Despite Weak Economic Indicators in Two Years, Experts Foresee Recovery

BY Obinna Chima

Although major economic indicators have remained weak in the last 24 months with  President Muhammadu Buhari in the saddle of governance, financial market experts have predicted positive growth in the remaining two years of the administration.

The Nigerian economy slipped into recession last year as its Gross Domestic Product (GDP) growth rate fell by 2.06 per cent in the second quarter of 2016.

A former bank Executive Director, Mr. Abdulrahman Yinusa, who spoke in a chat with THISDAY yesterday, expressed optimism that recent reforms in the economy will help stimulate economic activities.

“In economics, there is always the lag effects of policy change. Let’s assume that the first two years have been dedicated to changes in policy and reforms and so the lag effects should be over and we expect the positive effects to be felt.

“Remember that our recession was an oil price induced recession because of the reduction in oil revenue. Now that we are back to the $50 per barrel region and with the level of transparency we have seen in this government, we should have more money to embark on capital project,” he added.

On his part, the Chief Executive Officer, Financial Derivatives Company Limited, Mr. Bismarck Rewane, anticipated a “slow, painful, but also consistent” economic recovery in the next two years.

He explained: “The recovery process has started. But the time between when it starts and when you feel the impact would be long. So, let’s not expect any miracle. It needs a lot of hardwork. Don’t forget the average rate of growth in the past five years before the slowdown was 5.3 per cent.

“At best, even in 2019, you will be lucky to get 2.5 per cent growth and that means you will still be halfway to where you were before. So, it’s going to be a slow but painful recovery.”

Also, the Chief Executive Officer, Cowry Asset Management Limited, Mr. Johnson Chukwu, expressed optimism that there would be reversal in the decline of economic indicators in the second half of the current administration.

“The expected reversal would be policy-induced and also as a result of exogenous factors. The policy-induced segment would come from the government’s decision to come up with an economic plan. Previously, if you recall, for the first half of this administration, there was no defined economic plan. It took the government several months to set up a cabinet.

“Most of the critical economic agencies and parastatals are just having boards. So, we expect more effectiveness in the discharge of the duties of those agencies and parastatals with now fully constituted boards,” he added.

According to Chukwu, the new approach to addressing the Niger Delta issues would ensure sustained improvement in the country’s oil revenue.

The Chief Executive Officer, Asset Management Corporation of Nigeria (AMCON), Ahmed Kuru, believes that the aggressive intervention by the central bank would help stimulate the economy.

“Personally, I support the approach of the CBN. At one point the argument was whether they should devalue or not. But people don’t look back to see what has happened in the past.

“What is happening now is because the price of crude oil is stabilising and so we have more dollars to intervene in the market. For any investor that has long-term view about the Nigerian economy, this is the best time to invest in Nigeria,” he added.

The positive economic projections were largely based on improved economic activities in the country following enhanced dollar supply in the economy, reforms around the Ease of Doing Business as well as the launch of the Economic Recovery and Growth Plan.

While some of the factors responsible for the weakness in the economy in the past two years were as a result of delayed response by the Buhari administration to the structural adjustments needed to avert the GDP slump, others were due to external factors.

For instance, the benchmark Brent crude oil which was at $57.09 per barrel as at May 2015, when this administration took office, has remained soft and currently at $51.32 per barrel as at last Friday.

In addition, inflation rate in the country has worsened, rising by 91 per cent to 17.24 per cent as at April this year, compared with the nine per cent it was as at May 2015.

The country’s external reserves has also improved slightly in the past two years, from $29.1 billion when the president was sworn-in two years ago, to $30.50 billion as at May 25, 2017.

Also, Nigeria’s perennial exchange rate crisis worsened in the past two years such that the naira fell to an all-time low of N525 to the dollar on the parallel market early this year, before the Central Bank of Nigeria (CBN) developed a strategy to halt its slide. The naira exchange rate against the dollar which was at N218/$ on the parallel market when this government took over, now trades at N380 to the dollar. On the other hand, the official exchange rate has been adjusted to N305 to the dollar, from N197 to the dollar when Buhari took over.

Similarly, monetary policy has remained tight in the past two years as the benchmark Monetary Policy Rate (MPR) which was 13 per cent two years ago, is currently at 14 per cent.

The Nigerian stock market has also been struggling as findings show that at N10.048 trillion as at Friday, the market capitalisation is N1.611 trillion below the N11.659 trillion it was when the president took over.