Economy

NBS report on Nigeria’s economy pits Buhari, group. Presidency: No cause for alarm, PLAC: it’s ominous

By Akanimo Sampson

President Muhammadu Buhari’s administration and a leading civic group, Policy and Legal Advocacy Centre (PLAC), are not on the same page on the second quarters 2020 Gross Domestic Product (GDP) estimates released by the National Bureau of Statistics (NBS).

Nigerian President Muhammadu Buhari.

While the Buhari administration says the data agency’s report is relatively far better than many other countries recorded during the same quarter, PLAC tends to disagree, harping that the Monday report by NBS showing a shrink in Nigeria’s GDP by 6.10% year-on-year ‘’is ominous for the economy’’.

President Buhari’s Special Adviser on Media and Publicity, Femi Adesina, in a statement in Abuja claims that in real terms, the NBS report which ended a three-year trend of low but consistently improving positive real growth rates recorded since the 2016/17 recession.

‘’Consequently, for the first half of 2020, real GDP declined by –2.18% year-on-year, compared with 2.11% recorded in the first half of 2019. The overall decline of -6.1% (for Q2 2020) and -2.18 per cent (for H1 2020) was better than the projected forecast of -7.24% as estimated by the NBS.

‘’The figure was also relatively far better than many other countries recorded during the same quarter. Furthermore, despite the observed contraction in economic activity during the quarter, it outperformed projections by most domestic and international analysts.

‘’It also appears muted compared to the outcomes in several other countries, including large economies such as the US (-33%), UK (-20%), France (-14%), Germany (-10%), Italy (-12.4%), Canada (-12.0%), Israel (-29%), Japan (-8%), South Africa (projection -20% to -50%), with the notable exception of only China (+3%).

‘’The government’s anticipation of the impending economic slowdown and the various initiatives introduced as early responses to cushion the economic and social effects of the pandemic, through the Economic Sustainability Programme (ESP), contributed immensely to dampening the severity of the pandemic on growth’’, Adesina said.

Continuing, he said on the fiscal side, a robust financing mechanism was designed to raise revenue to support humanitarian assistance, in addition to special intervention funds for the health sector, pointing out, ‘’adjustments to the national budget as well as emergency financing from concessional lending windows of development finance institutions were critical in supporting governments’ capacity to meet its obligations.’’

On the monetary side, he said a moratorium on loans, credit support to households and industries, regulatory forbearance and targeted lending and guarantee programs through NIRSAL were some of the measures implemented in response to the pandemic during the second quarter.

‘’It is equally worth noting that since the start of the third quarter, the phased approach to easing the restrictions being implemented centrally and across states have resulted in a gradual return of economic activity, including the possibility of international travel.

‘’More importantly, the anticipated health impacts of the pandemic have been managed without overwhelming the health infrastructure, which would have further compromised the ability to re-open the country to travel, commerce and international trade.

‘’Indeed, this has provided greater confidence and ability for authorities to initiate the conduct of nationwide terminal examinations and resumption of the next academic year. It is anticipated that while the third and fourth quarters will reflect continued effects of the slowdown, the fiscal and monetary policy initiatives being deployed by the government in a phased process will be a robust response to the challenges posed by the COVID-19 pandemic.

‘’Furthermore, as the country begins the gradual loosening up of restrictions, and levels of commercial activity increase by people returning to their various livelihoods and payrolls expand, it still remains imperative that all the necessary public health safeguards are adhered to so the country avoids an emergence of a second wave’’, Adesina says.

But for PLAC, ‘’one more quarter of a shrink and the country will descend officially into recession. This is an expected trajectory and has set Nigeria on a worrying negative path.

‘’Although most economies around the world have taken a hit from the ravaging impact of the global coronavirus pandemic, there are concerns that Nigeria’s economic crisis could be on a long path of uncertainty’’, the group says.

According to PLAC on its website, ‘’global economic crisis has slowed and severely reduced crude oil production and export, around which Nigeria’s economy revolves. Government’s claim to implementing a policy of diversification of the economy has fallen flat without any evidence of success.

‘’Massive debts have piled up, including loans from the Chinese and other creditors. The cost of servicing the loan is massive, and it would appear that the country has no money to see it through the crisis.  The promise by the International Monetary Fund (IMF) to make available a loan of $3.4 billion is encountering stumbling blocks.’’

The IMF, it goes on, had listed conditions that Nigeria must fulfill to enable it access the loan. Conditions include the Nigerian government scrapping multiple exchange rates used for its financial dealings which has bred corruption; removal of subsidy on petroleum products and reform of the oil sector, including passage of a Petroleum Industry Bill (PIB).

‘’Nigeria claims it has removed subsidy. Yet the state-owned Nigeria National Petroleum Corporation (NNPC) continues to be the sole importer of petroleum products into the country, with prices set by it in a manner that is not transparent.

‘’The government’s half-hearted attempt to unify the exchange rates has seen currency values tumble by nearly 30 per cent. The NBS report of a decline in Nigeria’s GDP may not have come as a surprise to many. Nigeria had since begun to experience an economic downturn in 2019.

‘’However, this was compounded by the COVID-19 pandemic and the implementation of a nationwide lockdown, which meant that many commercial activities were halted or drastically minimised.  The Nigerian economy has been growing at a slow pace since its last recession in 2016 but has just witnessed its biggest contraction four years later, owing to the pandemic.

‘’Nigerians worry over what appears to be the absence of a concrete strategy to boost economic growth, especially in the midst of the pandemic, considering that prior to COVID-19, government policies were not creating tangible positive economic impact.

‘’The country continues to service debts with a chunk of its revenue, while seeking to generate revenue by placing additional levies and tax burdens on citizens. The extent of the impact of an impending recession is dependent on the response of the Nigerian government. On the streets, citizens are groaning in pain.

‘’Unemployment levels have reached 40 per cent, as enterprises that were already suffering from the impact of the hostile business environment in the country were forced out of business or constrained to lay off workers following the incidence of the pandemic’’, PLAC says.

PLAC, founded in 2009, is however an independent, non-partisan, non-profit capacity building organisation that works to strengthen democratic governance and citizens’ participation in Nigeria.

Through broad-based technical assistance and training, PLAC works to promote citizens’ engagement with government institutions and to advocate for legal and policy reforms and promote transparency and accountability in policy and decision-making processes.

At the core of its programming is a deep commitment to increase legislative advocacy, promote transparency and good governance, support and promote electoral reforms, enhance citizen’s access to public policies and advance anti-corruption campaigns.

PLAC has worked and evolved into a foremost and leading institution with capacity to deliver cutting-edge research, policy analysis and advocacy.

Categories: Economy, Nigeria

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