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Recession exit: Not yet time for celebration

LATEST data released by the National Bureau of Statistics, NBS, shows that Nigeria’s economy is technically out of a recession.  The gross domestic product, GDP, has grown by 0.55 per cent in the second quarter of 2017 (Q2’17) fully returning the economy on the path of positive growth after five consecutive quarters of negative growth.

Despite the fact that the new GDP numbers is hardly news as it was just the expected result of the sustained rebound in domestic oil output and price in the international market, the government and some commentators have celebrated what they consider a praiseworthy feat, with the impression that the government has finally turned the corner on revamping the economy.

But beside the point made above that the new figure is a self-fulfilling prophesy, we note also that the 0.55 per cent positive growth recorded is still a far cry from recovery as it was only a low base effect when considered against the -2.24 per cent recorded in the third quarter of 2016. This is a standpoint which indicates that the new position does not compensate for the lost ground.

It is also observable that the latest GDP report did not show that structurally the economy has moved an inch away from circumstances that propelled the recession, a contraction in government revenue due to persistent over dependence on the single revenue source.  This cascaded into currency controls that saw foreign capital leave, while the ability of producers to import raw materials, and that of traders to import produce were severely hampered.

Currently, the relaxed forex regime in place that has brought relief to these sectors was enabled by increased oil receipt rather than improved fiscal or monetary policy. It was not propelled by a significant improvement in alternative forex and domestic revenue sources.

The clear fact now is that despite the technical exit from recession, the economic policy executives of the government have not taken advantage of the crisis to make tough decisions that will forestall such a recession in the short to long term. By implication, the moment oil prices take another hit , Nigeria will be back to a recession.

It is also noteworthy that 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. GDP at 0.55 per cent is not that much different from zero, and if you add the fact that the Nigerian population is growing at about 3.0 per cent , then with a 0.55 per cent growth we are still in recession in per capita terms, with average incomes still falling by some 2.5 percent year-on-year.

We only see the latest GDP numbers as a platform for a serious economic reform that would guarantee real and sustained growth.


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