Economy ‘Technically’ In Recession, Says Finance Minister | Independent Newspapers Limited
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Economy ‘Technically’ In Recession, Says Finance Minister

ECA; economic recession, adeosun
Posted: Jul 22, 2016 at 4:31 am   /   by   /   comments (0)
  • Releases N248bn From 2016 Capital Account
  • Naira Hits Record Low Of N309 Against Dollar


Rotimi Akinwumi

Abuja – Mrs. Kemi Adeosun, Minister of Finance, on Thursday told the Senate that Nigeria’s economy is “technically” in recession going by the two digit inflation rates and other negative indices on ground.

Adeosun, who confirmed the grim situation while briefing the Senate on strategies and policies being adopted by the Federal Government to address the economic problems of the nation, however, said the recession was not a full blown one.

“Technically in economic terms, if you have two periods of negative growth, you are technically in a recession. But I don’t think we should spend too much time on labels.

“The issue is: we are in a tough place whether you call it a recession or not. But the most important thing is we are going to get out of it. Everything we are doing is moving us out of it.

“Our social intervention programmes have been funded. We are not the only country in recession. There are many countries doing far worse than us but for Nigerians that’s not comfortable.

“What Nigerians want to know is how is it going to affect me? And I want to assure everybody that what we are doing will turn this economy around”, Adeosun said.

The International Monetary Fund (IMF) on Tuesday forecast a possible recession for Nigeria’s economy in the near term as it slashed the country’s growth forecast from 2.3 percent in April to 1.8 percent for year 2016.

The Breton Wood institution in its World Economic Outlook Update for July 2016 said a combination of falling oil revenues and weakened investor confidence would help push Africa’s largest economy into recession.

Renaissance Capital (Rencap) analysts on Wednesday foresaw a tough second half of 2016 for Nigerian consumers on the back of weakening naira, rising petrol prices and spikes in interest rates.

Rencap, which made the prognosis in its June 20 edition of its Economic Research Update, anchored its conclusion on Nigeria’s consumer confidence index (CCI), which has seen a five-year decline.

“We expect the Nigerian consumer to come under further strain in 2H16 as the naira weakens, petrol prices rise and interest rates increase,” it said.

When the senators reminded the finance minister at the session that the IMF in its latest report predicted that the Nigerian economy would continue to shrink till the end of the year, the minister said the report should be disregarded as such projections have not always been accurate.

“I am not too worried about the IMF projection because their projections have not always been accurate. They equally issued a negative report on Britain as a result of Brexit. I don’t think we should panic every time IMF speaks. I think we need to be confident around what we are doing and where we are going. I remained extremely confident as I said around Nigeria”, she said.

She explained further that the government has made good release in the 2016 budget for specific purposes to achieve target goals.

The minister explained that in getting things turned around faster, government in its implementation of the 2016 budget has been very strategic in spending by investing in infrastructure, a move, she said, had made government release a total of N247.9 billion for capital projects execution in the 2016 budget.

“Ministry of Works had received N74 billion in the last two months compared to N19 billion received for the whole of last year. Agriculture which is a strategic focus of this government has received N21.9 billion compared to just N4 billion for the whole of last year; and transport has received N22 billion compared to just N6 billion for the whole of last year.

“I believe the speed and extent of our releases show government’s intent and seriousness around reviving this economy. And we are very confident that the work that we are doing will bear fruits. We are already beginning to see increased production in our agriculture.

“We are working now because we are expecting a bumper harvest. All the things we are doing are consistent with what we had said we would do, which is get this economy moving again in a way that is sustainable and in a way that doesn’t rely completely on oil.

“We know it’s a painful adjustment but we want to assure Nigerians that we are on the right track, in the right hands. No money is being wasted, no money is leaking. Every naira is being made to count fully”, she said.

She stated that all the releases have been fully cash backed, adding that additional release of N60 billion for capital projects execution would be made by the Federal Government in few weeks time.

The minister in response to question on financial status of the country inherited from immediate past administration said they inherited little reserves but huge debts one of which was the $5 billion cash calls indebtedness.

She said: “I think at a time like this blaming who was responsible doesn’t actually take us anywhere but I will tell you what I inherited. I inherited very little by way of reserves; I inherited significant debt, contractor debt. Cash calls of $5 billion outstanding to the oil companies.

“Many of the contractors even though we have paid them N107 billion find it very difficult to work because they are owed and some of them have not being paid since 2012. Their claims are over N390 billion. So, I didn’t inherit reserves that are positive, I inherited reserves that tend to be more negative than positive because the economy is actually in very good hands and we are doing absolutely our best to get through this difficult period.”

Meanwhile, naira fell to an all-time low on Thursday crossing N300 to the dollar for the first time after the central bank last month lifted its peg on the currency to allow it to trade freely on the interbank market.

The naira fell 5.4 percent against the greenback to N309 on dollar supply shortages. It later recovered to close at N292.40 on thin trades. The interbank market traded a total of $7.27 million.

Traders were expecting the central bank to intervene to ease dollar shortages, which did not materialise. The bank has not intervened for most of this week, they said. Instead it was mopping up naira liquidity to support the currency.

“Now that the market has adjusted upwards it seems people are comfortable and that’s why we are seeing some trades,” one trader said.

Banks had been quoting the dollar at N281 to N285 after the central bank lifted its 16-month old peg of N197 to the dollar last month.

But the lack of liquidity at those levels has curbed activity, leaving the central bank as the main supplier of dollars, traders say.

On the interbank money market, overnight rates has been stuck at a high of 40 percent for much of this week, traders say, as the central bank mops up naira liquidity through treasury bill issues to attract offshore investors into bonds.

The naira traded weaker on the black market to N375 against the dollar on Thursday.