Worries mount over tottering economy

By Chijioke Nelson and Sulaiman Salau   |   02 November 2015   |   3:33 am  
Image source dsto

Image source dsto

Economy-spectacles-1Stakeholders rue non-release of 2015 capital vote

A PLETHORA of headwinds may have hit the nation’s economy, with ominous signs about growth prospects just as analysts warn against further delay in addressing issues assailing productive activities in the country.

Already, President Muhammadu Buhari, on the sidelines of the India-Africa summit in New Delhi last week, admitted that the economy was in dire straits, with grave consequences for the fulfillment of recurrent expenditure obligations.

Specifically, the rising inflation, currently put at 9.4 per cent has defied measures like liquidity tightening till date, amid rising unemployment.

Besides, non-release of 2015 capital vote, expected to complement monetary policy measures, in order to boost the economy; non-activity in the Open
Market Operations (OMO) in the last four weeks; may have sent a signal to the banks that tougher times may be in the offing.

Also as the crude oil prices fell to $44.3 per barrel, the stakeholders in the oil and gas sector have expressed worry over its effect on national earnings, especially as the funding deficit has been put at $2 billion yearly.

Within the period under review, the directive by Buhari, which kicked off the full implementation of the Treasury Single Account (TSA), tightened liquidity in the financial system, jerking up interbank money market rates as it reached year highs of over 100 per cent before easing off.

The Central Bank of Nigeria (CBN), had at the last Monetary Policy Committee meeting, raised concerns over the slowing economic growth, which hit 2.35 per cent in the second quarter and weak consumer and investment spending, due to government’s non fiscal support.

The Economic Researcher and Programme Officer at the Centre for Social Justice, Donald Ikenna Ofoegbu, while assessing the state of the economy, noted that there are inadvertently, too many policy reversals and inconsistencies in the last nine months.

“We have monetary policy running without fiscal policy. We now have custom bosses running fiscal policies as if appointed the minister of finance. It’s sad and not the way to run an economy with the hope to attract foreign investors.

“It is hard to explain how in the entire 2015 financial year, no sum has been released for capital projects across the federation. Construction companies have retrenched workers, suppliers are suffering loss in stock value and customers cannot afford purchase prices. This means that we are some steps backward now” he said.

He pointed out that given global conditions- technological advancements, political issues and economic considerations, oil price uncertainty will continue and the 75 per cent dependence oil revenue by Nigeria will soon vanish into thin air, leaving us with nothing but dilapidated infrastructure, rising unemployment, illiquidity, and huge debt burden.

“There may be increased hunger, poverty in the land and aggravated insecurity, a resurge in corruption and credit crunch. It is hard to deny that we have not arrived at this point for now, but the handwriting has always been there and we have Nigeria only pretended to be blind to the truth.”

A capital market operator, who confided in The Guardian over the weekend, said that the measure was a tactical approach by the government and CBN to push banks to perform their primary role of lending, rather than invest the little real sector loanable funds in the less risky instruments.

This may also show that clamour to mop up excess liquidity in the economy using the OMO auctions have not always been for money management issues, but that of the promoters’ interest.

The Head of Research at Afrinvest Securities Limited, Ayodeji Eboh, told The Guardian that inflation in recent times has been driven by high cost of production (not demand pressure) and that the increase in liquidity in circulation will not pressure consumer prices.

Indeed, the high liquidity levels, money market rates have declined, with average NIBOR rate falling to 12.8 per cent from 16.2 per cent recorded the day before the September MPC meeting was concluded.

Treasuries and bonds have also rallied with majority of the benchmark FGN bonds currently trading above their par value, while average bond and treasuries yields across all tenors have fallen 100bps and 521bps to berth at 14.1 per cent and 8.4 per cent respectively.

“We expect high monetary and funding liquidity to translate into low rates in the credit markets and possible buoy loan growth to the real sector in the 4th quarter of 2015.

“However, in the absence of clear-cut fiscal economic policy direction to complement the monetary stimulus, risk appetite of investors and banks will remain weak relative to potential.

Meanwhile, the Society of Petroleum Engineers (SPE) Nigeria Council, in a communique after the Nigeria Annual International Conference and Exhibition (NAICE) made available to The Guardian yesterday, said drop in crude oil earnings from low oil price presents a yearly underfunding of $1.8 – $2.0 billion to the Federal Government.

It therefore noted that the crude oil market dislocation from the United States destination requires strategic realignment geographically to seek alternative markets in Europe and Asia.

The communique signed by its Chairman, Emeka Ene , among other highlights stressed that gas is the future of Nigeria, the key to unlocking economic potential of Nigeria and increasing the living standards of the average Nigerian.



  • IK

    Welcome to Buharinomics.
    It is the economy Chikeena!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
    The administration needs to understand that this body language thing is not how it is seen within the economic – locally and globally. All this chasing after rats when your house is on fire will have consequences on the entire system.

  • Blonde Johnny Bass

    If you employ mad man to look after your house, don’t blame anybody if you see your children inside pot of soup. The popular saying “The people get what the people want”, Buhari and the whole of the APC bandwagon are failures with nothing to show as individual but looters and killers of dreams, unity and progress. Tinubu repeated what his forebearers started by selling their own out to slavery.

  • Osanebi Osakuni

    Buhari sat down and listened to the Indian Prime Minister making analysis on his economic blue print in relation to Africa. His host specifically proclaimed that it is his desire to upstage China as the biggest trade partner to African countries.As soon as the man finished making his statement, Buhari went blank.He recovered later to recite his anthem; every corrupt person must return his stolen fund. He manifested a completely visionless fellow with very low intellectual ability. What a country? what a giant?

    • vic

      PRESIDENTIAL BUHARI IS PROVING TO BE A MOCKERY AND A BIG CLOWN WITH NO IDEAS AND NO SENSE OF SPEECH.

      • Osanebi Osakuni

        President ‘one chance’

  • Ebaah Odibo

    Where are the ‘change’ apostles in the social media? Have they run out of propaganda, or ideas? The ‘change’ seems to be the reversal of what was gained, albeit with endemic corruption, rather than injection of fresh ideas.

  • emmanuel kalu

    What we have here is a failure of the president to take advantage of his political capital and the crisis of fuel shortage after the election. it is also a failure of the president ability to focus and understand the priority of the country. probing as good as it is, is not an economy policy. immediately after the election, there were three ministry that the president should have nominated minister for. finance, agriculture, and power. a new MD for NNPC is good enough for the oil sector. There are also three things the president should have also done immediately to move the economy forward. 1) immediate effort to provide more electricity to the country( mandating metering, ending vandals of gas pipelines, and ensuring enough supply of gas to the genco). This would have helped greatly to increase productivity and reduce cost on the nation, especially business. 2) an immediate policy ideas on the subsidy of fuel, increasing the official price to what the people were paying on the street, N100-120. That would have immediately reduce the cost to the government( then the government could reinvest that money on better road and transport). 3) immediate reduction of cost of doing business for companies, and reducing the cost to the government also. This cost reduction for business could have come as reduction of fees and levies to government, improvement in transportation( better road, more rail etc). reduction of cost to governing, would have come in removing waste, fraud and abuse from government, scrubbing the budget of each MDA, and reduction of government workforce.

  • vic

    GUARDIAN, BE COURAGEOUS AND PUBLISH THE COMMENT BELOW WHICH IS TRUE TO ITS CORE OR ARE YOU AFRAID OF BUHARI??

    NIGERIA MUST MOVE FORWARD AND IN THIS REGARD YOU MAY WISH TO MAKE YOUR OWN CONTRIBUTION BY TRULY REPRESENTING THE VIEWS OF YOUR READERS LIKE MYSELF. REMEMBER, THIS IS DEMOCRACY AND READERS HAVE THE FREEDOM OF EXPRESSION.

    TRUTH IS ALWAYS BITTER BUT YOU DO NOT NEED TO PROTECT THE OBVIOUS CROOKS AND PROVEN LAIR POLITICIANS OF NIGERIA.

    PLEASE BE ABOVE BOARD IF NIGERIA IS TO MOVE FORWARD.

  • forestgee

    Surprisingly people keep saying Buhari has no plan. But he has one: “body language and do nothing”! About 6 months already wasted and if we take away the last year of his administration for campaigns and elections, PMB is now left with 21/2 years. Yet there is no sense of urgency…

  • Ify Onabu

    When Buhari would have finished fighting his ‘war’ against corruption, he will address the issues affecting the economy… in 2019!

  • vic

    ARRIVAL OF BUHARI AS PRESIDENT OF NIGERIA SPELLS DOOM AND GLOOM FOR THE POOR MASSES PENSIONERS AND YOUTHS OF NIGERIA.

    BUHARI, THE ILLITERATE DEADWOOD PEASANT PRESIDENT OF NIGERIA HAS NO IDEA AS TO HOW TO MOVE NIGERIA FORWARD. HE HAS PROVED TO BE AN INCOMPETENT AND IRRESPONSIBLE FUDGED-IN PRESIDENT WITHOUT ANY IDEAS AND DEVELOPMENT PLANS FOR NIGERIA.

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