BY CHINEDU IBEABUCHI

Unless Nigeria readjusts its spending pattern coupled with unchecked domestic borrowing, signs are rife that the country’s economy may have to grapple with recession shortly, say analysts at Partnership Investment Company Plc.

“While Europe has been grappling with economic recession for the past few months, the reality is coming home to Nigeria.  The fluctuation in the price of oil, Nigeria’s mainstay and the reckless spending by government, coupled with unchecked domestic borrowing send signal that the economy may be entering dire straits.

“GDP growth has slowed to 6.17 per cent year-on-year in first quarter 2012 from 7.68 per cent in fourth quarter 2011 and 7.13 per cent in first quarter 2011.

“This performance points to an economy in need of rejuvenation. The warning of impending recession may not be unconnected to recent downward review of GDP growth forecast for 2012 to between six per cent and seven per cent from seven per cent to eight per cent previously,” the analysts said in their weekly report.

The analysts are of the opinion that the partial removal of fuel subsidy which hit average disposable income has affected consumer spending while decrepit infrastructure is stifling the productive sector.

They further stated that the level of insecurity is a disincentive to investment while government policies or lack of it, in critical sectors like the petroleum sector leaves the economy hanging in the balance.

The analysts added that corruption tends to fritter away whatever good intention the government as lack of fiscal discipline is hampering efficiency in the disbursement of budgetary spending.

Continuing, the analysts said, “Effort to revive the agriculture sector, the biggest contributor to the Gross Domestic Product, GDP, is ongoing but better mileage will be gained if emphasis is in ensuring that intervention funds gets to the end-users.”

In its analysis of the capital market, the analysts said the Insurance sub-sector of the Financial Services industry, is open to mergers and acquisition due to the low price level and the fact that the sector has so much potential for growth.

They are of the view that strategic alliance is expected to unfold as recent effort by regulators to enforce compulsory insurance in some segment of the economy can only enhance efficiency and profitability.

The analysts said, “The sector is fraught with challenges, though, both regulatory and operational. Apart from the negative perception due to poor or non payment of claims over the years, the operators’ effort to instill confidence in the sector by Nigerians has not paid off much.

“The major threat in the sector is the limited foreign collaboration and participation especially in the potentially robust oil and gas insurance business. Also, the poor dividend and bonus history of the sector paints the picture of a sector in distress. Also, foreign participation is expected to improve once there is ample indication of a sector rebirth. The relatively low price of insurance equities creates opportunities for institutional investors to gain a foothold.”