Nigeria’s Economic Recession – A Recovery in Sight?

We have been through difficult economic times but with some of the actions the apex bank has taken, the economy seems poised to take a turn for better. As Nigerians groan under the burden of the recession, it must be comforting to know that respite is in sight. The CBN had set in motion, beginning last year, a set of policy actions to soften the impact of the recession, and ultimately reverse it and restore the nation’s economic fortunes. As early as May 2016, CBN Governor Emefiele had warned of the approaching headwinds of the recession and moved quickly to try and stop it. But budgeting delays originating in the National Assembly and the controversy over the proposed ‘Emergency Spending Bill’ hampered adequate intervention. However, the Bank’s timely reaction helped to reduce the destruction potential of the recession when it finally made landfall in 2016. The recession could have been worse in effect without those policy actions.

To ‘get’ the thinking behind the policies that have been deployed by the CBN to combat the recession, one needs to recognize the source of our economic woes. Indeed, Economists may differ on the theoretical solutions to pull the economy out of the recession but most agree that the bulk of our economic troubles is traceable to Forex scarcity occasioned by a steep drop in oil prices, falling and unstable oil production, a lack of exports, as well as an unhealthy dependence on imports.

The CBN, leaning on its insights on the chief source of he recession, appears to approaching the recession challenge by applying policy actions that:

– increase our supply of Dollars;
– reduce our Dollar spending;
– increase production of vital consumables, especially agricultural products and;
– stimulate the local economy by promoting higher liquidity and boosting consumer confidence

The Bank therefore set about restoring economic normalcy with a combination of policies that sought to achieve the four identified policy targets. Some of the specific actions taken by the CBN from 2016 to pull the economy out of the recession include but not limited to:

– adjusting exchange rate policy sufficiently to attract more foreign investments within the last year despite the challenging economic climate.
– taking constitutional steps to discourage hoarding of forex by licensed BDCs
– pushing an Emergency Spending Bill through the National Assembly to enable the government overcome cumbersome procurement rules that delay the award of government contracts. Had the Bill been signed into Law, the government would have fast-tracked the award and payments for contracts to improve the liquidity in the economy.
– A direct injection of N420Bn into the economy so far; with another N374Bn also due to be injected shortly
– The Anchor Borrowers’ Programme begun in 14 states in the current phase will cover the training and funding of  100,000 farmers of priority agricultural products and provide a guaranteed market for their produce. The plan is to roll the programme across the country, potentially doubling the number of farmers currently benefiting from it.
– The N5000 per month social programme already implemented in the first phase across six states will be expanded to accommodate even more states and people.
– 1,000,000 traders are to get subsidized loans to support their operations.

Clearly, increased public spending is at the heart of the government’s recovery strategy, in keeping with the time-honoured Keynesian tradition, going back to the Great Depression, of economies to spend its way out of a recession. The government intends to source part of the money from a $30Bn proposed loan request currently at the National Assembly, as well as from increased earnings from non-Oil exports and improved taxes.

The CBN’s proactive tackling of the recession has helped to improve the economic outlook for 2017. Multiple relevant institutions forecast a positive GDP growth for Nigeria by next quarter, confirming the CBN’s expectations that the economy is heading for a recovery. Both the World Bank and IMF predict a recovery for Nigeria in 2017. The World Bank, for example, expects the Nigerian economy to grow by 1% in 2017. Apparently modest given previous trend but attaining positive growth rate is a great start. Moreover Nigeria’s expected GDP growth gives much to cheer when viewed in the context that the country is dealing with the deepest recession in decades.

The path to economic recovery has not been as smooth some would like. But it has not been as turbulent as critics had envisaged. Analyst had earlier noted with concern that Monetary Policy from the CBN  had done much of the heavy lifting in getting the economy to recovery without the Fiscal Policies that traditionally accompany them (monetary policies). Such Fiscal Policies, including adjustments to taxes and government spending rules which are typically outside the direct mandate of the CBN, have since been stepped up to tackle the recession to produce economic policy harmony. That policy harmony is the basis for promise of economic recovery now predicted by experts to happen early rather than later .