Tuesday, October 03, 2017 4:00PM / News
The Economic Associates Q3 2017 quarterly conference on Nigeria’s Economic Outlook: Global Realities and Domestic Responses started with a focus on the Global Realities. It was identified that currently we are faced with twin gluts globally, the first being a Commodity Glut and the second being a Liquidity Glut. The global outlook has determined the pace of activity in the Nigerian Economy in the last three years. The oil price began to fall in July 2014 and that has determined pretty much of what you have witnessed up till now.
Apart from oil price, the responses of domestic variables too, for example in the few quarters, we have seen recession and fortunately we have seen recovery too. We have seen devaluation also with Naira moving from N199/N200 to N520 in the first half of February 2017 which was alarming. Fortunately, since the second half of February 2017 we have seen naira appreciation. Inflation has been in double digits, the good aspect of inflation is that it has dropped for seven consecutive month from January 2017 to 16.01% in August 2017. So, domestic variables have also been on what you can call a cyclical swing.
In terms of policy response, not much has been seen as the country has been left to the vagaries of global commodities prices and left to cyclical swings. Policy has not made a difference as the government has been talking about an Economy Recovery Growth Plan which states that by 2020 it will be Eldorado but it is believed that the ERGP is just a bunch of dreams as it says nothing about how recovery will be achieved and who will do what to achieve results.
Right now it is stated that the news is good as oil price is around $57. This is stated to be good for foreign reserves and the exchange rate as well. We had been unlucky since mid-2014 to see oil price dropped from over $100pb to $28pb in the first quarter of 2016. We had been unlucky that the domestic variables responded negatively to the swings but much of that has improved this year as oil price has moved to $50 and now at $57. The improvement in oil price has seen stability in exchange rates, we have come out of recession and inflation on the downwards part.
We have had a cyclical upturn without any serious policy intervention. Policy has involved a lot of talks and no action. Therefore, we have seen contraction and recovery based on cyclical forces.
In terms of investment destination around the world emerging economies like the BRICS, MINT and PIIGS are potential investment destinations as they are attracting larger chunk of investment funds presently. Nigeria is said to currently has growth and stability challenges.
Dr Ayo Teriba went further to throw more light that Nigeria relies almost exclusively on volatile export income for forex supply while it fails to attract incomes from other sources. Also, he described Nigeria as a very important destination for investors either through production or otherwise. He is of the view that investors will always come to Nigeria to do business either by manufacturing here directly or by having something to sell to us.
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