2018: Experts predict better economic performance

From available statistics, the Nigerian economy recorded some improvements in the 2017 fiscal year over the previous year. For assistance, the economy, through recovering crude oil prices and higher oil production, witnessed a positive Gross Domestic Product growth trajectory after a debilitating recession that spanned five quarters in a row. However, the foreign exchange market was less chaotic as a result of a remarkable accretion to the external reserves, which surged from $25.84bn on January 3 to $38.7bn on December 28, 2017. Similarly, inflationary pressure moderated considerably from a peak of 18.72 per cent in January to 15.90 per cent in November 2017. The stock market was bullish on the average, posting impressive returns, with the Nigerian Stock Exchange All Share Index recording 43.39 per cent year-to-date gain as of December 13, 2017, which significantly surpassed the negative performance of the previous year. The World Bank’s Ease of Doing Business ranking, in which Nigeria moved up 24 places, was indicative of an improved business climate. But it was not all cheering news in the year just gone by. The recent disclosure by the National Bureau of Statistics that the unemployment rate jumped from 14.2 per cent in the fourth quarter of 2016 to 18.8 per cent in the third quarter of 2017, while a total of four million people became unemployed during the first nine months of the just concluded year seem to outweigh the many positive economic developments in 2017. Reflecting the low growth environment and exposure to the oil and gas sector, the banking industry’s solvency ratios declined from about 15 per cent to 10.5 per cent between December 2016 and October 2017. Non-performing loans in the banking sector rose to 15 per cent as of October 2017, well ahead of the Central Bank of Nigeria’s regulatory threshold of five per cent. Against this backdrop, finance and economic experts on Sunday predicted further improvements in some key economic indicators in the 2018 fiscal period. They, however, warned that the combined forces of double-digit inflation, high unemployment rate and a fragile GDP growth, which is still below the rate of population growth, might conspire to prevent any significant improvement in economic indices on the welfare of the ordinary Nigerian. For instance, the immediate past President of the Abuja Chamber of Commerce and Industry, Mr. Tony Ejinkeonye, said the non-passage of the 2018 budget by the National Assembly before the December 31 date set by the Executive would slow down economic activities in the first quarter of this year. He stated that there was a need for the Federal Government to inject more funds into the economy to enable it accelerate the implementation of the Economic Recovery and Growth Plan. Ejinkeonye explained, “The economy requires significant fiscal injections to sustain and accelerate the Economic Recovery and Growth Plan put in place by the present administration. “With the significant investment in infrastructure, education and agriculture, among others, there is also hope that the country’s efforts in diversifying the economy, revenue and export base are to be sustained. “The capital aspect of the 2018 budget is an indication that sizeable resources have been allocated to capital expenditure, which means more effect will be felt in this regard as compared to the previous years where only lip service was paid to the matter.” He added, “As it stands today, the 2017 national budget is still under implementation and there is every tendency that it may last till June 2018, yet the President in his wisdom announced that the 2018 budget will commence implementation from January 2018. “This will introduce some elements of confusion in the way it is carried out as it may be difficult to appropriately track each of the budgets except urgent and responsible measures are put in place to comprehensively take care of this.” Also commenting, a developmental economist, Odilim Enwagbara, said in a telephone interview on Sunday that a liquid foreign exchange market, coupled with the Federal Government’s increased investment in the value chain segment of the agriculture sector, would unlock the job creation potential of the economy. He stated, “This country cannot develop without those who are passionate and ready to show us the unconditional ways of dealing with our fundamental economic problems. Let us know that economic development is 70 per cent political decisions and 30 per cent economics. “Agriculture, particularly food processing can create a lot of jobs, because we don’t need to import raw materials and it costs little or nothing to get food processed; we can process a lot of cassava and turn it into so many products, and this will create a lot of jobs for the people. “To drive economic growth, there is a need for investment in infrastructure. Without improving infrastructure, there is no way you can expect growth in an economy, because industrialisation, which is an essential way of creating jobs in an economy, needs to be supported by infrastructure.” He called for a reduction in lending rate in 2018, adding that this would assist small businesses to thrive. “Also, the cost of funds, which is very high, should be reduced and the only way to reduce it is to make sure that people get alternative financing through development banks like the Bank of Industry, Bank of Agriculture and NEXIM Bank, because commercial banks can’t give loans at single digits,” Enwagbara added. The Registrar, Chartered Institute of Finance and Control of Nigeria, Mr. Godwin Eohoi, said to achieve the expected growth rate in 2018, the economy needed higher levels of private investment, adding that fiscal stimulus should be applied in the medium-term through a package of spending to stimulate domestic demand and investment in the economy. He explained that building on the 2017 budget initiatives, the expansionary drive on public sector infrastructure spending should be sustained in the new year. Eohoi stated, “Efforts should be geared towards stimulating private sector capital and participation in investments in energy, transport, housing and agriculture. This should be supported by improvement in the implementation of the capital budget and efficiency of spending generally. “Government should work towards strengthening the frameworks for concession and public-private partnerships, including working with the legislature to address legislative and regulatory bottlenecks undermining private investments in key sectors. “It is expected that growth, in the medium-term, will generate the revenue necessary for future expansion of public service delivery, rebuild fiscal space, and narrow new borrowing requirement.” The Head, Banking and Finance Department, Nasarawa State University, Keffi, Uche Uwaleke, predicted that the economic performance in 2018 would be a marginal improvement over the last year’s. This, according to him, is because government revenues are still highly dependent on the oil sector and the performance of the economy in the new year will be powered by the happenings in the international crude oil market. Uwaleke, an associate professor of finance, explained that OPEC’s decision to extend the output cut agreement through 2018 had provided a guarantee that the crude oil price would stay above the budget reference price of $45 per barrel. He, however, warned that the negative effects of the current fuel scarcity, which made the whole of December a period to forget for most Nigerians, might likely linger into the first quarter of 2018 as inflation, which is beginning to reduce, would spike in January. He added “In response to the rise in inflation, the Monetary Policy Committee members in their meeting of January will leave the policy parameters unchanged namely the Monetary Policy Rate at 14 per cent, Cash Reserve Ratio at 22.5 per cent and Liquidity Ratio at 30 per cent. “There will be no significant departure from this monetary policy stance even during the MPC meeting of March 2018. The Federal Reserve’s policy of interest rates normalisation in the United States as well as the likely monetary tightening stance in the United Kingdom, where inflation rate has exceeded the Bank of England’s target of two per cent, will be a good reason to hold the policy rates throughout the first quarter of 2018.” In his comments, a former Managing Director, Nigeria Deposit Insurance Corporation, Ganiyu Ogunseye, said the pressure to make last-minute impression on Nigerians through populist policies would result in lots of trade-offs. He stated, “The 2018 fiscal year is a year of political economy, because it’s going to be a year to another election and the executive and legislature have to mend fences. This is because the relationship has not been cordial from what we see, and there a lot of fundamental issues that require the approval of the legislature, which if left undone, will affect the rate of progress in the economy. “There is a need to strike a balance between economic imperatives and political experiences, otherwise, 2018 can provide a lot of challenges than we had in 2017.”