Contrary to the position of notable economists that the economic recession the country is currently enmeshed in will last a while, governor of the Central Bank of Nigeria (CBN), Mr Godwin Emefiele, has said the recession is nearing its end as its worst part is over.
Emefiele, who gave this assurance while addressing members of the Nigeria Newspaper Proprietors Association (NPAN) in Lagos, promised that the recession would become history by the end of the year.
According to him, “The Nigerian economy is on the path of recovery and growth.”
He continued, “Trust me, if you are standing as a bystander, you are losing by being a bystander. Join the train now before the bus leaves the bus station. Let me repeat myself, we are already in the valley, the only direction for us to go is up the hill.
“Government is doing everything possible to ensure we move up the hill as quickly as possible. I am optimistic that with the action being taken by government, the monetary and fiscal authority, by the end of the fourth quarter of the year, Nigerians will see that the economy has started to move up the hills, out of recession.”
He added, “I must apologise that people are suffering, I must apologise that this is happening to our people, but I must confess that what is happening today is as a result of a global crisis; a global crisis in the sense that we’ve seen commodity prices dropping, we’ve seen geopolitical tensions all around the world. Here, we are talking about political tensions between Russia, Ukraine and the US and EU staying on one side and watching; political tensions between Saudi Arabia and Iran, trying to play their game.
“Of course, the US Fed, following the mortgage crisis of 2009 took a couple of actions, which given the size of the US economy in the world, have had an impact, both positive and negative on emerging and frontier markets which is where Nigeria unfortunately stands today.”
On the country’s descent to the current recession, the CBN governor said it was a consequence of the nation’s over-dependence on oil revenue over the years as well as the people’s insatiable desire for imported items.
He expatiated further, “I think that when you want to address the question of how did we get here, it is important to go back into the history to remind ourselves that there was a time in this country when we survived only on revenues from agriculture produce.
“There was a time in this country when we survived on revenues from groundnut pyramids in the northern part of the country. There was a time when this country survived on revenue from cocoa that was being produced and exported to the extent that the tallest building at the time, Cocoa House, was built with revenues from the export of cocoa.
“There was a time when this country survived on revenues generated from the production and export of palm oil and palm oil products from the mid-western and south-eastern parts of the country.
“At that time, I’m talking about the 50s and the 60s, Nigeria was the largest producer and exporter of palm produce in the world. Unfortunately, we abandoned it because we found oil. I wish what we did at that time was to ensure that we held strongly to our potential in agricultural sector.
“If we had held strongly to our potential in the agricultural sector and in the same vein, held strongly to the potential that we have because we found oil, our story will be different today,” he said.
Assuring that the management of the foreign exchange by the apex bank was producing positive results, he said, “I must say at this time that we are somewhat happy that it is paying off because in two and a half months, we’ve seen at least close to $1 billion coming in as inflows into the market.
“And the reason this has happened over these two and a half to three months was because other than just liberalise the market, we brought into the market the OTC Futures market – a market that provides opportunity to reduce the volatility in the FX market so that people will not puncture their supply in the market on demand for FX in the spot market and so that they could do their business without fretting over the exchange rate.”
Speaking on the government was tackling recession, Emefiele said, “Basically, what you would do is to spend your way out of the recession and we have not stopped talking about the fact that we need to spend our way out of the recession. I will tell you what has happened and what specific actions we have taken to take us out of this situation: the budget like you know was approved in May 2016 and of course by that time we had started to see signs that the economy was contracting.
“Unfortunately, the procurement process is such a long one in the public service, and you dare not breach the rules on the procurement process. I will give you an example, when you start a procurement process for an item, what happens is that you first advertise in the newspapers calling for bids; that process takes 12 weeks, which is three months.
“Imagine starting a procurement process in say May or June, you will agree with me that by now, you will be opening the bids, now when you open the bids and see the numbers, you begin to negotiate prices, after that you go to the Bureau for Public Procurement (BPP), may be after that you go to Federal Executive Council (FEC) to get approval and that takes another six months.
“What all this means is that we must shorten this process, but shortening this process means that we need to have an emergency spending bill, which I am aware is ready before the National Assembly for approval. What that does is to remove all the bottlenecks that are involved in the process of procurement so that government will spend the money to stimulate the economy.
“Unfortunately, at the time the budget was being approved, we started also to see a reduction in revenues, we started to see the Niger Delta Avengers agitating and I must confess to you that at this time the revenue from oil exports is down to less than $500 million on a monthly basis from a peak of $3.5 billion sometime in 2015.”
Continuing, he said, “On our side in CBN, when we found out that there was a likelihood this was going to happen, we started to advise that there was the need for spending. In March, we reduced the CRR from 30 per cent to 25 per cent and we told the banks; and this was despite the fact that inflation had also started to rise astronomically beyond our target.
“However, we said this cash we are giving you, about N1 trillion, we asked the banks to channel this money to agriculture and the manufacturing sector, as the reduction in CRR will help to moderate interest rates and also improve industrial capacity that will moderate inflation.
“But I must confess unfortunately, this didn’t happen and because it didn’t happen, during the subsequent MPC meetings we said okay, we will reduce CRR again and by reducing CRR, what we want the banks to do is that we will not give them cash, but asked them to find primary agriculture projects or new manufacturing project, and send them to us in CBN, so we will disburse those funds to the banks and they in turn can loan this money at nine per cent to the relevant sector.
“Again, I must confess that till date, the result has not been very encouraging. That is the reason the CBN continues to remain determined to ensuring that its intervention funds go directly to agriculture, either for its Anchor Borrowers’ Programme or its intervention to the micro, small and medium enterprises (MSME) some of the N220 billion would kick in a more aggressive manner to ensure that there is injection of liquidity that will help spur industrial and agricultural capacity.”