THE Nigerian economy appears caged in the recession territory after two years of reported exit from two consecutive quarters of negative growth. The growth rate has remained subdued, failing to meet government’s projections in the last two fiscal years, 2017 and 2018.
This year, we have seen signs that we may witness more difficulties in meeting desired growth targets. Three key reports recently pointed to this gloomy horizon.
First, the World Bank has just reviewed its growth forecast for Nigeria downwards to 2.1 per cent from 2.2 per cent. Back home a Central Bank of Nigeria, CBN, recent report shows a national revenue decline of 30.5 per cent and 4.2 per cent against proportionate quarterly estimates and previous quarter actual performance, respectively.
Also, Financial Vanguard report on corporate financial results submitted to the Nigerian Stock Exchange, NSE, for the companies’ operations in the first quarter of 2019 shows a 2.5 percent decline in combined profit.
These show a negative start to the 2019 economic and financial year. The second quarter is not looking better on some of the indicators. But we hope that some corrective measures should be taken to address the weak lines.
First, the key challenge from the World Bank’s perspective which tallies with a recent report by the National Bureau of Statistics, NBS, is that Nigeria’s recovery in oil production has fallen short of expectations and policy uncertainty has also constrained investment in new capacity, while weak domestic demand amid a challenging business environment has dampened non-oil growth.
On the oil sector performance, we note that the revenue drop was coming against significant rise in oil price in the international market. We are aware that supply disruptions in the Niger Delta region have been sustained.
The CBN had stated that the decline in oil revenue relative to the proportionate budget estimate was due to shortfalls in crude oil production and exports, arising from maintenance operations at the various NNPC terminals.
We also point to a lack of needed reforms or speed in approving and executing proposed reforms as constraints to stronger growth. Same goes for the non-oil sector, especially exports which have an added constraint in the Lagos Apapa export terminal, choked by broken down infrastructure.
However, the most worrisome aspect of the non-oil revenue failure was reported in tax receipts. The lower non-oil revenue relative to the proportionate quarterly budget estimate was due to shortfalls in a receipt from Federal Government Independent Revenue and Corporate Tax.
This should not be the case with all the noise about tax reforms and aggressive collections by the Federal Inland Revenue Service, FIRS.
It is, therefore, urgent that Nigeria makes significant structural reforms that improve the business climate and attract investment.