Udoma: Lack of Policy Implementation Forced Nigeria into Recession

  • No respite as naira weakens to new low of N440/$
  • Naira’s woes creates boom for Presco in Benin

    By Emma Okonji and Obinna Chima

    The Minister of Budget and National Planning, Senator Udoma Udo Udoma has blamed the current economic recession in Nigeria on lack of implementation of policies that were meant to turn around the fortunes of the country. On the same day, the Naira sustained its downswing on the parallel market as it depreciated toanewlowofN440tothe dollar, as against N436 to the dollar the previous day. The minister who spoke at a media briefing in Lagos yesterday, organised by the Nigerian Economic Summit Group (NESG), to announce its preparation for the forthcoming 22nd Nigerian Economic Sum- mit, said Nigeria had fantastic policies that would have created enough liquidity flow in the economy, but that past govern- ments failed to implement the policies because they relied so much on oil money.

    Udoma said the sudden crash in oil prices at international markets, forced Nigeria into recession because there were no other sources of revenue generation for the country. He however assured Nigerians that the country could come out of recession, if the private sector is encouraged to invest in the country. He said one of the ways to encourage private sector investments, is to sell part of Nigeria’s assets to private investors and encourage them to invest good money into the Nigerian economy.

    Aside heavy investments, the minister said encouraging local manufacturing would also help Nigeria to increase exports that would in turn bring foreign currencies into the country.

    “The way to go out of recession is to inject more money into circu- lation and this could be achieved through active participation of the private sector and by encourag- ing the manufacture of ‘Made in Nigeria’ products, which the 22nd Nigerian Economic Summit, is championing and it is billed to hold from October 10-12, 2016, at the Transcorp Hilton, Abuja,” Udoma said.

    According to him, the 22nd Nigerian Economic Summit with the theme ‘Made in Nigeria’, is in line with the President Muham- madu Buhari administration’s commitment to diversify the productive base of the economy away from oil.

    “Our current economic chal- lenges are rooted in our reliance on a single commodity, which is crude oil, whose price has fallen, leading to a drastic fall in our revenues. The Nigerian economy is currently in reces- sion and faced with contracting GDP growth, rising inflation and unemployment rates, as well as declining level of external reserves,” Udoma said.

    According to him, the goal of Nigerian Economic Summit Group (NESG) is to unlock the economic potentials of the non-oil and high-employment sectors, so as to achieve a sustainable inclusive growth that will ensure that the majority of Nigerians become more productive, thereby reducing poverty.

    “We are deliberately working towards diversifying the Nigerian economy by ensuring that non- oil sector drives the economy because this is the sector that contributes the most to GDP, and has more capacity to employ.

    “The basic strategy is to reflate the economy through fiscal stimu- lus and strategic implementation of annual budgets. What this means is that we are geared to strategically spend our way out of recession. Unfortunately, we have not met all our planned expenditures for 2016 due to low revenue out-turns. However, we have ensured that the resources that we release are targeted at priorities that will stimulate activities in the economy,” Udoma added.

    Director, NESG, Mrs. Wonu

    Adetayo, assured Nigerians that the summit would implement resolutions that would be reached at the summit, for the good of the country.

    No Respite as Naira Weak- ens to New Low of N440/$ Meanwhile, the Naira sus- tained its downswing on the parallel market as it depreciated toanewlowofN440tothe dollar yesterday, as against N436 to the dollar from the previous day.
    The development was once more attributed to the perennial scarcity of the dollars in the market.

    However, on the interbank FX market, naira pared some of its previous day loss as the spot rate of the naira climbed to N307.79 to the dollar yesterday, stronger than the N313.07 to the dollar it closed on Thursday.

    This is just as Nigeria’s external reserves fell further to $24.744 billion as of September 22, 2016, from the $24.759 billion it was as of September 21, 2016.

    The situation on the parallel market was attributed to the refusal by banks to sell dollars to Bureau de Change (BDC) operators.

    The President, Association of Bureau de Change Operators of Nigeria (ABCON), Mr. Aminu Gwadabe, had told THISDAY on Thursday that none of his members were able to access dollars from banks as directed by the Central Bank of Nigeria (CBN).

    “As I speak to you, no BDC has been able to access FX since Monday. It is very unfortunate that the liquidity in the market has dried up. That is too bad for the market,” the ABCON boss said in a phone chat with THISDAY.

    The central bank had directed agent banks to approve interna- tional money transfer operators to sell foreign currency accruing from inward money remittances to licensed BDCs.

    Naira Woes Creates Boom for Top Palm Oil Producers In a related development, Nigeria’s ban on importers accessing foreign exchange for certain products is proving a boom for the country’s biggest palm-oil producer as it stokes demand for domestic goods. Profit at Presco Plc, a Benin City-based manufacturer of the edible oil, more than doubled in the six months through June as sales jumped 60 per cent to N7.5 billion ($24 million), according to results published in July.

    The outlook for the next four years is a 10 per cent annual profit growth, its Managing Director, Felix Nwabuko said in an interview with Bloomberg.

    “The policy is bringing a boost to us in the sense that people who would ordinarily have imported, using government foreign exchange, are not doing that anymore,’’ he said.

    Nigeria’s central bank stopped importers of 41 items, including palm-oil and textiles, from ac- cessing official foreign-exchange markets in June 2015. The measure was part of a plan to prop up the naira after it plunged against the dollar following a drop in the price of crude, the country’s biggest source of foreign-exchange.

    A 15-month dollar peg that ended on June 20 caused a foreign currency shortage that contributed to West Africa’s biggest economy contracting in the first two quarters and drove inflation to the highest rate in more than a decade.

    The peg removal led the naira to weaken 37 per cent against the dollar. That hasn’t improved the availability of U.S. currency and most foreign investors are yet to return.

    Presco also faces challenges from the dollar scarcity as it imports fertilisers, chemicals and equipment including spare parts for plants, to increase output. Obtaining foreign-exchange “is tough – some months you don’t get, sometimes you get a little bit of what you need,” Nwabuko said.

    The company, which operates 16,900 hectares (41,761 acres) of palm-oil plantations and sells its output locally, plans to increase the export of palm-kernel oil to Europe, mainly the Netherlands, to enable it access dollars and cushion the impact of the scarcity in Nigeria,” Nwabuko said.

    Exports contributed 5 per cent of revenue from January to August and the company plans to increase palm-kernel crushing capacity to 100 tons daily by 2018, from 60 tons currently.

    Presco doesn’t plan to export palm-oil as “it has enough market locally and price comparison- wise, there is no real advantage in exporting palm-oil out of Nigeria,” the MD said.

    The company plans to increase oil-palm plantation to 31,400 hect- ares by 2021 from 16,900 while it targets to raise palm-oil mills capacity to 120 tons per hour from 60 tons, Nwabuko said.