Recession: Revisiting IMF/ World Bank’s Verdict

The predictions by World Bank and International Monetary Fund (IMF) that Nigeria economy’s current recession will rebound this year signpost better days ahead, ABDULWAHAB ISA reports

Economic growth by mere one per cent should not spur excitement. A one per cent growth will be too insignificant to deliver impactful mileage in an economy heavily burdened by recession as Nigeria is currently experiencing.

However, the declaration, last week, by the World Bank and International Monetary Fund (IMF) that the country had demonstrated signs of gradual recovery from recession elicited positive feelings.

The verdict

As a way of consolidating the position of government, the global bank corroborated projection by the Federal Government that Nigeria will exit recession this year. Nigeria officially got into recession in the second quarter of 2016.

Making the declaration in its January 2017 Global Economic Prospects report released last week, the World Bank forecast that Nigeria would grow at one per cent and that the global economy would accelerate moderately to 2.7 per cent in 2017.

“Sub-Saharan African growth is expected to pick up modestly to 2.9 per cent in 2017 as the region continues to adjust to lower commodity prices.

Growth in South Africa and oil exporters is expected to be weaker, while growth in economies that are not natural-resource intensive should remain robust.

“Growth in South Africa is expected to edge up to a 1.1 per cent pace this year. Nigeria is forecast to rebound from recession and grow at a one per cent pace.

Angola is projected to expand at a 1.2 per cent pace,” the report says. The Minister of Finance, Mrs. Kemi Adeosun and Governor of Central Bank of Nigeria (CBN), Godwin Emefiele, had both said that the country would return to growth this year.

The report stated that fiscal stimulus in major economies, particularly in the United States, could generate faster domestic and global growth than projected, although rising trade protection could have adverse effects.

“Growth in emerging market and developing economies as a whole should pick up to 4.2 per cent this year from 3.4 per cent in the year just ended amid modestly rising commodity prices,” the report predicted.

However, the World Bank noted that the global economy’s outlook was clouded by uncertainty about policy direction in major economies, adding that a protracted period of uncertainty could prolong the slow growth in investment that is holding back low, middle and high income countries.

Making similar prosperous projection last week, the IMF forecast Nigeria’s economic growth this year at 0.8 per cent, from the 0.2 per cent that the Fund had projected for the country’s growth last October.

In its latest World Economic Outlook, the IMF said its forecasts for Nigeria were revised up mainly to reflect high oil production due to security improvement in the country.

The Fund also revised its forecast for Nigeria in 2018 to 2.3 per cent from its previous projection of 0.7 per cent. According to the Fund, economic activities in both advanced economies, developing economies and emerging markets is forecast to accelerate in 2017–18, with global growth projected to be in line with its October forecasts at 3.4 per cent and 3.6 per cent respectively.

The IMF, however, noted that while outlook for advanced economies had improved for 2017–18, reflecting stronger activity in the second half of 2016, as well as a projected fiscal stimulus in the United States, growth prospects have marginally worsened for emerging markets and developing economies, where financial conditions have generally tightened primarily as a result of the sharp drop in commodity prices.

“For the countries hardest hit by the decline in commodity prices, the recent market firming provides some relief, but the adjustment to reestablish macro-economic stability is urgent.

This implies allowing the exchange rate to adjust in countries not relying on an exchange rate peg, tightening monetary policy were needed to tackle increases in inflation and ensuring that needed fiscal consolidation is as growth-friendly as possible.

“The latter is particularly important in countries with pegs, where the exchange rate cannot act as a shock absorber. “Over the longer term, countries highly dependent on one or a few commodity products should work to diversify their export bases,” the Fund stated.

Recovery/growth

plan: On proclamation by relevant agencies – the National Bureau of Statistics (NBS) and the World Bank said that Nigerian economy entered recession with all major indices contracting to negatives.

With the revelation, the Federal Government unveiled a document it tagged ‘Economic Recovery and Growth Plan (ERGP).’ The Minister of Budget and National Planning, Udoma Udo Udoma, presented the document to the National Economic Council.

He listed the three “strategic objectives” of the plan as restoring growth, investing in people and building a competitive economy.

He said the plan, as a short-term option, sought such home-grown actions as identifying revenue sources to plug fiscal deficit and boost reserves as well as implementing bold structural reforms in the areas of power, road, railways, public service reform and competitiveness.

The minister added that the plan also sought to project a six to seven per cent Gross Domestic Product growth and recovery by 2020. Presenting the document to members of private sector and technocrats of leading agencies at a retreat in Abuja, Udoma said: “You have all been invited to work with us as we continue our journey to transform the Nigeria economy.

This retreat is intended to provide an opportunity and a platform for a variety of stakeholders from across the entire spectrum of national life to consult and exchange views on a medium term economic plan for Nigeria. We are at a critical juncture in our national development trajectory.”

The Federal Government Strategic Implementation Plan (SIP) is anchored on four policy fundamentals – investing in critical infrastructure, embracing the private sector, fostering social inclusion and job creation and improving security and tacking corruption.

At various fora, government expressed confidence that with the several initiatives embarked upon, the country’s economy would soon be on track.

Experts’ tips

Experts have also tipped government on what is to be done to lift the economy from recession. A former Abia State Governor, Dr Orji Uzor Kalu, last week, advised President Muhammad Buhari to source funds, including from the IMF and inject same into the economy to enable the country come out of its current economic recession.

Such money, he reasoned, could be channeled into massive road/ bridge construction and other infrastructural projects.

Speaking in Port Harcourt at the official opening of Swiss Spirit Hotel, the former governor advised government to pay more attention to agriculture and other non-oil sectors, stressing that “once the artisans are active, the economy will be active.”

He posited that money spent on infrastructural development would eventually create more jobs for the citizenry and engage those who were already out of work.

However, an agriculturist, James Idahosa, advised government to develop the manufacturing sector concurrently with agriculture to enhance the success of its diversification agenda.

Speaking recently in Abuja, he said: “The Nigerian government should make Nigerians understand that there are different careers in the agricultural sector.

What Nigerians seem to understand from the message passed by government is that everyone should go into farming but agriculture comprises much more than digging up the soil to plant.

“The sector creates room for scientists who are needed to study soil texture, patterns and weather conditions that is conducive for planting.

“It also requires marketers, market analysts, and salesmen of agricultural products and equipment that would make production and economic activities easier for agricultural firms and producers.

“There are also those who deal with logistics, who strategically manage the chain of demand and supply and ensure that the production, supply, distribution and storage of products, are in good condition.

Conclusion

As projections by world leading financial institutions signpost that the economy is on its way to recovery, there is need for government to faithfully implement various contingent plans it set for the economy as defaulting on this may further spell doom for economy.