19 September 2016, Abuja – The Governor of the Central Bank of Nigeria, Mr. Godwin Emefiele, has predicted that the nation’s economy will likely come out of recession by the fourth quarter of this year when the result of the various measures put in place by the Federal Government and the monetary authorities becomes manifest.
One of such measures, according to him, is the decision of the CBN to establish a bridge fund for the government to utilise to stimulate the economy whenever there is a need for it.
Emefiele, who spoke to media executives in Lagos on Saturday, said, “We are already in the valley, the only direction is to go up the hill and the government is doing everything possible to ensure that we move up the hill. I am optimistic that based on the actions being taken by the monetary and fiscal authorities, the fourth quarter results will show evidence that we have started to move out of the recession.
“The worst is over. The Nigerian economy is on the path of recovery and growth. So, please if you are a bystander or sideliner, you are losing; join the train now before it leaves the station.”
While explaining the reasoning behind the bridge fund, the apex bank boss said, “Both the monetary and fiscal authorities are working together and that is why you can see a situation where today even when we have revenue shortage or deficit, the monetary authority is trying to bridge the gap.
“We said to the fiscal authority that we can give you a bridge to go ahead and spend, and when you obtain the foreign loan that you are negotiating, or when your revenue improve, you can repay the bridge that we have created for you in order to stimulate spending. That is a practical case of collaboration between the monetary and fiscal authorities.”
He alluded to the release of another batch of N350bn by the Ministry of Finance to stimulate the economy as another measure taken by the government to get the nation out of recession.
Following the introduction of a flexible exchange rate regime, Emefiele said foreign investors’ interest in the Nigerian economy was gradually increasing, adding that in the last three months, almost $1bn in Foreign Direct Investment had come into the country.
He stated, “I wasn’t optimistic that the FDI would come initially, but with what we have seen in three months, almost $1bn, I feel very confident that there will be more inflow into the system and more and more people will have foreign exchange available for them to do their business.
“That will improve industrial capacity. The rate may be high now, but there’s high possibility that with more availability of foreign exchange, the rate will come down. I am very optimistic that a lot of positive things will happen.
“I have talked about how the fiscal authority is trying to push in liquidity to stimulate consumption, demand consumption expenditure; and of course, when consumer consumption is stimulated, demand for goods will go up and if the demand goes up, the industrial capacity will improve. If we maintain a steady course in the way we are going, and if all those who have foreign exchange repatriate them, more and more people will have foreign exchange to do their business, that will improve industrial capacity.”
Another way to inject liquidity into the system, according to the CBN governor, is for the Federal Government to sell some of its assets in the oil and gas industry in order to raise money.
Emefiele said, “In April 2015, even before this government came on board, I had opined that there was a need for the government to scale down or sell off some its investments in oil and gas, particularly in the NNPC and the NLNG, at that time when the price of oil was around $50-$55 per barrel. We actually commissioned some consultants that conducted a study and at the end of that study, we were told that if we sell 10 per cent to 15 per cent of our holding in the oil and gas sector that we could realise up to $40bn.
“Unfortunately, the markets have become soft. If we choose to do that now, we can still get $10bn to $15bn, or maybe $20bn. If we have that kind of liquidity, it will be easy for us to really stimulate spending and also to turn the economy around. That proposal is still on the table, because I have also heard that some of our colleagues in the Federal Executive Council have talked about it and a lot of people too.
“If we take that option, I am optimistic we will be able to stimulate the economy and earn the foreign currency that we can really use to kick-start it.”
Another measure being considered by the Federal Government, according to him, is the shortening of the procurement process in order to accelerate the process of executing capital projects in view of the fact that the budget was not passed until May.
On the factors that pushed the economy into recession, the apex bank boss said the plunge in the prices of crude oil in the international market severely affected Nigeria’s earnings, in addition to the country’s inability to save when the prices were high and invest massively in infrastructure.
He also blamed unbridled appetite for the consumption of foreign goods for the recession, adding, “In 2005, Nigeria’s import bill was only about N70bn, but by 2015, Nigeria’s import bill had risen to about N790bn. What were we consuming?”
While reacting to the governor’s optimism that the recession would start easing off in the fourth quarter, economic and financial experts said on Sunday that it would be nearly impossible for the nation to come out of recession this year.
They said if the Federal Government implemented appropriate measures to tackle the problem, the country might be fortunate to witness a positive growth sometime next year.
“I am not sure we can come out of recession this year. Already, we are at the end of the third quarter. If the policymakers allow liquidity into the system and adopt appropriate measures, we may be lucky to come out of the recession early next year,” a professor of Economics at the Olabisi Onabanjo University, Sherriffdeen Tella, said,
The Head, Research and Investment Advisory, SCM Capital, Mr. Sewa Wusu, is of the opinion that the nation may not be able to come out of the recession until the second or third quarter of next year if appropriate measures are taken.
He said, “Recession is not something you come out of easily. It is going to be a long haul thing. We must take counter-cyclical measures to reflate the economy and get us out of recession. Nigerians need to be patient with the government. Countries that went into recession and came out did not come out so quickly.
“We need to spend money on sectors that can stimulate growth easily and also spend massively on infrastructure. Sectors that can stimulate growth, create employment, production and consumption, which we need to spend on are transportation, manufacturing and housing.”
The Chief Executive Officer, Cowry Asset Management Limited, Mr. Johnson Chukwu, said, “It is not possible for us to come out of recession this year. There is a time lag between the time policies are implemented and the time we begin to see their effects on the economy.
“We are already at the end of the third quarter. The stimulus package will come in the fourth quarter. Before we can begin to feel the effect, it will get to next year.”