PRESIDENT Muhammadu Buhari yesterday said that the real
impact of the country exiting recession will be better felt when ordinary
Nigerians experience a change in their living conditions...
The President’s
reaction came as the Nigerian Economic Summit Group, Lagos Chamber of Commerce
and Industry, LCCI and other stakeholders yesterday said that the economy is
still performing below its potential and tied to the oil sector, in spite of
the second quarter Gross Domestic Growth, GDP, report which indicated that the
country is out of economic recession. Recession cartoon Speaking on the
country’s exit from recession, President Buhari, who received the President of
Niger, Alhaji Mahamadou Issoufou, at his country home in Daura, Katsina State,
expressed excitement on the cheering news that the country is out of recession,
adding that the real gains should be improved conditions for Nigerians. In a
statement signed by the Senior Special Assistant to the President on Media and
Publicity, Garba Shehu, the President, fielding questions from, newsmen said:
“Certainly, I should be happy for what it is worth. I am looking forward to
ensuring that ordinary Nigerian feels the impact.” President Buhari commended
all the managers of the economy for their hard work and commitment, stressing
that more work needed to be done to improve the growth rate. He also said:
“Until coming out of recession translates into meaningful improvement in
peoples’ lives, our work cannot be said to be done.” Calling on the government
to expedite action on implementation of the various measures designed to reform
the economy, they insisted that the 0.55 per cent growth rate announced for the
second quarter by the National Bureau of Statistics (NBS), though a good
development, was marginal without any impact on the businesses and welfare of
Nigerians. Economy still fragile — FG Meanwhile, the Federal Government stated
that the Q2 GDP report shows that economic growth is fragile and vulnerable to
shocks. Special Adviser to the President on Economic Affairs, Dr. Adeyemi
Dipeolu said in a statement that though the exit is a welcome development, the
economic growth remained fragile and vulnerable to exogenous shocks or policy
slippages. Dipeolu in a statement signed by the Senior Special Assistant to the
President on Media and Publicity, Office of the Vice President, Laolu Akande,
said the growth in the Gross Domestic Product, GDP, called for cautious
optimism, especially as inflation has continued to fall from 18.72% in January
2017 to 16.05% in July 2017. He said: “Overall, the end of the recession is
welcomed but economic growth remains fragile and vulnerable to exogenous shocks
or policy slippages. ‘’Accordingly, it remains essential to intensify efforts
going forward on the implementation of the ERGP to achieve desired outcomes
including sustained inclusive growth, further diversification of the economy,
creation of jobs and improved business conditions.” Akande in the statement
said that the President Mohammadu Buhari-led administration “welcomes news of Nigeria’s
exit from recession with cautious optimism and will continue to drive Nigeria’s
economic growth by vigorously implementing the Economic Recovery & Growth
Plan launched earlier this year by President Muhammadu Buhari.” The Special
Adviser to the President on Economic Affairs while commenting on the economic
performance of the country as published by the Bureau of Statistics for the
Second Quarter of 2017 said: “The figures released by the National Bureau of
Statistics for the second quarter of this year (Q2 2017) show that the economy
grew in Q2 2017 by 0.55% from -0.91% in Q1 2017 and -1.49% in Q2 2016. This in
effect means that the Nigerian economy has exited recession after five
successive quarters of contraction. “This positive growth is attributable to
both the oil and non-oil sectors of the economy. Growth in the oil sector which
has been negative since Q4 2015 was positive in Q2 2017. It rose by 1.64% as
compared to -15.60 in Q1 2017, an increase of up to 17 percentage points.
‘’This improvement is partly due to the fact that oil prices which have
improved slightly from the lows of last year have been relatively steady as
well as the fact that production levels were being restored.” On sectoral
basis, he explained that, “The non-oil sector grew by 0.45% in Q2 2017, a
second successive quarterly growth after growing 0.72% in Q1 2017. This
increase which was not quite as strong as it was in Q2 2016 reflects continuing
fragility of economic conditions. However, given that nearly 60% of the non-oil
sectors contribution to GDP is influenced by the oil sector, growth in the oil
sector will help boost the rest of the economy. “The positive growth seen in
agriculture when the rest of the economy was contracting was maintained at
3.01% which is encouraging especially if seasonal factors are taken into
account. Manufacturing growth was also positive at 0.64% and although lower
than the previous quarter’s growth of 1.36%, it was a noticeable improvement
over the -3.36% experienced in Q2 2016 and a continuation of the turnaround of
the sector. Solid minerals which remain a priority of the Administration also
continued to grow and in Q2 2016 by 2.24%. “Overall, industry as a whole grew
by 1.45% in Q2 2017 after nine successive quarters of contraction starting in
Q4 2014. This positive development was somewhat overshadowed by the continued
decline in the services sector which accounts for 53.7% of GDP. Nevertheless,
electricity and gas as well as financial institutions grew by 35.5% and 11.78%
respectively in Q2 2017. Cautious optimism “The GDP figures give grounds for
cautious optimism especially as inflation has continued to fall from 18.72% in
January 2017 to 16.05% in July 2017. Foreign exchange reserves have similarly
improved from a low of $24.53 in September 2016 to about $31 billion in August
2017. In the same vein capital importation grew by 95% year-on-year driven by
portfolio and other investments but also notably by foreign direct investment
which increased by almost 30% over the previous quarter. “Foreign trade has
also contributed to improving economic conditions with exports amounting to
N3.1 trillion in Q2 2017 while imports which increased by 13.5% amounted to
N2.5 trillion in the same period. The overall trade balance thus remained
positive at N0.60 trillion. “Unemployment however remains relatively high but
job creation is expected to improve as businesses and employers increasingly
respond more positively to the significantly improving business environment and
favorable economic outlook. “Besides, as key sectoral reforms in both oil and
non-oil sectors gain traction, the successful implementation of ERGP
initiatives such as N-Power and the social housing scheme will boost job
creation. “Food inflation also bears watching as it has remained quite high and
volatile due mostly to high transport costs and seasonal factors such as the
planting season. Investments in road and rail infrastructures, increased supply
and availability of fertilizers and improvements in the business environment
should contribute to the easing of food prices.” Makarfi to Nigerians:
Statistics is not reality However, the Peoples Democratic Party described the
Q2 GDP report as mere statistics that contradicts reality. Reacting to the
development, Peoples Democratic Party, PDP, urged Nigerians not to see every
statistics as an indication of reality, following Tuesday’s report by the
National Bureau of Statistics (NBS) that the nation has exited the economic
recession that worsened living conditions in the past two years. In an exclusive
chat with Vanguard on the issue, Chairman, National Caretaker Committee of the
PDP, Senator Ahmed Makarfi, said it was the wish of every Nigerian for the
country to overcome the current hardship, warning however that statistics
differs from reality. “PDP is not praying for the country to be in recession.
Statistics may indicate one thing, but reality is different,” he said.
Makarfi’s position is not out of tune with that of other Nigerians struggling
to eke out a living in the past few years following the crash in the price of
crude oil in the international market. ‘Economy running below par, still tied
to oil’ Meanwhile, the Nigerian Economic Summit Group, Lagos Chamber of
Commerce and Industry and other economic operators have said the economy was still
performing below its potential and tied to the oil sector. According to the
NESG President, Mr. Bukar Kyari, “We just need to work on all the policy issues
for example the Ease of Doing Business, so as to restore confidence in the
economy. “We have to take it one step at a time because given the level of
unemployment in the country, economic growth has to be in double digit before
the impact can be felt.” Director- General, Lagos Chamber of Commerce, LCCI,
Mr. Muda Yusuf on his part said: “We are happy that technically, we are out of
recession, and the advantage of this is that it has positive signal effects,
especially to investors, that the economy is now recovering very well. The
recovery can enhance the interests of investors in the Nigerian economy that we
are now an economy that is out of recession. “Second, it is also an indication
that some of the policies that have been put in place by government are also
having some positive impacts, and it could also be a pointer that investors’
confidence is also picking up gradually. “So, those are the positive values
that the news of our being out of recession brings, but if we talk about the
operators in the economy, currently, it may not mean much; some of them may
even feel that it’s an academic thing but what I think we should appreciate is
that technically, we are out of recession.” In his reaction, Managing
Director/Chief Executive, Financial Derivatives Company Limited, Mr. Bismarck
Rewane said that though the growth is marginal, returning to positive GDP
growth is a major breakthrough but stressed that the Nigerian economy can do
much better if more credit is extended to the private sector. He said: “The
impact is still marginal because your population is growing at 3 per cent and
your GDP is growing at 0.5 per cent. In other words you are making 14,000
children every day, if we are to use the output to feed those children we will
only be able to feed 3000 of those children. But what we are doing now is that
we are taking from other children to feed those 14, 000 children. “But to be
honest with you, it is a major breakthrough that we are coming out of positive
territory after five quarters of negative growth. But look at what has happened
to South Africa. After two quarters of negative growth, they are back at 2.3
per cent.” Exit from recession shows Buhari‘s working —Adesina Also, Special
Adviser to the President on Media and Publicity, Femi Adesina, said the
cheering news that the country has exited from the economic recession that
affected every facets of the economy was an indication that the government was
active to its responsibilities to the citizenry. Adesina, who stated this when
he received a civil society group, Centre for Civil Society and Justice that
was on a solidarity rally in Abuja, said for the country to exit recession was
a clear testimony that President Muhammadu Buhari’s administration was working
for the progress and prosperity of all Nigerians. “That shows that we have a
government that is working for us. We have a government that is interested in
our welfare. We have a government that is interested in our well-being.
“Recession came due to some mistakes of the past and in just about a year, the
government battled it and today we are officially out of recession and we give
all glory to God.” Nigeria’s fortune still dependent on oil – Capital market
operators According to operators in the nation’s capital market, the exit from
recession in the second quarter of the year was in line with expectation given
that there has been consistent reduction in contraction in the last three
quarters. They opined that growth in the financial services sector was as a
result of rebound witnessed in the capital market as well as the high interest
rate. In his view, Mr. Johnson Chukwu, Managing Director/CEO, Cowry Asset
Management Limited, said though the exit was expected, but the fortune of the
country’s economy is still tied to the oil sector, which led the rebound in the
GDP. He said: “Some of us had actually predicted that Nigeria will come out of
recession in the Q2 this year, which has actually come to pass given the
improvement in the GDP. We saw the contraction reducing over the past three
quarters. So, we expected that given that the contraction was only 0.91 per
cent in the first quarter and one of the things we have always emphasised is
that if we can address the contraction in the oil and gas and mining sectors,
we are going to see rebound in the economy and that is what happened.” “If you
look at the first quarter, the oil and gas sector contracted by 11.64 per cent.
In the second quarter this year, it grew by 1.64 per cent. The oil and gas
sector accounts for about nine per cent of the GDP, but not just accounting for
nine per cent, it has a reflective impact on the GDP. It affects trade, manufacturing,
virtually all the sectors because of the pass through effect of the oil sector
viability. “With the oil and gas sector rebounding to positive from negative
growth, the overall national GDP actually increased by 0.55 per cent. So, you
will want to say that the turnaround in the fortune of the economy was largely
attributable to the oil and gas sector because the though the non-oil sector
grew by 0.45 per cent but that growth was lower than the growth in the first
quarter, which was actually 0.72 per cent. “So, the non-oil sector grew in the
first quarter at 0.72 per cent, but the oil sector contracted by 11.64 per
cent, leading to an overall contraction in the GDP. This Q2’17, the non-oil
sector grew by only 0.45 per cent, whereas the oil sector grew by 1.64 per
cent, reducing the contraction of 11.64 per cent in the first quarter. So, the
fortune of Nigeria’s economy can still be described as tied to the apron of the
oil and gas sector,” Chukwu added. He attributed the improvement in the
financial services sector to the growth in the capital market, saying that
unlike the previous quarter where the capital market recorded a negative
growth, the rebound in Q2 help in lifting the financial services sector. Also
reacting, Mr. Dolapo Ashiru, Head, Stockbroking Services, Lead Capital Plc, a
lot of the rebound has to do with the on-oil component of the GDP. He, however,
stated that the services component is not yet where it is supposed to be and
advised the government to focus more on in the sector. “The rate of growth in
the services sector is still low because the weak purchasing power of
Nigerians,” he said. On the contribution of the financial services sector to
the GDP, he said: “Because of the high interest rate regime we saw that a lot
of banks were very active in placements. They were very active in treasury
operations and foreign transactions due to the liquidity in the foreign
exchange, FX, market in the quarter. Maritime operators insist economy still in
recession Operators in the maritime sector however dismissed the NBS Q2 GDP
report insisting the country is still under recession. The Deputy National
President of the Chartered Institute of Logistics and Transport, CILT, Mr.
Alban Igwe said that he had only received the NBS report and that he was still
studying it. Igwe explained that the statistical report is different from news;
Nigerians will like to know what parameters were used in their assessment of
the economy. He said “We want to verify the parameters used, what has changed
since Nigeria got out of recession. ‘We cannot take what the NBS has said hook,
line, and stinker without asking questions as to the authenticity of the
report”. Similarly, the National President of the Association Nigerian Licensed
Customs Agents, ANLCA, Prince Olayiwola Shittu described the report as
propaganda by government adding that the Nigerians are reeling under recession.
“What indices did the NBS use in getting their findings and conclusion? How can
they sit in the comfort of their offices and say Nigeria is out of recession
when the opposite is the case?” he queried. Shittu said that recession is very
on and that Nigerians are stilling feeling the pang of it. “Schools are
resuming soon and I am sure that some children will not return back to school
because their parents do not have money to pay their fees.” On the contrary,
the Executive Secretary of the Nigerian Shippers Council, NSC, Mr. Hassan Bello
said that the NBS report was a welcome development as the economy is getting
back on its feet. Bello said that indicators have shown that there has been an
increase in the rate of employment and decrease in the inflation adding that
infrastructural provision by the government is ongoing. He explained that Truck
Transit Park, TPP, and the Inland Container Deport initiatives of government
will further boost the economy as these projects will create more jobs
opportunities for Nigerians. Vetiva predicts 3% growth for Q3 GDP Meanwhile
analysts at Vetiva Capital Management Company Limited while commenting on the
Q2 GDP report project 3.0 per cent growth for the third quarter of the economy.
They said: “Whilst the Nigerian economy should persist on a positive growth
path for the rest of the year, we warn that most of the growth will be
superficial, stemming from higher agriculture (from import substitution) and
recovering oil output (from reduced militant activity). Stronger stimulus,
preferably fiscal, is required to resuscitate consumption and propel
medium-term growth. After accounting for the deviations from our estimates, we
project 3.0% growth in Q3’17 (FY’17: 1.1% y/y), from 3.5% y/y previously,
driven by downward revisions to all major non-oil sectors.”
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