The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed on Monday expressed optimism that the current economic recession officially confirmed by the National Bureau of Statistics (NBS) will be short-lived.
Speaking at the 26th Nigerian Economic Summit organised by the Nigerian Economic Summit Group (NESG) and the Federal Ministry of Finance, Budget, and National Planning, she said the country would emerge from the recession in the fourth quarter of this year or by the first quarter of 2021.
Nigeria, Africa’s biggest economy, entered its second recession in five years in the third quarter of this year as Gross Domestic Product fell for the second consecutive quarter. The GDP contracted by 3.62 percent in Q3 and 6.10 percent in the second quarter.
The Finance Minister went on to state that the new coronavirus-induced recession followed the pattern across the world where many countries had entered an economic recession.
“Let me remind us that before the impact of COVID-19, the Nigerian economy was experiencing sustained growth, which had been improving quarter by quarter until the second quarter of 2020 when the impact of the COVID-19 was felt,” she said.
Ahmed stated that other countries also in recession, including the United Kingdom and the United States, recorded much deeper contraction than that of Nigeria.
According to her, “Nigeria is not alone in this, but I will say that Nigeria has outperformed all of these economies in terms of the record of a negative growth.”
The theme for this year’s Summit is “Building Partnerships for Resilience”. It is expected to be an earnest discourse for public and private sector stakeholders to reflect on the state of the Nigerian economy, rethink the country’s economic fundamentals, deliberate on the impact of the global pandemic, and chart a path to rapid recovery.
The NESG, which is considered the apex platform to discuss economic reforms with the government since 1996, has recently been regarded as a “talk shop”. However, its annual summit to which it continues to invite the government has had no impact at all as economic policy deteriorated under the President Buhari administration, almost reverting completely to 1970s style “commanding heights” philosophy which unequivocally privileged state control over creating markets in which private enterprises compete.
While previous governments at least paid lip service to reforms and championed one or two key reforms, the Buhari administration has explicitly eschewed the sort of market policies the NESG promotes. This has negatively impacted the economy and is believed to have pushed the 2014-2015 oil price fall into a recession. The present government’s policy choices have also left the Nigerian economy poorly prepared for the new coronavirus pandemic.
A turning point for NESG was last September when its Secretariat issued a scathing review of government economic policies, particularly CBN’s multiple interventions in the economy. In an article entitled, “Matters of Urgent Attention” signed by its CEO, Laoye Jaiyeola, NESG pinpointed critical issues that should be urgently addressed such as inappropriate policy clarity with which the CBN has conducted the foreign exchange transactions, loan disbursements (intervention funds) and price-fixing.
The group also flayed the immunity conferred on CBN officials via the ‘repealed and re-enacted’ Bank and Other Financial Institutions (BOFAI) Act 2020 recently passed by both chambers of the National Assembly, and bemoaned the rate distortions caused by some distortions in the liquidity and interest rate management of our financial system.
CBN apparently considered this review as stinging and described it as a “malicious attempt by the group to tarnish the economic recovery program of the apex bank.” The apex bank insisted that beneficiaries of the government’s intervention funds went through an expansive process of Participating Financial Institution (PFI) and additional assessments before funds were disbursed.
The NESG has however refused to back down on its concerns over some of the measures taken by CBN to support the stability of the nation’s financial system and enable faster economic recovery. This trend towards independence and candid review of government policies has been evident in the opening of this year’s Nigerian Economic Summit.
While delivering an address of welcome at the summit, Chairman of the Board of the NESG, Mr. Asue Ighodalo explained that Nigeria is missing out on the $19 trillion invested in negative-yielding assets globally because the country’s investment climate is seen as “unwelcoming, unsafe, and unpredictable.”
He pointed out that for a country in desperate need of development momentum and capital, the events of last month, including the #EndSARS protests, the debilitating riots, and all of the issues that emerged, were bad for morale, confidence, and business.
“Of the $19tn invested in negative-yielding assets globally, none of it has been invested in Nigeria, regardless of what it can earn, because our investment environment has been tagged ‘unwelcoming, unsafe, and unpredictable’,” he said.
Ighodalo harped on the need to strengthen the attractiveness of the investment climate to encourage local and foreign investments given that the country’s fiscal space is currently constrained by low revenues and high debt.
According to him, “The world does not trust our commitment to the rule of law and the impartiality and efficiency of our dispute resolution processes. Our multiple exchange rates, policy flip-flops, and perception of how we react to investors confuse the investing world. These are not labels we can afford particularly now.”
The NESG boss noted that peace and stability remain key investment indicators, asserting that, “We are in competition with many developing countries across the globe for patient capital.”