Nigeria in Recession: Understanding the technicalities
It is now official, the Nigerian economy, which overtook South Africa to emerge as the largest in Africa in 2014, is now in recession, the federal government finally declared yesterday.
The Minister of Finance, Mrs. Kemi Adeosun, who made this disclosure while briefing the Senate yesterday on the state of the nation’s economy, was however emphatic that the recession was technical and would be short-lived.
Buttressing the point, her counterpart in the Ministry of Budget and National Planning, Senator Udoma Udo Udoma, who briefed State House correspondents after the 69th meeting of the National Economic Council (NEC), said the economy was “technically in recession”, adding however that it would start to grow by the end of the third quarter of 2016.
The recession, notwithstanding, Adeosun was confident that Nigeria would come out stronger in view of the policies and programmes that the government had put in place to address the downturn.
She also confirmed that fuel subsidies had been totally eliminated, adding that the petroleum products in the country were now market-driven, as the subsidy removal by the government had paved the way for healthy competition among oil marketers.
“Is Nigeria in recession? Technically, if you go into two quarters of negative growth. Technically, we are in recession but I don’t think we should dwell on definitions. I think we should really dwell on where we are going.
“I think if we are in a recession, what I will like to say is we are going to come out of it and it will be a very short one because the policies that we have will ensure that we don’t go below where we need to go and I think with what we are doing, we will begin to turn the corner by the third quarter.
“I can confirm there is no more subsidy. It is a market-driven price and indeed, one of the good things that we are now seeing is that prices have actually been coming down.
“There is now competition between filling stations for market share which is a good thing, which means overtime, the market will continue to correct itself,” she said.
Adeosun also disclosed that Nigerians, before the removal of the subsidy, consumed 45 million litres of petrol a day, but consumption has now dropped to 26 million litres a day, a situation she said had provided the platform for the government to make reasonable savings.
“If you look at what is happening in the petroleum sector before the subsidy removal, we were subsidising around 45 million litres of fuel a day.
“Now, without subsidy, usage has dropped to 26 million litres. So what does that tell you? All the smuggling that was going out of the country based on the subsidy that we were providing has stopped. Those are real savings to the economy which we are now redirecting into essential infrastructure that will get this economy going,” she explained.
The minister also told the senators to ignore the recent projections from the International Monetary Fund (IMF) that the Nigerian economy would be vulnerable to global shocks.
According to her, IMF projections were not necessarily in tandem with reality, insisting that she remained confident in the potential of the Nigerian economy to weather the current economic crisis.