The new threats to a challenged economy

AFTER five quarters of economic contraction (Q1 2016- Q1 2017), Nigeria exited recession. With a positive 0.72 per cent GDP growth in Q2 2017, economic recovery has been slow and grinding, reaching 1.9 per cent in Q1 2018 and declining to 1.5 per cent in Q2 2018. Consequent on this, the economic wellbeing of many Nigerians has been unsatisfactory. Indeed for many, there is actually no evidence that the recession was over.

The difficulties in the economy are logical, given that a GDP growth of 1.5 per cent against a population growth of 2.5 per cent can only result in decline in GDP per capita, and therefore many Nigerians will naturally continue to feel that the recession was still subsisting. The modest and tentative recovery from recession occurred mostly because of the recovery in the price of crude oil in the international market.

In January 2016, a barrel of crude sold for $29.78; but by October 2018 the price had recovered to nearly $80 per barrel, with projections that it could hit 100 dollars per barrel. The Economic Recovery and Growth Plan of the Federal Government, ERGP, is expected to be supported by the recovery in oil prices. Certainly the significant rise in our foreign exchange reserves from about US$24 billion in Q4 2016 to nearly US$44 billion in November 2018 derives essentially from this recovery in global price of crude petroleum.

The arrest of the devaluation of the Naira from about N500 to about N360 against the US dollar was made possible by the significant improvement in the price of oil. That became a major factor coupled with the CBN tight monetary stance in reigning in the inflation which had reached nearly 20 per cent in Q4 2016, but today is under 12 per cent. Despite these improvements in macroeconomic indicators, the government has had to face up to the unrelenting growth in unemployment and underemployment.

The current efforts at social spending, including conditional cash transfers, CCT, to the poorest of the poor, some support to the industry and micro financing need more time and sustained intensity to show significant result. But the hope for sustained recovery is facing three threats. One is the changing focus to politics, and the diminishing focus on good governance.

By Mazi Sam Ohuabunwa

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