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Why Nigerian Economy Is In A Mess As Emefiele Gives Hope Of Coming Out Of The Recession In The First Quarter of 2021

 Why Nigeria Economy Is In A  Mess

By By Stephen Ubanna

President Muhammadu Buhari of the ruling All Progressive Congress, APC, appears to have left the Nigeria’s economy  worse  than he met in May 29, 2015.  The situation is made worse with the  country’s external debt rising to N33 trillion as  the World Bank raises alarm that the  nation’s economy had plunged into a severe recession , described as the worst in the recent years.

The world Bank  had blamed the collapse  in oil prices in the international oil market  coupled with the Wuhan Town  in Hebei Province of the Asian country of China emerged Coronavirus , popular, COVID 19, to the recession. Crude oil exports alone, accounts  for over 90% of  the country’s Foreign n Earnings. The oil price shock was said to have tarted  even  when  former President Goodluck Jonathan of the then ruling People’s Democratic Party, PDP, was still in the office.

 It was said to have  got worse in  2015,  forcing the Katsina state born Nigerian President  to  seek for the approval of the then Bukola Saraki , a former governor of Kwara state and  then Senate President , to  borrow from Multi-lateral Financial   Institutions but was blocked.  He  did not find it funny.

 He  had  waited for an opportunity to do so. The opportunity came with the take over of the  9th National Assembly by the the APC and the emergence of Ahmad Lawan as the Senate President  and Femi Gbajabiamila as the Speaker of the House of Representatives. The APC led National Assembly Leadership appear to have given the blanket approval to borrow from the world Bank and  any  other  Multi-lateral Financial Institution and he did not hesitate doing so, claiming that it is for  development and rehabilitation  of the country’s ‘s broken down infrastructural facilities: road, railway and electricity and provision of new ones. The government had depended on earnings from crude oil sales to settle the external debts.

 .It is on record that the country Crude oil price in the International oil market further ,  fell  to four year Gross Domestic Product, GD P, contracted by  3.6  between  July and September 2020, after shrinking by 6.1% in the second quarter of 2020, due to the Coronavirus. 

Yemi Kale,  the  country’s Statstician General had  said  that’’ the Cumulative GDP, for the first nine months of this Fiscal year  was  2.8%. He may  have  sent a signal to the Godwin Emefiele led, Central Bank of Nigeria,  CBN, that the economy is heading towards recession , when he confirmed that the 2020, third quarter Real  GDP had  contracted  by 3.62% like the the  previous quarters of the year.

Economic Analysts had spointed out   that  the  first and second quarters, economic Contraction  was a clear indication that the country’s  economy  had officially  slumped into recession. The  recession  is  coming  at  a  time the nation is just recovering  from the recession that followed  the 2015 oil crash.

The  International Monetary Fund, IMF, may have painted a gory image of the situation  when it  revealed at the beginning of the crisis  that  the economy   will contract by 8.9 this year  in the worst case scenario without any stimulus. The Multi-lateral Financial Institution had   described the contraction as the largest over the last 40 years. Recall that the  IMF,  prior to the manifestation of the signs of  recession for the Nigeria  economy  had   forecasted  a 5.4% drop in the country’s GDP.

Hajia Ahmed: Minister of Finance, Budget and National Planning

Hajia Zainab  Ahmed, minister of Finance, Budget and National Planning, may have given  a signal of the economy heading  towards  recession   last May , after the first virtual Federal Executive Council, FEC, which was said to have been presided over by Yemi Osinbajo, the country’s Vice President.

The minister, who was said to be   very blunt  that the  ravaging COVID 19,  is not only affecting the Health sector but other sectors of the economy, had said  that  the resources to fight the  pandemic  was grossly  inadequate. She did not stop there.  She  had told those that cares to listen that  the drop in the oil price in the international  market   had affected the revenue and Foreign Exchange  earnings from the oil sector .

 She may have become convinced that the country  is heading towards  recession at the start of the second term in of office the Nigerian President  as the Net  oil and gas revenue paid into the Federation Account in the first quarter of  this 2020 was a mere N940.91 billion., showing a shortfall of  about N125.52. The situation was not different in the second and third quarter of the year.

She was emphatic: we are  going  into recession. She had  assured  that the government  is doing everything within its capacity    to ensure that the recession  is shallow  ‘’so that   the country could easily come out of it’’. She may have  be working on  the theory  that the recession will be shallow which may have igiven Emefiele, the CBN, governor the confidence that the country’’ will come out of it in the first  quarter of 2021’’.

At the  55th Annual Bankers Committee,  dinner  which was  that  held in Lagos, the nation’s Commercial nerve center on Friday, November 27, 2020, the CBN  governor had said the implementation  of its interventionist measures  , would save  the economy  from the  recession  . He  was optimistic  that  the country would attain  2.0% growth rate in 2021.

He had said  that the ‘’downside risks would still remain  as  restoration  of full economic  activities , particular,  in the service related sectors of the economy    are uncertain. He noted that ‘’until the COVID 19 vaccines  ,is reduced the situation may not change but says no cause for alarm . The CBN governor was said  to have told the  Bankers Committee members  at Lagos at the AGM,  that what is happening in Nigeria is not different from what is happening in other emerging economies  that rely  in Crude oil earnings  as well as the retreat by Foreign portfolio investors.

Godwin Emefiele: CBN Governor, Warns Against Rushing Towards The ECO Project

He stressed  that the drop in oil earnings  had significantly affected  the supply  of Foreign Exchange  into the  Nigeria market.  Emefiefele,  who could not hide his feelings had said  that in order  ‘’to adjust  for the decrease in the  supply of Foreign Exchange  into the country to meet the demand of importers and other end  users, the naira  depreciated from N305.00 to a dollar to N360 to a dollar and subsequently to N380.00 to a dollar. Many expects  Emefiele , to have informed  Nigerians that the naira has been devalued for the umpteenth time as the price of goods and services had  continued to rise on a daily basis.

   Although ,the CBN governor, h ad said that there is no case for people to panic  over the  poor state of the  economy, stressing that the Buhari led APC  government  had put   in place measures  to improve the non- oil exports  and other sources of Foreign Exchange  to prevent  significant decline  in the country’s reserves which currently stands at  $36 billion, which he had said is sufficient ’’to cover  seven months importation  of goods and services into the country.

  The Delta state born CBN governor,  disclosed that since  earnings from Crude oil sales in the international oil  market dropped,  the country had no option but to fall back on Agriculture which remains the key to  the government economic diversification plan. 

He cited the Fertilizer Initiative Programme which had continued to deliver significant quantities  and high quality fertilizer to farmers. He revealed  that the Programme  had facilitated  the  resuscitation  of 31 Fertilizer   blending plants  in different parts of the country and also  created a good  number of direct  and indirect  jobs  across the value chain

. He  may have gladdened the heart of Nigerians when  he said that  the government will continue ‘’ to support  the Agricultural sector  through the CBN  Anchor Borrowers Programme and other similar schemes’’.  He gave an  insight into the revenue earnings from Cocoa and Sesame  seed alone, last year, which was said to have  increased  by  $79.4 million and $153 million respectively, described as very encouraging.   

He listed other measures that had had been  put in place by the government to revamp the economy, which includes  revamping  the cotton, textile  and  garment sector , through the apex  Bank  Textile Revival Intervention Fund, which many believe would greatly ‘’reduce   the Foreign Exchange  spent on cotton  and other textile imports’’.

 Aware of the adverse  effect of the drop in in oil earnings to the  economy because of the domination of Multi-national oil Companies  in the sector the government has initiated plans to increase the participation of more Nigerians  in oil and gas Exploration and Production  .

This s evident going by the plan to embark on conducting the bidding process for its 57 Marginal Oil fields, that   had been suspended over the last ten years. That much  was confirmed by Emefiele, the CBN , governor, at the Bankers Committee AGM.  This is  good news to Nigerians who had looked forward  for such  an opportunity to participate in the  nation’s oil and gas sector.

It is instructive to not that the Buhari  government  had continued to support  the local content  and other areas of the oil and gas sector  with the disbursement of   Funds from  the $200 million  Nigerian Content Intervention Fund to Indigenous Manufacturers and service providers but that was how far he could go.

 The Nigerian President  instead of facing the economic problems he met on ground as a two-time elected President of Nigeria, had repeatedly blamed  former Presidents Olusegun Obasanjo, late Musa Yara ‘Adua, who presided over the affairs of the country between 199 and 2015, for the near destruction of the economy.  

Given the poor state of the economy and the country’s security challenges under the Buhari Administration in the last six years, Obasanjo,  who had ruled the country as a military Head of State and as an elected President  had said  that the country  to a failed and badly divided state, describing the country  country as a basket case  and poverty capital of the world and an wholesome and insecure nation.              V

Stephen Ubanna

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September 2021

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