By Eromosele Abiodun
While Nigeria may not be the only frontier/emerging economy facing economic challenges on the back of the rout in commodity prices, the actions and inactions of the federal government and economic managers have further worsened the Nigerian case, economic experts have said.
A case in point, the experts noted, was the fixation of the official exchange rate by the Central Bank of Nigeria (CBN), which has severely impaired investors’ confidence in the Nigerian economy.
Experts at Eczellon Capital Limited stated this while responding to the numbers released by the Nigerian Bureau of Statistics (NBS), which showed that the Nigerian economy contracted by three per cent in the fourth quarter of 2015.
Similarly, the experts said the various administrative tools deployed by the CBN were reactionary and unstable.
This, they posited, further eroded confidence in the apex bank’s handling of the foreign exchange crisis.
“These inevitably created a vacuum in the nation’s foreign exchange (FX) markets and heightened uncertainties which in turn impaired investment and growth of the Nigerian economy in recent quarters. As the Monetary Policy Committee (MPC) of the CBN sits on the 21st and 22nd of March, it is imperative for the Committee and the apex bank to provide guidance on the management of the nation’s currency. In our view, this should entail the development of a roadmap that would allow for flexibility in the pricing of the naira, preferably through a managed floating system. Added to this would be the need for adequate support from the fiscal authorities to complement monetary policies. This support has largely been absent in recent times. This would invariably attract the needed investment into the country and set the economy on a sustainable growth path,” they said.
Numbers released by the NBS last week had revealed that the Nigerian economy expanded by 2.11 per cent year-on-year (y/y) in the fourth quarter of 2015. The figure was 0.73 per cent and 3.83 per cent points lower than what was achieved in Q3 2015 and the corresponding quarter of 2014. In nominal terms, the value of the economy was put at N25.9 trillion for Q4 2015 and N94.1 trillion for the entire year 2015. The growth numbers came way below expectations and were the lowest since 2011 (post GDP rebasing era).
The poor showing of the nation’s economy in the fourth quarter was largely tied to the woeful performance of the nation’s oil sector in the period under review.
According to the NBS, the sector contracted by 8.28 per cent y/y and 19.10 per cent, quarter-on-quarter (q/q) compared to the 1.06 per cent growth recorded in the third quarter of 2015.
The contraction, it added, was on the back of a 9.0 per cent fall in the average price of crude-oil in the fourth quarter, and a reduction in the nation’s oil production capacity to 2.16mbpd (million barrels per day) from 2.17mbpd in Q3 2015.
“However, the non-oil sector grew by 3.14 per cent y/y, which was 0.09 per cent points higher than what was achieved in the third quarter of 2015, but 3.30 per cent lower than the 6.44 per cent recorded in the similar quarter of 2014. The performance of the sector was driven by activities in Trade, Agriculture, Real Estate, and Information & Communication with quarterly growth rates of 5.86 per cent, 3.48 per cent, 12.59 per cent and 18.47 per cent respectively, “the NBS said.