…as they attribute lull to inconsistent policies
With the recent recession that hit the Nigerian economy, economists are indeed worried that the country may not be out of the woods anytime soon.
Local and international investors have expressed fears that the lack of direction being displayed by the Central Bank of Nigeria may have profound implication for the ailing economy, as the year rolls by.
And with their fears further heightened by the plunge of the Naira to N415 to a Dollar recently, economic experts warned that if the Federal Government and the apex bank failed to cushion the effect of high inflation, lending, unemployment rate, high poverty rate (70 per cent) and negative growth rate of the Gross Domestic Product, among other issues, the situation could result in ‘stagflationary depression’ with grave consequences for citizens.
STOCK MARKET HEATS UP
Expectedly, the barometer of the economy, the Nigerian stock market is also feeling the heat. Since August 30, 2015, the market capitalization and all share index have maintained a slide. For instance, while the market capitalization dropped by N1.8 trillion as it crashed from N11.2 trillion to N9.4 trillion, the all share index also dropped from 34,310.37 to 27,493.12 within the same period.
The President, Proactive Shareholders Association of Nigeria, Mr. Taiwo Oderinde, explained that the developments in the emerging market in the past one year were a reflection of the country’s economic stance, which is very hostile policy-wise.
According to him, the lack of economic direction by the FG/CBN, which is seen in policy summersaults, is responsible for the sustained downturn witnessed in the bourse. He said that the indicators would crash further till the end of the year, adding that it they may go as low as 20,000 basis points (ASI) and N8 trillion, respectively.
He said the country had been plagued with serious economic and financial challenges, which had resulted in activities being slowed down, especially in the financial sphere, which included the NSE.
Oderinde added: “If there is a direction from the apex bank, the market and the economy would recover the loss recorded in the last year. The share prices can be better if things turn around economically and the regulator should ensure its policies are well thought out before making declarations in the public.” Other shareholders blamed the dwindling performance of the stock market on neglect of retail investors by regulators of the market. The national secretary, Independent Shareholders Association of Nigeria Mr. Adebayo Adeleke, described the year as unproductive and not impressive.
To him, the marginal gain that was recorded occurred in June 2016 when the flexible foreign exchange was introduced as institutional investors buoyed the market but it was not sustainable as share values started dropping.
“They are not interested in the development of the market and the economy because they only take advantage of the falling prices and when the price rises, they offload and make their profit and leave. The flexible exchange rate policy has just opened a way for foreign investors to bring their money and buy cheap stocks and repatriate their returns. The retail investors are not playing in the market; as you can see, the incentives to attract them are not there.“The regulators are not doing anything. There is liquidity crisis in the market and people do not have the cash to invest. FG is yet to release money into the economy and purchasing power has really gone down with high inflation,” he stated.
NO END IN SIGHT- EXPERTS
Economic experts, who spoke with The Point, disclosed that there is no light at the end of the tunnel for now as they insisted that the efficiency of the country’s economy had been constrained by monetary and fiscal policies.
The Director General, West African Institute for Financial and Economic Management, Prof. Akpan Ekpo, told The Point that in the last one year, the lending rate had become worse. Without the lending rate being single digit, he insisted that the economy cannot make progress.
“The real sector is dead, small-scale industries cannot borrow. If we want to diversify the economy, it means we are asking people to borrow money to set up industries but nobody can borrow at 26 per cent to build a factory and be able to repay with irregular power supply and poor road network. The capital market where you can go and get funds is bank-dominated. So, this is the problem and I expect the CBN governor to try and address that issue as fast as possible,” he said.
The WAIFEM boss advised the CBN governor, Mr. Godwin Emefiele, to take into cognisance the nature and structure of the Nigerian economy in order to revive the ailing economy.
He added that the Naira is not convertible and should be treated efficiently. According to him, introducing a features market into a foreign exchange market, whose commodity is already scarce, is a wrong and devastating move made by the Emefiele-led CBN.
“That makes sense in a developed economy like America, which has a vibrant manufacturing sector and other sources of earning foreign exchange, and business owners don’t need to change currency when traveling out. But that wouldn’t work in Nigeria because the Naira is not convertible, it must be changed to other currency if you have to travel out. The forex policy heightens speculation, increases inflation and sharpen uncertainty and that is why the Naira has been reducing in value every day,” he explained.
Instead of banning some imported goods like rice, margarine, tinned fish in sauce and roofing sheets among others, the Professor of Economics charged the apex bank to place tax or increase the tariff on the commodities.
“We do not have adequate and friendly business environment for most of the commodities to be produced here and that is enough to scare investors. Banning such commodities does not make sense but increasing their tariff is a much better option. I do not support influx of imported goods but I believe the CBN should apply caution in implementing its policies. If it were to be normal times when the economy was stronger, it would have been better,” he added.
Another financial analyst, Dr. Kunle Lawal, described some actions of the FG in recent times as not depicting ‘change’, especially in the partial deregulation of the petroleum downstream sub-sector, the flexible forex and acclaimed diversification of the economy.
“My concern is that the administration is doing more of talk than actions. It has said a lot about diversification but there are no signs or policies in place to act the word. How can we diversify with increasing lending rate, unfriendly business environment and several cases of policy reversals? If these persist, the economy would deep further into depression,” he explained.
However, other analysts tasked the FG to take the opportunities offered by the recession. A renowned economist, Prof. Pat Utomi, said FG should cash in on the opportunity and fix its economy permanently.
He said, “A continuous fall in the price of oil would make the country realise its wealth in agriculture. Aside from the government support, a group of individuals could also come to the aid of the small entrepreneurs to build the economy from bottom. Such investors can create a social fund to help the poor through donations of funds to finance houses to give loans to the poor at much lower interest rates in order to stimulate their business activities.”
