The Statistician General of the Federation, Dr. Yemi Kale, Thursday reiterated that economic recovery was a gradual process, stressing that Nigerians would not feel the impact of the countryâ€™s exit from the recession overnight.
Speaking in an interview on ARISE News Channel, the broadcast arm of THISDAY Newspapers, the National Bureau of Statistics (NBS) boss noted that the first step to come out of an economic recession was to halt the contraction, which the nation has been able to achieve.
After contracting for five consecutive quarters, the Nigerian economy exited the recession in the second quarter of 2017, as data on the countryâ€™s gross domestic product (GDP) growth rate released by the NBS Tuesday showed that the economy grew at 0.55 per cent in the second quarter (Q2) of 2017.
However, some Nigerians have continued to criticise the NBS report, saying they were yet to feel the impact of the economic turnaround.
But Kale who took his interviewers on ARISE News Channel through reasons why the nation was able to reverse the contraction, however, stressed that the GDP growth attained in the second quarter was still fragile.
According to him, the economy started slowing down from six per cent, before it slumped to five per cent, and continued spiraling downwards.
â€œNobody was paying attention then. The numbers are there. From five per cent it went to three per cent, two per cent and down to negative. It has been happening for a while, but nobody was paying attention.
â€œSo, the same way, the recovery will be a gradual process. The first step is to arrest the decline. Once you stop the slump, then you can now build on it. That is the stage we are in now. It doesnâ€™t mean that things are now alright.
â€œLook at manufacturing, during the recession, employers laid off workers, they cut down on advertisement and in the process the advertising companies lost revenue, sacked staff and cut back on other services,â€ he pointed out.
According to him, the country exiting the recession was based on 46 different economic activities. In those 46 activities, he said some grew while some contracted.
Shedding more light on how the NBS arrived at its data, Kale said when the entire sectors were aggregated total output came to 0.55 per cent.
He explained: â€œIt does not mean that the entire economic activities were negative. Of the 46 economic activities, 21 still remained negative which suggested that everything was not yet well. But the other 25 that went positive were enough to push up the overall figure. So, that was basically what happened.
â€œSo the man on the street would say he didnâ€™t feel the growth, but there is a reason for that: the broader sectors that drove the growth were agriculture and industry. Industry is basically mining, manufacturing and crude oil production.
â€œWhether I have money in my pocket or not, does not stop the oil from flowing from the Niger Delta. So, when you say oil production grew the economy, the man on the street will not feel it because it has nothing to do with his pocket,â€ he explained.
He noted that improvement in dollar supply to manufacturers arising from the growth in the countryâ€™s external reserves as well as improved crude oil production, contributed to the economic expansion.
â€œManufacturers need dollars and to get dollars which depends on the forex reserves of the central bank and the forex reserves of the central bank is dependent on oil prices and oil production.
â€œSo, when oil prices go down, oil production goes down and the amount of dollars available reduces, this impacts on manufacturers negatively, because they go to the black market to buy at higher rates and their cost of production goes up.
â€œAs their cost of production goes up, they may have to pass the cost on to consumers and as the cost of their goods go up, peopleâ€™s purchasing power goes down, because they canâ€™t purchase the same amount of goods they used to purchase. They start purchasing less and because of that and producers only produce what they can sell.
â€œSo, once producers see that members of the public are no longer buying their products, they reduce production and reducing production means you are cutting jobs because you donâ€™t need that many people to produce anymore.
â€œSo, they lay off a lot of people and the more you lay off people, less people have income to spend in the economy, so they buy less and then it continues in that way,â€ Kale said, as he tried to explain what economists term the cyclical flow of income, in a manner that was relatable.
According to him, as soon as dollars started becoming available, the reserves of the central bank started increasing, adding that because the Niger Delta disruption was reversed, crude oil production also improved.
â€œThe CBN started releasing dollars to manufacturers and then it pulled back their cost and they now gradually started hiring more people,â€ he added.
Kale emphasised that a recession was purely about negative output.
â€œIt is not about poverty, it is not about unemployment. It is not about the prices of goods in the market and about the health or education system. These are obviously related, but in terms of when you say an economy is in or out of a recession, those things are not taken into consideration.
â€œIn the computation of the GDP, they are not considered. They matter, but as a policymaker, you have to understand what the different indicators are talking about.
â€œIf somebody wants to take care of inflation, you look at the inflation report and if you want to look at output, you look at the GDP report.
â€œAs a policymaker, you canâ€™t be mixing these things up. You have to understand what each of these items mean and how they relate to each other.
â€œBased on international standards and methodology used all over the world, this is what a recession means regardless of whether the man on the streets does not believe. We report based on international conventions and standards,â€ he said.
He pointed out that there is a link between manufacturing, output and the oil sector, adding however that agricultural output in the country is immune to oil production and prices.
â€œIf you look at the numbers, we came out of recession because the oil sector recovered, manufacturing recovered and agriculture maintained its growth.
â€œHowever, there are sectors that are not affected by dollars like manufacturing. Throughout 2016, if you noticed, agriculture maintained its growth. People in that sector donâ€™t care what is happening to the exchange rate. They produce their rice and others,â€ he added.