— PDP Recession still on — Maritime operators
Economy running below par, still tied to oil — NESG, LCCI, others
ABUJA –
PRESIDENT Muhammadu Buhari yesterday said that the real impact of the country
exiting recession will be better felt when ordinary Nigerians experience a
change in their living conditions. The President’s reaction came as the
Nigerian Economic Summit Group, Lagos Chamber of Commerce and Industry, LCCI
and other stakeholders yesterday said that the economy is still performing
below its potential and tied to the oil sector, in spite of the second quarter
Gross Domestic Growth, GDP, report which indicated that the country is out of
economic recession. Recession cartoon Speaking on the country’s exit from
recession, President Buhari, who received the President of Niger, Alhaji
Mahamadou Issoufou, at his country home in Daura, Katsina State, expressed
excitement on the cheering news that the country is out of recession, adding
that the real gains should be improved conditions for Nigerians.
In a
statement signed by the Senior Special Assistant to the President on Media and
Publicity, Garba Shehu, the President, fielding questions from, newsmen said:
“Certainly, I should be happy for what it is worth. I am looking forward to
ensuring that ordinary Nigerian feels the impact.” President Buhari commended
all the managers of the economy for their hard work and commitment, stressing
that more work needed to be done to improve the growth rate. He also said:
“Until coming out of recession translates into meaningful improvement in
peoples’ lives, our work cannot be said to be done.”
Calling
on the government to expedite action on implementation of the various measures
designed to reform the economy, they insisted that the 0.55 per cent growth
rate announced for the second quarter by the National Bureau of Statistics
(NBS), though a good development, was marginal without any impact on the
businesses and welfare of Nigerians.
Economy
still fragile — FG
Meanwhile,
the Federal Government stated that the Q2 GDP report shows that economic growth
is fragile and vulnerable to shocks. Special Adviser to the President on
Economic Affairs, Dr. Adeyemi Dipeolu said in a statement that though the exit
is a welcome development, the economic growth remained fragile and vulnerable
to exogenous shocks or policy slippages. Dipeolu in a statement signed by the
Senior Special Assistant to the President on Media and Publicity, Office of the
Vice President, Laolu Akande, said the growth in the Gross Domestic Product,
GDP, called for cautious optimism, especially as inflation has continued to
fall from 18.72% in January 2017 to 16.05% in July 2017.
He said:
“Overall, the end of the recession is welcomed but economic growth remains
fragile and vulnerable to exogenous shocks or policy slippages. ‘’Accordingly,
it remains essential to intensify efforts going forward on the implementation
of the ERGP to achieve desired outcomes including sustained inclusive growth,
further diversification of the economy, creation of jobs and improved business
conditions.”
Akande in
the statement said that the President Mohammadu Buhari-led administration
“welcomes news of Nigeria’s exit from recession with cautious optimism and will
continue to drive Nigeria’s economic growth by vigorously implementing the
Economic Recovery & Growth Plan launched earlier this year by President
Muhammadu Buhari.” The Special Adviser to the President on Economic Affairs
while commenting on the economic performance of the country as published by the
Bureau of Statistics for the Second Quarter of 2017 said: “The figures released
by the National Bureau of Statistics for the second quarter of this year (Q2
2017) show that the economy grew in Q2 2017 by 0.55% from -0.91% in Q1 2017 and
-1.49% in Q2 2016. This in effect means that the Nigerian economy has exited
recession after five successive quarters of contraction. “This positive growth
is attributable to both the oil and non-oil sectors of the economy. Growth in
the oil sector which has been negative since Q4 2015 was positive in Q2 2017.
It rose by 1.64% as compared to -15.60 in Q1 2017, an increase of up to 17
percentage points.
‘’This
improvement is partly due to the fact that oil prices which have improved
slightly from the lows of last year have been relatively steady as well as the
fact that production levels were being restored.” On sectoral basis, he
explained that, “The non-oil sector grew by 0.45% in Q2 2017, a second
successive quarterly growth after growing 0.72% in Q1 2017. This increase which
was not quite as strong as it was in Q2 2016 reflects continuing fragility of
economic conditions. However, given that nearly 60% of the non-oil sectors
contribution to GDP is influenced by the oil sector, growth in the oil sector
will help boost the rest of the economy.
“The positive
growth seen in agriculture when the rest of the economy was contracting was
maintained at 3.01% which is encouraging especially if seasonal factors are
taken into account. Manufacturing growth was also positive at 0.64% and
although lower than the previous quarter’s growth of 1.36%, it was a noticeable
improvement over the -3.36% experienced in Q2 2016 and a continuation of the
turnaround of the sector. Solid minerals which remain a priority of the
Administration also continued to grow and in Q2 2016 by 2.24%. “Overall,
industry as a whole grew by 1.45% in Q2 2017 after nine successive quarters of
contraction starting in Q4 2014. This positive development was somewhat
overshadowed by the continued decline in the services sector which accounts for
53.7% of GDP. Nevertheless, electricity and gas as well as financial
institutions grew by 35.5% and 11.78% respectively in Q2 2017. Cautious
optimism “The GDP figures give grounds for cautious optimism especially as
inflation has continued to fall from 18.72% in January 2017 to 16.05% in July
2017. Foreign exchange reserves have similarly improved from a low of $24.53 in
September 2016 to about $31 billion in August 2017. In the same vein capital
importation grew by 95% year-on-year driven by portfolio and other investments
but also notably by foreign direct investment which increased by almost 30%
over the previous quarter.
“Foreign
trade has also contributed to improving economic conditions with exports
amounting to N3.1 trillion in Q2 2017 while imports which increased by 13.5%
amounted to N2.5 trillion in the same period. The overall trade balance thus
remained positive at N0.60 trillion. “Unemployment however remains relatively
high but job creation is expected to improve as businesses and employers increasingly
respond more positively to the significantly improving business environment and
favorable economic outlook. “Besides, as key sectoral reforms in both oil and
non-oil sectors gain traction, the successful implementation of ERGP
initiatives such as N-Power and the social housing scheme will boost job
creation.
“Food
inflation also bears watching as it has remained quite high and volatile due
mostly to high transport costs and seasonal factors such as the planting
season. Investments in road and rail infrastructures, increased supply and
availability of fertilizers and improvements in the business environment should
contribute to the easing of food prices.” Makarfi to Nigerians: Statistics is
not reality However, the Peoples Democratic Party described the Q2 GDP report
as mere statistics that contradicts reality. Reacting to the development,
Peoples Democratic Party, PDP, urged Nigerians not to see every statistics as
an indication of reality, following Tuesday’s report by the National Bureau of
Statistics (NBS) that the nation has exited the economic recession that
worsened living conditions in the past two years. In an exclusive chat with
Vanguard on the issue, Chairman, National Caretaker Committee of the PDP,
Senator Ahmed Makarfi, said it was the wish of every Nigerian for the country
to overcome the current hardship, warning however that statistics differs from
reality. “PDP is not praying for the country to be in recession. Statistics may
indicate one thing, but reality is different,” he said. Makarfi’s position is
not out of tune with that of other Nigerians struggling to eke out a living in
the past few years following the crash in the price of crude oil in the
international market. ‘Economy running below par, still tied to oil’
Meanwhile,
the Nigerian Economic Summit Group, Lagos Chamber of Commerce and Industry and
other economic operators have said the economy was still performing below its
potential and tied to the oil sector.
According
to the NESG President, Mr. Bukar Kyari, “We just need to work on all the policy
issues for example the Ease of Doing Business, so as to restore confidence in
the economy. “We have to take it one step at a time because given the level of
unemployment in the country, economic growth has to be in double digit before the
impact can be felt.” Director- General, Lagos Chamber of Commerce, LCCI, Mr.
Muda Yusuf on his part said: “We are happy that technically, we are out of
recession, and the advantage of this is that it has positive signal effects,
especially to investors, that the economy is now recovering very well. The
recovery can enhance the interests of investors in the Nigerian economy that we
are now an economy that is out of recession.
“Second,
it is also an indication that some of the policies that have been put in place
by government are also having some positive impacts, and it could also be a
pointer that investors’ confidence is also picking up gradually. “So, those are
the positive values that the news of our being out of recession brings, but if
we talk about the operators in the economy, currently, it may not mean much;
some of them may even feel that it’s an academic thing but what I think we
should appreciate is that technically, we are out of recession.”
In his
reaction, Managing Director/Chief Executive, Financial Derivatives Company
Limited, Mr. Bismarck Rewane said that though the growth is marginal, returning
to positive GDP growth is a major breakthrough but stressed that the Nigerian
economy can do much better if more credit is extended to the private sector. He
said: “The impact is still marginal because your population is growing at 3 per
cent and your GDP is growing at 0.5 per cent. In other words you are making
14,000 children every day, if we are to use the output to feed those children
we will only be able to feed 3000 of those children. But what we are doing now
is that we are taking from other children to feed those 14, 000 children.
“But to
be honest with you, it is a major breakthrough that we are coming out of
positive territory after five quarters of negative growth. But look at what has
happened to South Africa. After two quarters of negative growth, they are back
at 2.3 per cent.”
Exit from
recession shows Buhari‘s working —Adesina
Also, Special Adviser to the President on
Media and Publicity, Femi Adesina, said the cheering news that the country has
exited from the economic recession that affected every facets of the economy
was an indication that the government was active to its responsibilities to the
citizenry. Adesina, who stated this when he received a civil society group,
Centre for Civil Society and Justice that was on a solidarity rally in Abuja,
said for the country to exit recession was a clear testimony that President
Muhammadu Buhari’s administration was working for the progress and prosperity
of all Nigerians. “That shows that we have a government that is working for us.
We have a government that is interested in our welfare. We have a government
that is interested in our well-being. “Recession came due to some mistakes of
the past and in just about a year, the government battled it and today we are
officially out of recession and we give all glory to God.” Nigeria’s fortune
still dependent on oil – Capital market operators According to operators in the
nation’s capital market, the exit from recession in the second quarter of the
year was in line with expectation given that there has been consistent
reduction in contraction in the last three quarters.
They
opined that growth in the financial services sector was as a result of rebound
witnessed in the capital market as well as the high interest rate. In his view,
Mr. Johnson Chukwu, Managing Director/CEO, Cowry Asset Management Limited, said
though the exit was expected, but the fortune of the country’s economy is still
tied to the oil sector, which led the rebound in the GDP. He said: “Some of us
had actually predicted that Nigeria will come out of recession in the Q2 this
year, which has actually come to pass given the improvement in the GDP. We saw
the contraction reducing over the past three quarters. So, we expected that
given that the contraction was only 0.91 per cent in the first quarter and one
of the things we have always emphasised is that if we can address the
contraction in the oil and gas and mining sectors, we are going to see rebound
in the economy and that is what happened.”
“If you
look at the first quarter, the oil and gas sector contracted by 11.64 per cent.
In the second quarter this year, it grew by 1.64 per cent. The oil and gas
sector accounts for about nine per cent of the GDP, but not just accounting for
nine per cent, it has a reflective impact on the GDP. It affects trade,
manufacturing, virtually all the sectors because of the pass through effect of
the oil sector viability. “With the oil and gas sector rebounding to positive
from negative growth, the overall national GDP actually increased by 0.55 per
cent. So, you will want to say that the turnaround in the fortune of the
economy was largely attributable to the oil and gas sector because the though
the non-oil sector grew by 0.45 per cent but that growth was lower than the
growth in the first quarter, which was actually 0.72 per cent.
“So, the
non-oil sector grew in the first quarter at 0.72 per cent, but the oil sector
contracted by 11.64 per cent, leading to an overall contraction in the GDP.
This Q2’17, the non-oil sector grew by only 0.45 per cent, whereas the oil
sector grew by 1.64 per cent, reducing the contraction of 11.64 per cent in the
first quarter. So, the fortune of Nigeria’s economy can still be described as
tied to the apron of the oil and gas sector,” Chukwu added.
He
attributed the improvement in the financial services sector to the growth in
the capital market, saying that unlike the previous quarter where the capital
market recorded a negative growth, the rebound in Q2 help in lifting the
financial services sector. Also reacting, Mr. Dolapo Ashiru, Head, Stockbroking
Services, Lead Capital Plc, a lot of the rebound has to do with the on-oil
component of the GDP. He, however, stated that the services component is not
yet where it is supposed to be and advised the government to focus more on in
the sector.
“The rate
of growth in the services sector is still low because the weak purchasing power
of Nigerians,” he said. On the contribution of the financial services sector to
the GDP, he said: “Because of the high interest rate regime we saw that a lot
of banks were very active in placements. They were very active in treasury
operations and foreign transactions due to the liquidity in the foreign exchange,
FX, market in the quarter. Maritime operators insist economy still in recession
Operators in the maritime sector however dismissed the NBS Q2 GDP report
insisting the country is still under recession. The Deputy National President
of the Chartered Institute of Logistics and Transport, CILT, Mr. Alban Igwe
said that he had only received the NBS report and that he was still studying
it. Igwe explained that the statistical report is different from news;
Nigerians will like to know what parameters were used in their assessment of
the economy. He said “We want to verify the parameters used, what has changed
since Nigeria got out of recession. ‘We cannot take what the NBS has said hook,
line, and stinker without asking questions as to the authenticity of the
report”. Similarly, the National President of the Association Nigerian Licensed
Customs Agents, ANLCA, Prince Olayiwola Shittu described the report as
propaganda by government adding that the Nigerians are reeling under recession.
“What indices did the NBS use in getting their findings and conclusion? How can
they sit in the comfort of their offices and say Nigeria is out of recession
when the opposite is the case?” he queried. Shittu said that recession is very
on and that Nigerians are stilling feeling the pang of it. “Schools are
resuming soon and I am sure that some children will not return back to school
because their parents do not have money to pay their fees.” On the contrary,
the Executive Secretary of the Nigerian Shippers Council, NSC, Mr. Hassan Bello
said that the NBS report was a welcome development as the economy is getting
back on its feet. Bello said that indicators have shown that there has been an
increase in the rate of employment and decrease in the inflation adding that
infrastructural provision by the government is ongoing.
He
explained that Truck Transit Park, TPP, and the Inland Container Deport
initiatives of government will further boost the economy as these projects will
create more jobs opportunities for Nigerians. Vetiva predicts 3% growth for Q3
GDP Meanwhile analysts at Vetiva Capital Management Company Limited while
commenting on the Q2 GDP report project 3.0 per cent growth for the third
quarter of the economy. They said: “Whilst the Nigerian economy should persist
on a positive growth path for the rest of the year, we warn that most of the
growth will be superficial, stemming from higher agriculture (from import
substitution) and recovering oil output (from reduced militant activity).
Stronger stimulus, preferably fiscal, is required to resuscitate consumption
and propel medium-term growth. After accounting for the deviations from our
estimates, we project 3.0% growth in Q3’17 (FY’17: 1.1% y/y), from 3.5% y/y
previously, driven by downward revisions to all major non-oil sectors.”
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