The Managing Director, Cowry Assets Management Limited, Mr. Johnson Chukwu has said that the Nigerian economy had gone through a very difficult period in the first half of the year 2016.
Chukwu who made this statement while expressing his assessment of the first half of 2016 in an interview with Primetime Reporters in Lagos disclosed that the report card at the end of the first half of 2016 does not look quite pleasant.
According to him,” If you look at, we are talking of an inflation rate of about 16.5%, we are talking about the GDP growth rate that is in the negative of 0.36%, we are talking about an exchange rate of N298, we are talking of reserve of about $26 billion and we are talking of the increased level of unemployment of about 12.1%. Those are not pleasant report card for the economy”.
He however expressed happiness over some measures employed by the federal government which he described as painful but necessary measures it needed to take to reposition the economy.
“One of which is the issue of the deregulation of the downstream sector of the oil and gas sector, at least, we are no longer talking of subsidy payments. The second factor is allowing Naira to adjust appropriately depending on the market forces, that has been done”, he said.
The Cowry Assets Management Limited boss pointed out that a couple of other things needed to be done in order to get the economy on the right track one of which is bringing back liquidity to the economy as well as creating windows to attract foreign direct investments into the economy.
“That for me is significant which is at the doorstep of the executive arm of government to do. I am looking at the fact that we need to earmark some infrastructure for concessioning to the private sector and the private sector will certainly attract foreign capital into the economy. We need to diversify ting and then address he immediate source of foreign exchange earnings and then address the issue of the Niger-Delta militancy.
“I was also happy when the President said that they are in talks with the militants in the Niger-Delta to calm them down and address the restiveness in the Niger-Delta. We need to do all those things. But on paper, the reality is that the economy has gone through a very difficult period in the first half of the year. Even the Minister of Finance did mention that the economy has gone into technical recession.
“I want to believe that in the next couple of days, by the time the National Bureau of Statistics has published their second quarter report, we should see effectively that the economy has gone into recession and that has also been confirmed to some extent by the International Monetary Fund which stated that the Nigerian economy is likely to contract by 1.8% at the end of the fiscal year”, he said.
On the effect of the signing into law the 2016 appropriation bill on the economy, Chukwu observed that one had to recognize the fact that the budget implementation was just starting now and so, it may be too early to assess the effect of the budget implementation on the economy.
He said,” But I want to say that a lot of things has happened between the day the budget was signed and now, one of which is that the revenues of the government has further declined because of the crisis in the Niger-Delta. So, parts of the budget assumptions are not going to be achievable. The budget was predicated on the 2.2 million barrels per day and $38 per barrel benchmark but the positive price variance is more than offset by the negative volume variance as a result of the crisis in the Niger-Delta. I think at some point, we were producing between 1.2 and 1.5 million barrels per day which is a far cry from our target budget of 2.2 million barrels per day”.
He therefore surmised that the government projection on which the capital expenditure budget was premised on was not being realized adding that the government hasn’t the financial resources to implement the budget as it was originally designed which he said had been alluded to by some of the Ministers including that of Finance and Budget and National Planning who said that it may be difficult to be fully implemented because the revenue streams are far below the revenue target in the budget.
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