Nigeria's recession is on the mend

Godwin Emefiele

The Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele has pronounced good tidings on the state of the nation's economy which has been hit recently by recession. 

“We have turned the bend,” he said at the weekend in Lagos.

Nigerians have been grumbling over the tough economic climate – high food prices, poor infrastructure, job cuts and low productivity, among others.

Speaking to media executives, Mr. Emefiele said the worst is over. His optimism is hinged on the following facts:

• foreign portfolio investors have injected $1 billion into the economy in the last two and half months;
• an Emergency Spending Bill, which will enable the government shorten the process of spending money (through award of contracts) is ready for the National Assembly;
• close to N374 billion will be injected into the economy this week to stimulate it. So far, N420 billion has been spent;
• social spending will soon begin and there will be capital expenditure payments; and
• one million traders will get subsidised loans.

“Those are the things that government is doing and I must confess to you that I’m optimistic that we have turned the bend and going forward we will still spend more that will stimulate the economy,” the CBN chief said.

He said the $1 billion inflow came in response to the flexible foreign exchange regime introduced within the period.

Speaking on the success of the forex policy and the government’s policies geared towards reviving the economy, Emefiele said: “The only way we can improve supply at this time is to say, ‘fine, those foreign investors, those foreign portfolio investors, what do we do to make them come again?’ And so we went into a flexible exchange rate regime. We opened the market, we organised the market. We’ve seen some depreciation in the currency, but I must say that at this time, we are somewhat happy that the result is paying off, because in two and a half months, we’ve seen close to about $1billion coming in as inflow into the market, and the reason this has happened is because other than just liberalising the market, we bought into the market the OTC (Over-The –Counter) features market.

“The Market that provides the opportunity to reduce the volatility in the foreign exchange market so that people do not bunch up their supply on the spot, so they can now go i and do their business without disturbing themselves about the exchange rate. Those were the actions that we’ve taken and today I must say that it’s been successful.”

The government is determined to pump money into the economy and pull it out of recession, but this, according to the CBN boss, is being hampered by the slow procurement process, which, in most cases, takes about six months to actualise.

He said: “Naturally, let me say this, if you are in a recession, basically what you do is to spend your way out of recession. I will tell us what has happened between January and now. I will tell you what actions have been taken to send us out of this situation. Budget, like you know was approved in May 2016 and, of course, by that time, we had started to see signs that this was going to happen. Unfortunately, the procurement process is such a long one in the Public Service and, of course you dare not breach, or break the rules of procurement and I give you an example.

“When you start the procurement for an item, what happens is that you have to advertise for bids in the newspapers. That process of advertisement and calling for bids require that it has to be for 12 weeks. Twelve weeks is three months. Now when you open the bid, you’ll  now see the numbers, you’ll now negotiate for the prices. After that you’ll go to the Bureau for Public Procurement, get the approval. After that, maybe you’ll go to the Federal Executive Council to get approval. You’ll find out that almost six months would have elapsed and that is why government is saying we must shunt this process.

“Shunting this process means that we need to have an Emergency Spending Bill, which has now been prepared. I am aware it’s ready for the National Assembly to take on for approval.

“What that does is, it removes all the bottlenecks involved in the process of procurement so that government can go directly and procure items and spend money to stimulate the economy.”

Emefiele said the Federal Government’s revenue caused by falling oil prices and the restiveness in the oil producing areas that reduced crude output, will not daunt government’s efforts o revamp the economy.

The apex bank, said Emefiele, is working to provide Bridge Funds to keep the government’s activities going, pending when budgetary funding and due process requirements are met.

 ”Government remains undaunted, the Monetary and Fiscal policies remain undaunted and we also had in the budget a deficit of N1.8trillion; N900 billion was to be sourced locally, another N900 billion was to be sourced in foreign currency, and because the foreign currency is yet to come in, what the Monetary and Fiscal authorities are saying is, ‘if the need arises, it would provide what is called ‘Bridge Funding’ for the fiscal authorities so they can go ahead and spend. When the proceeds of the foreign loans come, then, we can use that to clear the bridge fund that has been done.

“That is allowed because this time we do not need to wait and that’s why you may have read  that the Minister of Finance just came up and said so far we have spent about N420 billion and, in fact, by this coming week (this week) alone another close to N374 billion would be injected into the economy to stimulate it.

“The social spending will kick in; other payments for capital expenditure will also kick in. Those are the things that government is doing and I must confess to you that I’m optimistic that we have turned the bend and going forward we will still spend more that will stimulate the economy,” he said.

Emefiele added that part of the plan that has been projected for 2016 is that one million market women will benefit from subsidised loans at subsidised rates that will come from “our micro, small and medium enterprise loan.”

The CBN is discussing with the fiscal authorities and the Office of the Vice President that handles social spending is also in discussion with the apex bank to see to it that “we put it in place as quickly as possible so that market women  across the country can enjoy the micro, small and medium enterprise loan at subsidised prices, the CBN chief added.

“Those are some of the actions we are taking and I’m optimistic that going forward you are going to see more action that will help to stimulate the economy and turn the country around again,” Emefiele said.