The politics of Nigeria’s recession
Just like the national budget, we and most other legacy media organisations owe the Nigerian populace a duty to carefully analyse and interpret this big economic news about Nigeria exiting economic recession which became public knowledge only last Tuesday, September 5, 2017. The release of the annual national budget is a usual big news which deserves a lot of attention to make it very relevant for most Nigerians. Similarly, the issue of Nigeria’s exit from recession, based on the Q2 report from National Bureau of Statistics (NBS) requires serious and painstaking reportage.
The ordinary Nigerians would want to know what recession is all about. Those who know would want us to explain whether the growth is sustainable. Some people would want to be told the implications of the exit. There are those who insist that the national Gross Domestic Product, GDP, is still controversial and they need to be convinced that there is no alternative for now. There are also those who have no clue whatsoever and may be asking to know whether Nigerians would now begin to enjoy improved living conditions – whether new jobs would be created and whether the prices of goods and services would drop drastically as a result? Some would want to know if the exit would force fundamental changes that would correct underlying institutional weakness and tackle the obvious disconnect in growth, poverty reduction and human development. A key question from informed readers would be whether Nigerians would now begin to experience an environment for high levels of investment and growth, given that some investors fled the country at some point; whether these would now begin to return to the country with their capital. There are scores of other questions which need to be answered in fulfillment of our sacred duties and roles as financial or economic journalists? The story of the economic recession does not need to be trivialised or used to settle political scores. Recession is a serious problem which affects the life of every Nigerian and may have been caused because productivity is generally below average. The breaking news is an opportunity for elaborate interpretations and discussions which may touch on the structure of the economy, the dominance of primary production, weak farm-factory linkage, disconnect between finance and the real sector and so on. There is absolutely no place for politics or the politicisation of this sensitive, complicated and highly technical issue dubbed ‘economic recession’. The Nigerian people will engage properly and sensibly if they understand the issues clearly. François Lequiller of OECD, in explaining the phenomenon, stated: “if by growth you mean the expansion of output of goods and services, then GDP or preferably real GDP – which measures growth without the effects of inflation – is perfectly satisfactory. It has been built for this purpose. The letter ‘P’ stands for “Product”, the result of production. Gross Domestic Product is defined as the sum of all goods and services produced in a country over time, without double counting products used in other output. It is a comprehensive measure, covering the production of consumer goods and services, even government services, and investment goods.
Paul Carsten of Reuters News Agency, in his interpretative report and in-depth analysis on the Nigerian experience, explained that the pace of growth was slow despite higher earnings from oil. This, according to him, means that Nigeria’s economy remains fragile and dependent on its dominant export. Most commentators do not seem to be comfortable with the growth which was 0.55 percent year-on-year. This is despite the OPEC data which showed that crude oil production rebounded 9.1 percent to 1.68 million barrels per day over the same period.
Carsten also stated that the GDP expansion was a full percentage point lower than economists polled by Reuters expected. He stated that the NBS also said the first-quarter downturn, at 0.91 percent, had been steeper than initially estimated. He stated that the economy shrank by 1.5 percent in 2016, its first annual contraction in a quarter century, crippled by lower oil revenues following years of subdued prices and a shortage of hard currency. He quoted the presidential economic advisor, Adeyemi Dipeolu, who welcomed the end of recession and confirmed that economic growth remains fragile and vulnerable. According to Dipeolu, “Two bright spots are inflation, which has fallen from 18.72 percent in January to 16.05 percent in July and foreign exchange reserves, which have risen from a low of $24.53 billion last September to around $31 billion in August”. He opined that policy must remain geared towards economic recovery and diversification. Carsten stated that economists sounded cautious about the rebound, saying Nigeria still was not achieving its economic potential. One of them Razia Khan, the chief economist for Africa at Standard Chartered said “This is not at all a robust GDP print. “It still falls far short of the growth rates the Nigerian economy should be achieving. “The NBS said the second quarter GDP contribution from the non-oil sector – notably agriculture and manufacturing, including textiles, clothing and footwear – shrank slightly from the previous three months and from the previous year. Paul Carsten stated that Nigeria‘s government had also touted agriculture as a way to wean the country off its oil dependence. Growth in agriculture fell to 3.01 percent from 4.53 percent in the second quarter of 2016. “Regardless of growth moving back into positive territory, it remains fragile,” said Celeste Fauconnier, a regional economist at Rand Merchant Bank in Johannesburg, which predicts a full-year expansion of just 0.5 percent. “An undiversified production base, a host of structural rigidities and persistent security troubles point to a prolonged and gradual recovery period,” said Fauconnier. On GDP as a satisfactory measure of growth, here is an account by OECD: If ever there was a controversial icon from the statistics world, GDP is it. It measures income, but not equality, it measures growth, but not destruction, and it ignores values like social cohesion and the environment. Yet, governments, businesses and probably most people swear by it. According to François Lequiller, head of national accounts at the OECD, part of the problem is that perhaps we expect too much from this trusty, though misunderstood, indicator.