Federal Government’s overbearing political considerations over economic decisions have been identified by some stakeholders as majorly responsible for lingering crisis typified by deteriorating living conditions of the citizens.
The implication is, according to them, delay as well as misjudgment in economic decisions, which has resulted in the lack of symmetry between monetary and fiscal authorities.
Nigeria’s economic problem is a consequence of poor political decisions, usually influenced by rationale other than economic thinking, and that is why we are suffering, says an analyst who pleaded anonymity.
“There is an urgent need for accelerated reforms, recognising that Nigeria can no longer rely on the certainty of robust oil earnings,” Razia Khan, managing director, chief economist, Africa Global Research, Standard Chartered Bank, London, says.
Bismarck Rewane, economist and chief executive, Financial Derivatives Company (FDC) Limited, in his November 21, 2016, monthly economic outlook, observed that policy divergence still lingered in the economy as the last Monetary Policy Meeting for the year was in a “period of increasing conflict between monetary and fiscal policy makers.
“In theory, the two sides of the policy coin are expected to be complementary to achieve sustainable growth and price stability. However, this is not the case at this time. On the political front, the president is also under immense pressure to reconcile divergent interests within his party, government, legislature and even the judiciary.”
Rewane said the Central Bank of Nigeria (CBN) and monetarists were of the view that a “foreign exchange supply gap is the fundamental reason for imported inflation as well as the pass through effect of exchange rate weakness into prices as the main culprit.”
Consequently, their strategy is to achieve exchange rate stability through sterilising large chunks of naira, pushing up interest rates in the Treasury Bills market, restricting demand (with the 41 items and other capital controls) and achieving an IFEM rate of between N305-N320/$, that is acceptable.
Their thinking, according to Rewane, is that if the exchange rate crisis is contained, inflation is curbed, economic activities will pick up and new investments will begin to trickle in.
However, the “fiscalists on the other hand have a three-point agenda of economic recovery and growth plan, the borrowing programme and the budget, with a significant pushback from the National Assembly, which is stalling the achievement of these plans.”
Analysts at Cowry Asset Management Limited in their economic outlook for the week say their expectation is that the “fiscal authority will complement the monetary tools by fast-tracking key socio-economic reforms that will improve ease of doing business and help boost productivity, which is necessary to spur economic growth.”
According to a Consumer Expectations Survey Report by the CBN, the overall outlook of consumers in Q3 2016 remained downbeat even as Consumer expectations for the next quarter slipped to 17.8 in Q3 2016 from 20.3 in Q2 2016.
“Given the aforementioned, and in the absence of significant improvement in economic conditions, we anticipate sustained economic decline in the short to medium term. We therefore advise the fiscal authorities to expedite structural reforms which will boost confidence and increase productivity,” according to Cowry Asset analysts.
The lethargy on the part of government, according to some other analysts, has resulted in the non-articulation of policies such as diversification of the economy.
Friday Ameh, an energy analyst, observes for instance that recent government’s pronouncements on exploitation and transportation of crude oil as well as turning around of the dead refineries are at variance with its avowed commitment to diversification and less reliance on oil as the major foreign exchange earner.
John Groffen, ambassador, Kingdom of the Netherlands, in a recent interview with BusinessDay said, “We fully understand the need for the diversification of the economy because if you only have one product, if you do not add value to this product and something happens in that sector, you are lost. That is the present situation.
“Nigeria is challenged because of the drop in crude oil price. So, you need to diversify. We know the government wants to do this and we have been very supportive of the government policy. We believe that a lot of potential in the economy of Nigeria is being unutilised and we will like to partner with Nigeria – ministries, companies and industries. And the particular area we will like to cooperate is in the field of agriculture.”
