The Minister of Finance, Mrs. Kemi
Adeosun, on Wednesday admitted that Nigeria was in its worst possible
time with the Gross Domestic Product figures for the 2016 second quarter
released by the National Bureau of Statistics showing the nation’s
economy now in recession.
The
nation’s external reserves fell by 2.86 per cent to $25.45bn on August
29, 2016, the latest report from the Central Bank of Nigeria showed on
Wednesday. The foreign exchange reserves stood at $26.2bn at the end of
July.
The continued scarcity of
foreign exchange also pushed the naira to an all-time-low of 420 against
the United States dollar at the parallel market.
The development came hours after the economy entered recession, according to the data released by the NBS.
Adeosun said the nation had a long way to go and the government was not deceiving itself that all was rosy.
She
spoke with State House correspondents at the end of a meeting of the
Federal Executive Council held inside the Presidential Villa, Abuja.
“It’s the worst possible time for us. Are we confused? Absolutely not,” the minister said.
She
identified some of the ways the country could get out of recession to
include diversification of the economy and investing in capital
projects.
The minister said, “I think
that we have a long way to go. We’re not confused and we’re not
deceiving ourselves that everything is rosy. It’s not.
“It’s
a difficult time for Nigeria but I think Nigeria is in the right hands
and if we can stick with our strategy… We still have some adjustments to
make. I think we need to make some adjustments in monetary policy.”
In the report released by the NBS, the GDP growth rate slid further from -0.36 per cent in the first quarter to -2.06 per cent.
It
also released the capital importation report for the second quarter,
the unemployment statistics, the inflation rate for July and the labour
productivity report for July.
All the
reports painted a negative picture of the Nigerian economy with
inflation rising to 17.1 per cent from 16.5 per cent; the unemployment
rate increasing to 13.3 per cent from 12.1 per cent and the investment
inflows dropping to the lowest levels at $647.1m from $710m.
In
terms of the GDP, the negative growth rate recorded in the second
quarter of the year is a confirmation of the predictions by the Federal
Government and economists that the country was heading for a recession.
A
recession is defined as a significant decline in activities across the
economy, lasting longer than a few months. It is visible in industrial
production, employment, real income and wholesale retail trade.
The technical indicator of a recession is two consecutive quarters of negative economic growth as measured by a country’s GDP.
In
nominal terms, the report put the country’s GDP at N23.48tn, adding
that this was 2.73 per cent higher than the second quarter of 2015 value
of N22.86tn.
The NBS, in the lastest
report, said, “In the second quarter of 2016, the nation’s Gross
Domestic Product declined by -2.06 per cent (year-on- year) in real
terms.
“This was lower by 1.70
percentage points from the growth rate of -0.36 per cent recorded in the
preceding quarter, and lower by 4.41 percentage points from the growth
rate of 2.35 per cent recorded in the corresponding quarter of 2015.
Quarter-on-quarter, the real GDP increased by 0.82 per cent.”
The report stated that most of the sectors recorded huge declines in their GDP growth rates during the second quarter.
Some
of them are oil, which recorded a negative GDP growth rate;
manufacturing, -1.02 per cent; financial sector, 2.8 per cent;
transport, 6.18 per cent; construction, 3.77 per cent; and real estate,
2.12 per cent.
For the manufacturing
sector, the report said its drop in the GDP performance was as a result
of high operating votes, which impacted negatively on capacity
utilisation.
It said, “Nominal GDP
growth in manufacturing in the second quarter of 2016 was recorded at
negative 1.02 per cent (year- on-year), 1.09 percentage points lower
than the 0.07 per cent recorded in the corresponding period of 2015.
“This
was partly as a result of higher operating costs related to higher
costs of inputs and alternative energy sources. Growth was 1.96
percentage points higher than the first quarter of 2016, when it was
2.98 per cent.”
For the oil sector,
the report said the drop in crude oil production, which was caused by
the activities of militants, adversely affected the growth of the
industry.
It said, “During the period
under review, oil production was estimated at 1.69 million barrels per
day, 0.42 million barrels per day lower from the production in the first
quarter of 2016.
“As a result, real growth in the oil sector was negative 17.48 per cent (year-on-year) in the second quarter of 2016.
“Growth
declined by 10.68 percentage points and 15.59 percentage points
relative to growth in the second quarter of 2015 and the first quarter
of 2016, respectively.”
The report,
however, said the financial and insurance sectors grew at 2.80 per cent
in nominal terms (year-on-year) in the second quarter.
It
added that while the growth rate of financial institutions was
insignificant, the insurance industry recorded a growth rate of 19.55
per cent.
For the real estate sector,
the report stated that its 2.12 per cent growth was lower by 8.57
percentage points than the growth rate reported for the same period in
2015 and higher by 1.51 percentage points compared to the preceding
quarter.
Under the capital
importation report, the NBS said that the economy recorded its lowest
investment level with a total investment inflow of $647.1m in the second
quarter of 2016.
The amount,
according to the bureau in the report released by the Statistician
General of the Federation, Dr. Yemi Kale, represents a fall of 8.98 per
cent, relative to the first quarter.
It added that the decrease was also a decline of 75.73 per cent, relative to the second quarter of 2015.
The
report said the continued decline in the value of investment inflows
into the economy was symptomatic of the difficult period that the
Nigerian economy was going through.
It
added, “The second quarter saw the economy enter into the first
recession during the rebased period, according to the technical
definition of two consecutive periods of decline. This may suggest less
profitable opportunities for investment.
“In
addition, in the second quarter, there was considerable uncertainty
surrounding the future exchange rate policy, which may have deterred
investors. The naira was allowed to depreciate towards the end of the
quarter. These factors were likely to have contributed to the record
decline in capital importation.”
The
report said year-on-year, the investment inflows declined for each broad
type (foreign direct investment, portfolio investment and other
investment).”
Portfolio investment,
it noted, recorded the largest decline of 88.76 per cent year-on-year,
compared with the declines of 37 per cent and 1.22 per cent for foreign
direct and other investments, respectively.
The
NBS also said the unemployment rate had risen from 12.1 per cent in the
first quarter of this year to 13.3 per cent as of the end of the second
quarter.
It said the number of
people unemployed or underemployed increased from 24.4 million as of the
end of the first quarter to 26.06 million persons.
A
further analysis of the report revealed that between the third quarter
of last year and the second quarter of this year, the number of those
unemployed had risen by 4.5 million.
The
report said, “The number of underemployed in the labour force (those
working but doing menial jobs not commensurate with their qualifications
or those not engaged in fulltime work and merely working for few hours)
increased by 392,390 or 2.61 per cent, resulting in an increase in the
underemployment rate to 19.3 per cent in Q2 2016 from 19.1 per cent in
Q1 2016.
“During the reference
period, the number of unemployed in the labour force increased by
1,158,700 persons, resulting in an increase in the national unemployment
rate to 13.3 per cent in Q2 2016 from 12.1 in Q1 2016.”
The
report also said, “In July, the Consumer Price Index, which measures
inflation, increased by 17.1 per cent (year-on-year), 0.6 percentage
points higher from the rate recorded in June (16.5 per cent).
“The
pace of the increase in the headline index was however weighed upon by a
slower increase in three divisions; health, transport and recreation
and culture divisions.
“Energy and
energy-related prices continue to be the largest increases reflected in
the Core sub-index. In July, the Core sub-index increased by 16.9 per
cent during the month, up by 0.7 per cent points from rates recorded in
June (16.2 per cent).”
Meanwhile, the
naira hit an all-time low of 420 against the dollar at the parallel
market on Wednesday as dollar shortage continued to weigh on the
economy.
The reserves had fallen by 0.4 per cent at the end of July, down from the $26.34bn recorded on June 29.
The foreign exchange reserves stood at $26.42bn on May 28; it was down by 9.2 per cent year-on-year.
The
CBN had on June 20 lifted its 16-month-old currency controls and
auctioned about $4bn on the spot and futures market to clear a backlog
of dollar demand, to help boost interbank market trading.
The
global plunge in oil prices has caused the reserves to be depleting
very fast. The development has forced the CBN to introduce foreign
exchange controls, which were abandoned last month.
But
Bureaux de Change operators have raised the hope of a gradual
appreciation of the local currency in the near term as the CBN licensed
11 new international money transfer operators to address the dollar
supply side.
“Depending on the
effective implementation of the central bank’s policy, the appointment
of new international money transfer operators will ensure that banks
will have more dollars to sell to bureaux de change and provide the
needed liquidity in the market,” the President, National Association of
Bureaux de Change Operators of Nigeria, Aminu Gwadabe, told Reuters on
Wednesday.
The Special Adviser to the
President on Economic Matters, Dr. Adeyemi Dipeolu, said the NBS report
had also indicated that the second half of the year would be better.
“Besides
the growth recorded in the agriculture and solid mineral sectors, the
Nigerian economy in response to the policies of the Buhari presidency is
also doing better than what the IMF had estimated with clear
indications that the second half of the year would be even much better,”
he said.
Financial analysts have
called on the Federal Government to declare a national emergency on the
economy to avoid a situation where the current recession will results in
a full blown depression.
Those that
spoke to one of our correspondents in separate telephone interviews are a
former Managing Director,Unity Bank Plc, Mr. Rislanudeen Muhammed; and
the Head, Banking and Finance Department, Nasarawa State University,
Keffi, Uche Uwaleke.
Muhammed said
the government would have avoided the current economic recession if it
had taken the advice given by economists in the earlier part of the
year.
He said, “The economy should be
under a state of emergency as there is a thin line between either
getting the economy out of the current recession and stagflation or
slipping and sinking further into depression.”
In
his comment, Uwaleke, an associate professor of finance, said said the
statistics released by the NBS confirmed the strong correlation between
oil revenue and macro economic indicators for an economy largely
dependent on the revenue from a single product.
No comments:
Post a Comment