“We knew that this was going to happen because economy that specialises in exporting primary products and importing manufactured goods would end up having terms of trade shifting against it. You can have a temporary boost, but if you don’t use that boost to have a structural adjustment that would make for prudent management of the economy, you would be courting trouble”.
With this expose by Muhammadu Sanusi , the ex-CBN governor and the Emir of Kano, the deep root of the current recession is laid bare for all to see. The summary of it all is that the nation is tossed into a deep hole by the planlessness of the past governments. The statistics are disturbing, GDP decline to 2.06 per cent, growth of -17.48 per cent in real terms; a projected -1.8 per cent change in real GDP for 2016. the worst annual recession since 1987 and many more. In fact, the yawning hole in the economy is endless.
Then how can the nation dig its way out of the hole of this recession? Well, there are plenty of opinions floating around, particularly from the affected stakeholders
For instance, the President of the Manufacturers Association of Nigeria (MAN), Frank Jacobs, said emphasis should be laid on the need to fund the productive sectors of the economy adequately so that the tempo of industrialisation attained by the country can be sustained, as well as save the sector from the current economic tsunami. He said: “Moreover, export of manufactured products and, indeed, other finished products should be encouraged in order to make up for the deficit we are currently witnessing in the forex market while exporters should be encouraged to repatriate accrued funds home. The government should also explore other avenues of foreign exchange inflow outside oil sales by giving incentives to exporters and introducing ‘counterpurchase strategies’ used in the not too distant past by countries like Malaysia, Singapore, Brazil among others which included conditionalities for forex generation before being given certain size of dollar-denominated contracts like defence or power.”
The Organised Private Sector (OPS), maintained that it is important to encourage the manufacturing sector to grow in view of the critical role it plays in job and wealth creation as well as technology and skill acquisition.
Though stakeholders in the real sector said the Federal Government’s new policy of allocating 60 per cent of foreign exchange (forex) transaction was commendable and would facilitate restoration of the sector and economy at large, the Lagos Chamber of Commerce and Industry (LCCI) warned that it could pose a risk to the stability and transparency of the forex market and thereby work contrary to its purpose of restoring the economy.
The Director General of the Chamber, Muda Yusuf, noted that the policy discriminates against other sectors, outside the manufacturing which account for over 85 per cent of the country’s GDP and jobs in the economy.
“If a minimum of 60 per cent of all forex allocation goes to manufacturing for raw materials and machineries; what happens to other sectors? Currently petroleum products imports are priority and could take another 25 per cent of foreign exchange. This implies that the rest of the sectors would settle for the balance of 15 per cent. This is clearly not a sustainable framework.
It is important to recognise the interdependence of sectors and the integrated nature of the economy. All sectors complement one another for the economy to function properly. This is not to diminish the critical importance of the manufacturing in the economy. But we should realise that other sectors play important roles as well. Such other sectors include ICT, telecoms, real estate, transportation, aviation, maritime, tourism, hospitality, entertainment, agriculture, distributive trade, health services, education services, broadcasting, print media, solid minerals, engineering and construction to mention a few. There are also very important invisibles that will require foreign exchange. The sustainability of the forex sectoral allocation policy is in doubt. It could only create more confusion in the foreign exchange market,” he said.
According to Yusuf, fiscal policy measures are better suited to address sectoral imbalances than monetary policy. “Such policy tools include import tariffs, taxation and other incentives. Above all, there is need to upscale infrastructure investments very urgently. These are the more effective ways to fix the structural problems of the economy than monetary policy. What is key for monetary authorities is to ensure that financial markets are efficient and transparent; and to ensure that there is discipline among players.”
On the appropriate steps to rebound the economy, he said: “This is the time to seek quick wins. One of the quick wins is to review current trade policy measures in order to reduce the pressure of cost on investors and citizens. The exchange rate depreciation has an inherent structural effects on the economy. It naturally rewards inward looking initiatives and resource based enterprises. It is too much of a shock on the economy to combine high import duty regimes with a weak and rapidly depreciating currency. Conversion of import values at current exchange rates for purposes of computation of import duty and other port charges have escalated costs beyond measure and had paralysed many businesses.
“The burden of cost and inflation has become unbearable, which is what the economy is experiencing at the moment. The poverty situation has also been aggravated. The proposition here is to moderate the inflationary pressures and ease poverty conditions by reviewing import duty regimes and the various trade facilitation issues at the nation’s ports. This could be done without undermining current economic diversification drive.
There should be a more effective oversight over the terminal operators and shipping companies to curb unfair charges on imports and exports made possible by the several monopoly structures in the maritime sector.
Ensuring a balance between the interests of investors, producers, consumers and the welfare of citizens is a strategic imperative at this time.”
Stakeholders also opined that the Federal Government may need to pump more money into circulation to turn the economy around.
The Director General of Nigeria Employers Consultative Association (NECA), Segun Oshinowo, explained that all over the world, nations get out of recession through spending on workers and infrastructure.
“One of the things that has restrained growth is power. This has dropped significantly in the last two decades, we have to invest a lot more. It’s a shame that a country like South Africa has better power supply than Nigeria despite our huge population. It’s unfortunate that our mess has now turned into a disaster through government policies”, he stated.
He added that another area that government can restore the economy would be through regular payment of workers salary, “Even though, the Federal Government is able to pay its workers, federating states are not and the income of workers play significant role to the economy. If the workers are empowered economically, they would be able to spend more and this will trickle down to the common man on the street.”
Managing Director of Financial Derivatives, Bismark Rewane, as part of the solutions, charged the Federal Government, to as a matter or urgency, ensure that the country produces what it consumes and stop salivating over foreign goods that keep depleting the nation’s foreign reserves.
Rewane said the Federal Government has a duty to start addressing the core issues in the economy frontally, adding that no country has ever created a great economy by depending on the industrial outputs of other nations.
Members of the organised labour equally condemned the country’s near-total dependency on imported manufactured goods, ranging from the simplest household consumer items to the most complex industrial inputs, stating that such makes the economy more vulnerable to both internal and external shocks. Nigeria imports at least 70 per cent of its refined fuel, despite pumping 1.6 million barrels of crude oil a day in June 2016 according to the International Energy Agency (IEA). This lack of a strong production base has resulted in imported inflation.
The Nigeria Labour Congress (NLC) President, Ayuba Wabba, said that the recession leaves Nigeria with no alternative than to make good this plan by coming up with comprehensive, inward-looking policies to boost production and thus mop up the excess labour force in the market.
The Federal Government, he added, must also focus its policy on massive spending as a way out. “As the purchasing power of the citizenry is low at the moment (due mainly to months of unpaid workers’ salaries), government needs to enhance individual liquidity by spending wisely on agriculture, infrastructure and stimulating the manufacturing sector. More efforts must be made to pay the backlog of workers’ wages. We must increase the consumption of locally-made goods and services. We must export more to drive the economy.
Other analysts also suggested that the federal and state governments should borrow from the capital market to finance revenue-yielding capital projects, ensuring that contractors are faithfully paid to enable them pay their workers.
“The economic policies of the Federal Government must also be shaped to attract Foreign Direct Investment, not just portfolio investors. But we must warn that foreign investors will only take a chance on our economy when they see that our local investors are also investing”, according to one of them.
In his contribution, the Executive Secretary, Association of Telecommunication Companies of Nigeria (Atcon), Mr. Ajibola Olude, expressed optimism that Nigeria can move out of recession through right policies.
He said: “Measures to be adopted by a nation under recession include the devaluation of the nation’s currency. By devaluing the naira, imported goods will become more expensive and Nigerians will be forced to buy goods made in Nigeria.”
“Nigeria could also reach out to organizations like IMF, World Bank and the likes to lend money to either offset or finance its expenditures. Nigeria at this period must as a matter of urgency embark on diversification model to increase her foreign exchanges, while Nigerians should be encouraged to patronise made in Nigeria goods.”
Mr Felix Akhime, in his contribution, however, noted that borrowing and devaluation will add to the nation’s woes, rather, he advised that the country should develop its natural resources as well as the IT sector to fast track growth.
“Nigeria should be known for a particular product, invest in innovators, let them think outside the box. With encouragement from the government, their products would be globally accepted. FG should not only rely on agriculture alone, but spread its tentacles to ICT, which is another alternative to oil. Before we know it, recession would be the one to pack its belongings and the country would be great again, that is, if government is truly sincere about making Nigeria great again”.