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Why We May Have More Economic Problems

Buhari at Ministerial Retreat On Economy

Nigeria’s path to recovery and sustainable growth is lined with mines and mortar despite optimistic forecast for the economy in several quarters, notably by the Bretton Woods institutions. Waiting in the wings to puncture the optimism are policy inconsistencies, fiscal limpness and insecurity.

The International Monetary Fund (IMF) World Economic Outlook, WEO, for July 2017, had estimated Nigeria will grow at 1.9 per cent in 2018 compared to South Africa that will trudge at a slower pace of 1.2 per cent. Pointers which suggest that the economy could have a positive turn as forecast, even as early as this quarter, are growing GDP numbers, rising manufacturers Purchasing Managers Index (PMI) and a burgeoning stock market.

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The economy shrank 0.5 percent year-on-year in the first quarter of 2017 compared to 1.73 percent in the last quarter of 2016 to suggest that the economy is inching towards positive territory. Supporting the improving GDP numbers is an equally better showing for Manufacturing Purchasing Managers Index (PMI), which has progressively grown for the third consecutive month, according to NBS data (Nigeria Bureau of Statistics).

The PMI is an economic indicator used by economists to peer into the future of an economy, to see if things are looking up or down. For this metric, the magic number is 50 but Nigeria’s rose to 52.9 in June of 2017 from 52.5 in May. It is the strongest since February.

To further clip all doubts that the economy is on a northbound journey, the stock market got more liquid, adding more than N3 trillion in capitalisation since the end of January while the All Share Index, which measures how well the stock market is performing has leapt 35 percent in about the same time, providing leverage to cyclical and bellwether stocks alike.

But all of these gains could blow in our faces if we don’t watch it as Nigeria’s all time Achilles, policy bungling aka summersault, threatens to reverse the hard fought gains. Even if one must give credit to the Central Bank of Nigeria (CBN) for catering to the price stability needs of the economy by tempering inflation albeit in small measures, stabilising the naira and attempting to manage interest rates, the fiscal side of government has got the system on a limp beginning with the brinkmanship of the legislature in the absence of Mr. President. Their untoward behaviour in the run up to the Acting President’s assent to the budget leaves much to be desired.

The rancour clearly exposed the lack of leadership in government. Suffice this to mean that without clear leadership such as the one seen to be provided by the president, policy will suffer and so would the economy.

Still on the matter of policy, a situation where an honourable minister is unsure about the next policy step to take on a matter does not only make internal players proceed with caution, it frightens away foreign ones. This is how damaging the recent contradiction about taking or not taking foreign loans can be. It portrays the minister in the mould of Prince Hamlet who instead of taking a decisive action on the murder of his father and infidelity of his mother, dawdled on the issue leading to one of Shakespeare’s biggest tragedies. Pussyfooting could be tragic for an economy.

Inaction by the CBN when the naira started faltering back in 2015 is one reason why the economy slipped into recession.

The mounting insecurity with the recent killing of soldiers and oil explorers in the northeast is another factor that could reverse the growth being experienced. Add to this, mounting tensions by the Indigenous Peoples of Biafra (IPOB) and threats by the Niger Delta militants that they are going to resume hostilities in September and you have a recipe for an economy in turmoil. The economies mainstay, oil needs a secure environment for it to be mined. Anything short of the projected 1.8 million barrels per day in this year’s budget can challenge the economy.

To forestall the fears highlighted afore, it is advised that Mr. President come back home with dispatch and take charge (if he can). Managers of the economy should be masters of their games and they should strive for an equitable system fair to all, free from marginalisation. These are simple but far reaching recipes for holding this economy together.

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