Though data released by the Nigeria’s National Bureau of Statistics (NBS) Tuesday indicate that Nigeria’s economy is finally out of a recession, some economic analysts are not quite enthused about 0.55 percent growth, saying that it does not compensate for the lost ground.
While others have celebrated what they consider a praise-worthy feat, which indicates that the government has finally turned the corner on revamping the economy, analysts at SBM Intelligence are less excited by the developments.
“A growth of 0.55 percent does not only compensate for the lost ground, it is also below expectations considering the low base the growth is starting from,” they noted.
They cite two major reasons for their position. First, that the turnaround to positive growth was predicted by many parties; “It was expected, given how the negative growth had already caused the economy to contract, providing a low base for growth to start from,” they pointed out.
Secondly, they say the conditions that led to the recession, including a contraction in government revenues and a stubborn refusal of the government to allow the naira float, are still very much around.
“Coming out of a recession is not the same as the economy making a recovery. Nigeria is very far from recovering from the loss of the last eighteen months. It will be more beneficial if the government and its agents shelve the unnecessary celebration and backslapping,” SBM analysts said, adding that the recovery plans documented in the ERGP have been unfavourably reviewed by all informed observers of the Nigerian economy.
“We have wasted a crisis. We will do well not to waste the aftermath of the crisis. It is time to get to serious work,” they posited.
They specifically point out that the Nigerian government has not taken advantage of the crisis to make tough decisions that will forestall such a recession in the short and long term.
“The moment oil prices take a big enough hit again, Nigeria will be headed back to a recession,” they averred, adding that the 0.55 growth in Q2 is less than the lowest period of contraction, from a much higher base.
“The least negative growth in any quarter was -0.67% in Q1 of 2016. Subsequent contractions were higher, peaking at -2.34% in Q3 of 2016. The single quarter growth that now has the country out of recession is 0.55% and is less than the lowest period of contraction, from a much higher base,” they noted.
A Reuters’ poll on the Nigerian economy, where it was forecast ahead of the release of official growth figures that the economy may pull out of recession, also warned of sustainability of the trending growth.
The outcome of the poll specifically indicated that strong growth in the Nigerian economy won’t show up until business confidence is restored through the adoption of a single foreign exchange policy.
United States businesses and companies have also canvassed a free-floating naira for them to invest and do more business in Nigeria.
Senator Chris Coons, head of a congressional delegation visiting Nigeria, Africa’s largest economy, said last week that capital controls are deterring U.S companies from investing in the country.