered from various places but soon we’ll put out comprehensive figures on that.

Against optimism by the Central Bank of Nigeria (CBN) and the Finance minister that Nigeria is technically out of recession; and that by end of 2017, the largest economy in Africa, would officially exit recession, financial analysts have however expressed cautious optimism that looking at our economic growth rate, we cannot get out of recession this year as projected.

In an exclusive telephone chat, the Managing Director, Cowry Asset Limited, Mr. Johnson Chukwu, said that even if the Nigeria Bureau of Statistics comes up with the Q2 GDP growth figure, 0.1 per cent or 0.2 per cent growth rate for the quarter, which does not really indicate that the economy is on a growth path.

“Remember that our population is growing at about 3 per cent, and you need a GDP growth rate of above 3 per cent to begin improve on the standard of living. So, until we begin to grow at range of about 5 per cent, which even the Federal Government is not even projecting in the next two years.

Also, looking at the ERGP, there is no projection growth of up to 3 per cent in the first two years, even at a marginal positive growth rate; economy is still not in a good shape to adopt further restrictive economy policy.

Looking at the available indices, Nigeria is not coming out of recession until we begin to grow the economy at the range of five per cent and above.

We are not going to see an improve in the living standard, but we if we are growing at 1.2 or 1.0 per cent, the standard of living will continue to deteriorate because the population is growing faster than the economy growth rate. With such development, we are going to see an increased level of unemployment.

Director, Lagos Chamber of Commerce (LCCI), Dr. Muda Yusuf, said, “until we see the growth number from the Nigeria Bureau of Statistic (NBS) before we can probably say that we are technically out of recession but without the figure we cannot say that.

Meanwhile, the hope that the Nigerian economy will exit the current recession has improved further, as the manufacturing and non-manufacturing activities increased in the month of June 2017, despite the decrease in the monetary aggregates.

Manufacturing Purchasing Managers Index (PMI) in Nigeria expanded for the third consecutive month in the year 2017 to attain the highest level since March 2015. The Composite Manufacturing Index (CMI) increased to 52.9 points in June 2017 from 52.5 points in May 2017.

The Composite Non-Manufacturing Index (CNMI) also expanded to 54.2 points in June 2017 from 52.7 points in May 2017, to attain the highest level since December 2014,

The growth in the monetary aggregate was below targets, as the CBN employed tools to tame high inflation rate and stabilise the foreign exchange.

We expect the inflation rate in Nigeria to drop to 15.64% in June 2017 from 16.25% in May 2017. However, the government’s decision on Premium Motor Spirit (PMS) price and electricity tariff still remain downside risks to the path of inflation in 2017.

We do not believe there will be enough justification for the Monetary Policy Committee (MPC) of the CBN to increase interest rate when it meets on July 24-July 25, 2017.

The accretion to the external reserves still significantly depends on the sustained oil production and efforts of the Organization of the Petroleum Exporting Countries (OPEC) and Russia to adhere to the agreed oil output cut till March 2018.

The long-term stability of the foreign exchange rate depends on the conducive domestic business environment; particularly the sustained improvement in infrastructure.

We expect the overall performance of the equity market for July 2017 to be positive, provided quoted companies report strong Q2 June 2017 results.

Yields on fixed income securities may trend marginally lower in July 2017 because of the expectation of lower June, 2017 inflation rate.

Also, the Organisation of Petroleum Exporting Countries, OPEC, released a global growth forecast of 3.4% for 2017, from 3.1% in 2016 in its monthly report for June 2017.

The OPEC asserted that the improving momentum in the global economy from Q1 2017 is expected to continue for the remainder of 2017.

However, President Muhammadu Buhari has said that the economy under his watch, was recovering very fast.

He said that he was pleased with the progress being made on different fronts, such as power, roads, anti-corruption fight, agriculture, solid minerals, Treasury Sinlge Account, etc to rejigs the economy and steer it back on track, in spite of the challenges facing his administration.

Buhari said this on Monday, after receiving briefings from the Minister of Budget and National Planning, Udoma Udo Udoma; his finance counterpart, Kemi Adeosun; and the Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele.

The briefings received by Buhari, who returned from a 103-day medical vacation in London penultimate week ago, lasted over two hours.

According to the President’s Special Adviser on Media and Publicity, Femi Adesina, Buhari was ecstatic that the economy was “looking up after two years of doing yeoman’s job.”

He disclosed that the ministers and the CBN governor updated the President on the improving state of the economy, implementation of the 2017 budget, preparation for the 2018 budget, revenue strategies, combined cost reduction and debt management.

According to Adesina, “a delighted president declared that he was pleased with the progress being made on different fronts.”

He further revealed that the monetary policy strategies and their economic impact were among the issues discussed at the briefing.

He said Buhari reminded the ministers and the CBN governor that reviving the economy was one of the major planks on which the ruling All Progressives Congress, APC, campaign was based.

He added that Buhari urged the government officials to sustain the tempo, pointing out that the main objective of government was to bring succour to Nigerians across all walks of life.

Motolani Oseni, Temitope Omoniyi, Lagos & Mathew Dadiya, Abuja