Nigeria Will Exit Recession Next Year - Yemi Kale

Barring further economic upheavals or exogenous shocks, the Nigerian economy is expected to exit the recession in 2018, the Statistician General of the Federation, Dr. Yemi Kale has said.
 
His forecast on the economy is more conservative than that of other watchers of the economy, including the Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele, Special Adviser to the President on Economic Matter, Dr. Yemi Dipeolu, the International Monetary Fund and World Bank, which have forecast that the Nigerian economy will exit the recession this year.
 
In an interview with Economic Confidential in Abuja, Dr. Kale said that “if oil prices do not collapse and the Niger Delta remains stable, by 2018 we would recover”.
On the performance of the Nigerian economy in the past one year, he added: “It was an extremely difficult period and we all felt it. But I will say that most of the indicators suggest that we are coming out of it.
“We have not come out of it yet, but the worst has already happened and it’s a slow process of recovery. There is also what we call technical recovery, different from the recovery Nigerians would prefer.
 
“When you tell somebody the economy is coming out of recession, they would say what do you mean. After all prices are still high. Coming out of a recession means recording positive growth. And your positive growth can be plus zero point one per cent (+0.1).
“But that does not mean everything is fine. It technically means you are no longer in negative territory.”
 
He further posited that the fact that the economy is no longer contracting does not translate to buoyancy, stressing that there is going to be a gradual process of recovery as the economy improves.
“At least all the indicators are suggesting that things are getting better. Also, people always make this mistake when we say inflation is slowing down.  
“Inflationary slowdown does not mean prices are coming down.  Inflation by definition is always a rise in price. All we are saying is that the increase is decelerating.
 
“Before it rose by 100 per cent, but this time it went up by 50 per cent. As such, having double-digit inflation figure is still a huge problem. The fact that it went down from over 18 per cent to 17 per cent and now to 16 per cent shows improvement. But I can tell you 16 per cent is not good,” he said.
According to him, if the current macroeconomic trends continue, by the end of the year things should have normalised and by 2018 Nigerians would feel the recovery.
“If oil prices do not collapse and the Niger Delta issue is managed, by 2018 we should experience full recovery,” he said.
He also acknowledged that 2016 was extremely difficult for the country but the economy had started slowing down as far back as 2014.
 
“I have to speak frankly as I have always done in the past, the economy has been slowing down since 2014. Anyone that was following the numbers should know that the economy was slowing down.
“From 6 per cent, GDP growth fell to 5 per cent, then to 4 per cent, then to 3 per cent, then 2 per cent, before it became negative.
“The fact that the economy was slowing down did not mean it went from six to zero, it was gradual. If you were paying attention to the data, you would have known that the problem was looming.
“Since it was an election year, people did not pay rapt attention to the slowdown. And so 2016 was horrible, because we went through hell. We had an economy, in my opinion, that was dysfunctional,” he said.
 
Kale likened the Nigerian economy between 2014 and 2016 to a house built on three foundations, saying that the foundations were shaky and weak. 
“You have the oil sector which is one pillar, then there is the non-oil sector that is dependent on oil, which is the second pillar, and we have the non-oil sector that is not dependent on oil, like agriculture, which is the third pillar.
“Two pillars were directly dependent on oil. So when oil collapsed, two legs were impaired leaving us with one pillar. And that is the problem we had.
“Rather than diversify the economy, we had an economy solely dependent on oil. The other sectors depended on oil to survive. We have, for instance, manufacturing, but their production input is dependent on foreign materials. 
“And the foreign input is dependent on foreign reserves, while our foreign reserves depend on oil earnings. So when the oil price goes down, and we do not have enough reserves, manufacturers do not get foreign exchange to get their inputs, they cannot produce and so resort to the black market to source for foreign exchange at high prices and the cost of production goes up.
“This cost will eventually be passed to consumers. In this scenario, demand goes down while cost goes up,” he explained.
Speaking on whether the economy can be rebased in a recession, Kale said the economy is supposed to rebased every five years.
“We are supposed to have to done it this year, but no allocation was made in the budget for that.
 
“Every country does its rebasing in a maximum of five years.  The United States of America does it once a year. Those ones (countries) have more money, so they do it every year; other than the fact that their economy is more dynamic. 
“Technology is changing so many things, so they have to upgrade all the time. If you don’t rebase your economy, it is like using the Betamax VCR system. 
“When we rebased the economy, politicians grabbed at it because it favored them. If it were negative, nobody will even talk about it.
“I was surprised to see during the election period that APC went to our website to retrieve all the positive figures but refused to accept the ones that were negative.
 
“PDP too took all the positives and refused the poverty rate figures. Meanwhile, all of them are NBS data. I have even seen a minister who agreed with chapter two in one report and said chapter three was not correct.
“While commending us for a job well done in chapter two, chapter three was tagged as incorrect in the same document,” he said.   

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