Fare Thee Well, Recession!

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The news of Nigeria exiting recession is quite cheering. It is however too early to celebrate, writes Olawale Olaleye

The federal government’s reaction to the news of the 0.55 growth in the economy, indicating a gradual exit from recession was a safe mode – smart and well-conceived. Not oblivious of the unstable state of the other factors that could help put the economy on a guaranteeing pedestal, the federal government admitted that the nation’s economic growth still remained brittle and evidently susceptible.

This, of course, is in spite of the heartening news from the National Bureau of Statistics (NBS), some days ago, which had claimed that there was a 0.55 per cent growth in the second quarter of 2017, albeit after five consecutive quarters of contraction.

In August of 2016, the NBS released official Gross Domestic Product (GDP) figures for the second quarter of that year and confirmed that the Nigerian economy was officially in recession.

The GDP, according to the statistics released, was contracted by 2.06 per cent in the second quarter of 2016, following a contraction of 0.36 per cent in the first quarter. This, it noted, officially placed Nigeria in a recession, which was defined by two or more consecutive quarters of negative economic growth.

Naturally, the news followed mounting criticism of President Muhammadu Buhari’s ability to manage the economy. And expectedly, Nigerians started to struggle with the cost of basic amenities as prices soared and the value of the naira depreciated significantly, compared to the US dollar.

Indeed, this particular decline in growth was believed to have marked the worst recession in Nigeria’s history since the Ibrahim Babangida regime, when the economy declined by 0.51 per cent and 0.82 per cent in two consecutive quarters in 1987.

It was for this reason that the news of the economy exiting recession was well received by many people but not with justified reservations from different quarters, a majority of which cautioned against premature celebration.
But as a smart administration, the federal government has also sued for caution. Economic Adviser to the President, Dr. Yemi Dipeolu, who called for measured caution, also noted that the economy remained vulnerable to “exogenous shocks or policy slippages” and that it was imperative to intensify the implementation of the Economic Recovery and Growth Plan (ERGP) as well as diversification of the economy to achieve the desired results.

But analysts have contended that although the Nigerian economy might have made a promising turn through an expansionary GDP growth rate in the second quarter (Q2) of 2017, the operators as well as the Nigerian people should put the celebration on hold pending, when the effect is felt in all the relevant areas of the economy, including the informal sector.

There are still concerns that the growth could still stumble – perhaps – especially because of such factors as the nation’s increasing population growth rate of 2.7 per cent, the attendant low income per capita, uncertainty in the oil markets, poor consumer spending as well as high inflation and the unemployment rates.

The Q2 2017 growth rate of 0.55 per cent (year-on-year) was 2.04 per cent higher than the corresponding quarter of 2016 (-1.49%) and higher by 1.46 percentage points over the -0.91 per cent recorded in the preceding quarter, yet 1.95 percentage points lower than the South African economy, which like Nigeria, exited its recession about the same period, growing by 2.5 per cent.

Curiously, Nigeria’s economic recovery was said to have been driven principally by the performance of four major economic activities and they are oil, agriculture, manufacturing and trade. But like Obinna Chima, a reporter on the staff of THISDAY noted, “while the figures showed that the economic contraction appears to have petered out, Nigeria’s per capita income did not grow fast enough, because its population growth rate of almost 3 per cent outpaced GDP growth.

“Of greater significance, the Q2 2017 growth rate was primarily oil sector driven, which should sound a note of caution to the managers of the economy and policy makers, because further growth in the sector would most likely be muted in subsequent quarters, and bring to the fore, the need to implement policies that would drive non-oil sector growth.”

By and large, it is good that the NBS which announced that the nation was officially in recession was the same agency that broke the news of her gradual exit from the web of that economic contraption. Therefore, while it is worthy of note that such a development is happening at all, notwithstanding at the twilight of the Buhari administration, cautiously celebrating this fragile success is germane to seeing how best to properly make a huge capital of this ephemeral success.

That the average man on the street is unable to connect to this economic literature yet makes elaborate celebration uncalled for, because for as long as it does not translate into significant changes in the prices of staple foods and other everyday needs of an average Nigerian with commensurate purchasing power like it was felt when the recession newly began, talk about exiting recession might as well remain in the books.