Government needs to focus on the fragile economy
The Nigerian Economic Summit Group (NESG) last week released its latest report titled “Looking Inwards: Will Nigeria tread the path of Economic Recovery and Growth in 2017?” The prognosis did not look good. Aside highlighting the fact that the real Gross Domestic Product(GDP) contracted by about 1.6% last year, the report also stated that our national trade balance turned negative to N823.7 billion with deficit balance of payments to the tune of N1.8 trillion. According to Dr. Doyin Salami, chairman of NESG board on research and publication, “if we don’t come out of recession properly, we may go back into it.”
While it is good for the NESG to worry about the future, the current challenge is that the economy is on a tailspin. The dollar exchange rate has touched N500 on the parallel market while the Central Bank of Nigeria (CBN) makes allocation to some selected people at N305, with all the dire implications. Meanwhile, commercial banks have virtually stopped lending because of high interest rates; inflation is chasing 20 per cent while documented unemployment is growing every day. Foreign inflows have continued to dwindle and the stock market is on a downward spiral.Yet those who dare to speak out are attacked by government officials.
To compound the problems, at a period energy alone accounts for about 30 per cent of the operating cost of businesses and running individual households, the sector is in near comatose. Chairman of Transcorp Group and United Bank for Africa (UBA), Mr. Tony Elumelu last week painted a rather gloomy picture of the power sector that should worry the authorities. “Transcorp Power Holdings is owed almost N50 billion,” he said. “When we put in the invoice for this month, we should be owed almost N54 or N55 billion. How do you survive in business like this? Other GenCos I know are actually dying. The truth is that Transcorp Power, as a key operator in the sector, is struggling. And if we are struggling, you can imagine what others are going through”.
Unfortunately, there is no coherent response from the federal government to any of these challenges. Even the All Progressives Congress (APC) national leader and former Governor of Lagos State, Senator Bola Tinubu has had to come out publicly to criticise the monetary policy of the President Muhammadu Buhari administration. “To move closer to the overarching vision, we now have to shift primary focus to the economic front,” said Tinubu who added: “The desired economic restructuring will require a change in economic mindset and strategy. We must avoid the nostrums of mainstream orthodoxy that say government deficits are always bad.”
What the foregoing suggests is that except there is a quick intervention with measures put in place to address the current drift in the economy, the GDP will tank. The consequences of such realities will definitely spread to other areas of national life. Insecurity could worsen as unemployment and job losses lead many idle young hands into crimes of desperation. Labour agitations and strikes will increase as more states get into trouble with payment of salaries. Recourse to separatist tendencies, blackmail, militancy and transactional kidnapping could also heighten.
For sure, the reversal of the looming recessional avalanche would require a combination of fiscal and monetary creativity. Yet the economic challenges we face in the country today cannot be tackled with the ad-hoc approach being adopted by the current administration. At the risk of sounding repetitive, we reiterate the need for the Buhari administration to institute a team of economic experts that will come up with policy prescriptions to lead the nation out of the current challenges.