Re: Nigeria: Papering Over The Cracks – HSBC, By Ibrahim Olalekan

When President Buhari led the All Progressives Congress (APC) party into the 2015 general elections, his campaign focused on three major reforms namely re-positioning the economy, containing security threats and fighting corruption. This would indicate that he had made considerable effort to properly diagnose Nigeria’s socio-economic condition.

It should also be recalled that the APC administration inherited a cash-strapped mono product economy which was also extremely vulnerable. As was aptly put by HSBC “Nigeria’s painful recession” in 2016-2017 was in the offing owing also to the devaluation of the local currency the Naira by the previous administration from N155 to N199 to a dollar in 2014 in a bid to defend the Naira and reduce the depletion of foreign exchange reserves.

The writer’s allusion to Nigeria’s positive macroeconomic indicators only to opine that Nigeria has a disappointing macro outlook is very contradictory. To put this in perspective, it is important to reference some key macroeconomic indicators e.g current account surplus is 5% of GDP. Foreign exchange reserves at a historic high of $47bn. Headline inflation has decelerated from 18.4% at the start of 2017 to 11.23% in August 2018.

The total value of capital importation into Nigeria in Q2 2018 is $5.5bn. These strong fundamentals have supported the currency even in spite of monetary normalization in some advanced economies. The Naira has been relatively stable and performing satisfactorily compared with some of its peers and that of selected emerging economies.

The oil price shock in 2016 seriously affected government’s fiscal position and inadequate buffers for the rainy day led to the depletion of foreign reserves. Although unemployment stands at 19%, the expansionary fiscal policy of the Buhari administration reduced the impact of the 2016 economic headwinds on employment amid operations of factories.

The Social Investment Programme which includes N-power, Conditional Cash Transfer and Homegrown School Feeding programme were implemented to put the economy on the path of recovery. These programmes sustained the purchasing power of beneficiaries by maintaining the aggregate demand that kept factories in operation. This is akin to the stimulus packages the USA, China and the European Union unleashed during and after the 2008 financial crisis.

In fact, ultra low interest rates and fiscal expansion have just started to unwind in those countries.

Concerns about Nigeria’s legacy structural problems led to the rollout of some landmark initiative such as the Presidential Enabling Business Environment Council (PEBEC), National Industrial Policy and Competitiveness Advisory Council, Made in Nigeria for Exports et cetera.

These programmes are conceptualized for the diversification of Nigeria’s economy away from oil and improve the competitiveness of Made in Nigeria goods in the international market. These policies are intended to put an end to jobless growth by creating jobs that are good for development.

Ibrahim Olalekan, a Public Affairs Analyst wrote from Abuja, Nigeria.

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