•Urges govt to open borders for regional trade
By Nkiruka Nnorom
Group CEO, Emerging Africa Capital Group, Mrs. Tonyi Sanni, speaks on Nigeria’s entry into the second recession in five years and the way forward..
COVID-19 pandemic and even #EndSARS protest have been blamed for the recent recession, but beyond these two things, what other mistakes do you think led the nation into this second recession?
Although the novel virus and EndSars protest have been blamed in some quarters for Nigeria’s current economic situation, from an analytic point of view, our challenges began long before the #EndSars protest. Recall that Nigeria had recorded a significant decline in GDP (-6.1%) even before the protest started in October.
Africa’s biggest economy slid into recession due to the reduction in revenues following the crash in oil prices and other negative impacts of the virus in the country.
For example, the lockdown brought about reduced consumption and production, disruptions in supply chains as producers could not produce during the period.
Again, increased pressure on the naira due to falling reserves also affected our currency price whilst protracted border closure contributed to the rise in inflation rate and reduced purchasing power for household economies.
With complete shutdown in business activities as curtailment for the COVID-19, do you think Nigeria could have escaped this considering?
It is unrealistic to compare a fragile economy like Nigeria which had only just come out of a recession four years ago and has other structural challenges such as commodity dependence and import dependence to developed economies with more established financial systems. There are, however, steps we could have taken to ease the pressure on the populace including more impactful stimulus and palliative measures. However, we have the challenge of low fiscal headroom.
In what ways do you think the situation will affect the ordinary Nigerian and the entire nation?
The National Bureau of Statistics (NBS) reports are historical in the sense that they are recorded in the period of reference. So, it reflects the actual effect of the nation’s economic stance.
The actual confirmation of the recession may further affect Nigerians by triggering further withdrawal of already reduced Foreign Direct Investments (FDIs) and Foreign Portfolio Investments (FPIs) into our economy and could discourage domestic investment in the short term.
Inflation is on the rise, foreign reserves are dropping and the manufacturing sector is shrinking, how can the government encourage production and exports to earn foreign exchange and boost the economy?
Government can encourage production by improving the security environment for farmers to boost the agriculture sector. Second, government can also improve access to finance for manufacturers, re-open the borders to encourage regional trade and also manage our currency transparently and realistically.
The federal government has said that Nigeria will get out of the recession in first quarter 2021, do you think we have the right monetary and fiscal policies to navigate out of this so soon?
I believe this projection is hinged significantly on expectations of the availability of Covid-19 vaccine in major economies by Q1 which is expected to trigger increased demand for oil and correspondingly the recovery of our oil revenue dependent economy.
Is government getting it right in the area of diversification?
We must not only diversify our income source beyond crude oil sales revenue to other exports of agricultural products and solid minerals, we must also drive the process of conversion of primary produce to finished products. Our policies must encourage investment in production and in job-creating ventures. Security, political stability, rule of law and a transparent judicial system and financial inclusion are equally essential to our economic recovery and growth.
What is the way forward?
Political stability, good governance, transparency and elimination of corruption, fiscal prudence and responsibility and continuous building of trust of both domestic and international investors are the way forward.
We also need the consistent implementation of balanced, even-handed, and consistent policies that create a conducive environment for investment. Property rights must be protected and so must human rights.