The Federal Government has raised hopes that the economy which slipped for two consecutive quarters this year and is currently performing worse at least in recent years, will not eventually slip into recession as is being widely speculated.
Vice President Yemi Osinbanjo, allayed fears of a possible recession as he spoke to select journalists at the weekend in Abuja, assuring that government is putting in place pro-people policies that would quickly reverse the trend, especially when the implementation of the 2016 budget begins in ernest.
“And some of the policies that we want to put in place would also be helpful. We expect that agriculture will also kick in; we expect that funding for MSMEs will kick in. So, we think the trajectory will be good.
“Some have suggested that a recession is inevitable, I don’t think so. I think that we are well on the way, especially if we are able to implement our budget well. We are well on the way to getting out of the worst part of where we are today. And I think things will improve,” said the Vice President.
Growth had come under severe strains arising from declining private and public expenditures, majorly caused by low government revenues, and the impact of non-payment of salaries at the state and local government levels has posed a key dampening factor on consumer demand.
The CBN last Tuesday raised concerns that with the economy seeing two consecutive quarters of slow growth this year, the nation could slip into recession in 2016 if proactive steps were not taken to revive growth in key sectors.
Analysts’ concern really is that the overall macroeconomic environment remained fragile, especially as President Buhari dragged in constituting his cabinet that should set policy direction and spur the economy.
The economy of Africa’s largest country, by GDP, after peaking at 6.54 percent in the second quarter of 2014, moved lower to 6.23 percent in the third quarter and then settled at 5.94 percent in the fourth quarter, according to the National Bureau of Statistics (NBS).
Output growth in the first half of 2015 trended further downwards from the level in the fourth quarter of 2014, mainly on account of softening oil prices. According to the NBS, real GDP grew by 2.35 per cent in the second quarter of 2015, a second consecutive quarterly less-than-expected performance and a significant decrease from the 3.96 and 6.54 per cent seen in the preceding quarter and corresponding period of 2014, respectively.
Real GDP, is projected to stabilise at 2.63 per cent in 2015, still lower than the 6.22 per cent recorded in 2014, mainly driven by the non-oil sector.
But the Vice President sees things differently, as he particularly noted the fact that slowing growth is a global phenomenon, while soothing nerves that Nigeria will come out stronger.
“One thing is clear. First of all, you probably accept that all over the world, there is a slowing down in economies. Our slowing down is greatly affected by drop in revenues. But we think that in the next two quarters, especially when we are able to implement the budget, we will be able to ramp up growth a bit more,” he stated.
“We think that will definitely improve our growth. We expect that by the time the 2016 budget has been implemented, we will be able to ramp up with that, especially given improvements in infrastructure, especially power. We believe this will help performance of industries generally.”
Osinbanjo also disclosed that the 2016 budget which would kick-start the new zero-budgeting era is already on course, though he could not say explicitly when it would be ready.
“What we are doing at the moment is that we are working on the MTEF in particular and we expect that will be submitted to the National Assembly very shortly. A lot of the ministries are already working. By Tuesday, we will be sending the zero budgeting guidelines to the ministries.
“We have held a lot of meetings with the revenue generating agencies, the Budget Office, National Planning Commission. So, we are working out the parameters for the new budgeting system.”
Asked whether there are projections on when the budget will be ready, he responded, “No, I can’t say that now. This is because it’s a new process and it’s a lot of work. And we are trying to work round the clock and we are holding meetings day-by-day. And all the agencies are meeting.
“It is a rigorous process and I don’t want to commit to any time lines or dates. And very soon, we are going to have our ministers in place.”
Osinbajo confirmed that government ministries would be merged under Buhari’s administration to cut burgeoning recurrent costs, saying “Definitely, we are not going to have as many ministries as we have now. There is no question at all about that. The President has made it quite clear that he intends to work with fewer ministries. Of course, you may not have fewer ministers because the constitution says that you must have a minister from every state.
“But surely, you must have fewer ministries. That’s definitely what the President has said, not once, not twice and I believe that’s what will occur,” the Vice President added.
He also backed the CBN’s recent foreign currency controls, which according to him, had been helpful in stabilising the foreign reserves and markets, noting however, that such controls were short term and would likely be relaxed as things stabilise further.
”So, long term, we expect that the Central Bank will ease restrictions as we go along. In fact, medium to long term and hopefully we will be able to go back to more or less where there was greater freedom of movement of foreign exchange. But it’s definitely short term. There is no question about that,” Osinbajo added.
John Osadolor & Onyinye Nwachukwu
