This came as the Secretary to the Government of the Federation (SGF ), Mr. Babachair David Lawal said that the Federal Government may not fully implement the 2016 national budget; also attributing the situation to the activities of the economic saboteur-militants.
The SGF said while the economy should look better in second half of the year, growth will probably not “be sufficiently fast, sufficiently rapid to be able to negate the outcome of ” the first and second quarters.
The economy shrunk by 0.4 percent in the first quarter, the first contraction in more than a decade, as oil output and prices slumped and the passing of the 2016 Appropriation Act was delayed.
According to New Telegraph, a currency peg and foreign-exchange trading restrictions, which were removed last month after more than a year, led to shortages of goods from fuel to most consumables and contributed to the contraction in the first three months of the year.
Leon, who spoke in a recent interview in Abuja, said, while conditions that impeded growth in the first half of the year, including shortages of power, fuel, and foreign exchange, as well as the higher price of dollars on the parallel market, may have been reduced, they still weigh on the economy. IMF cut its 2016 growth forecast for Nigeria to 2.3 per cent in its April Regional Economic Outlook from 3.2 per cent projected in February.
The World Bank lowered its forecast to 0.8 per cent last month, citing weakness from oil output disruptions and low prices. Last year ’s expansion of 2.7 per cent was the slowest in two decades, according to IMF data.
“Most people would agree that if you should fix one thing in this country, it should be power,” Leon said. “There is a need to start changing the power equation from 2016, from today, not tomorrow or later.”
Nigeria generated an average of 2,464 megawatts of electricity on June 6, according to information from the power ministry. This is less than half of the installed capacity of 5,000 megawatts for a nation whose population of 180 million people is the highest on the continent.
It compares to power generating of more than 40,000 megawatts in South Africa, which has a population a third of our size. While inflation will probably continue its upward trend through the end of this year, it is unlikely to exceed 20 per cent, Leon said.
Price of goods growth accelerated to 15.6 percent, the highest rate in more than six years, in May and probably quickened to 16.2 per cent last month, according to the median of seven economist estimates compiled by Bloomberg. The Monetary Policy Committee (MPC ), “may be open to tolerating a little more inflation if growth emerges as the priority, as opposed to choking inflation and squeezing the little life out of growth,” Leon said. “But the CBN, in conjunction with the MPC, needs to be clear to participants in markets what exactly their priority is.”
The CBN left its benchmark rate unchanged at 12 per cent in May and will announce its next decision on July 26. The MPC is likely to increase the rate by 500 basis points in the next year “to address the prevailing inconsistencies between an accommodative monetary policy and a more flexible exchange rate,” Goldman Sachs said in a note on July 8.
Nigeria’s huge budget of N6.1 trillion, with a deficit of 2.2 trillion, or 2.14 percent of gross domestic product, came into operation in May after a delay of four months. If had earned all the revenue it targeted, the fact that the budget was passed late means it’ s likely not all the capital spending planned to boost growth will take place, or it will not be as prudent as initially set out.
He added, "if expenditure stays as planned, and revenue is less due to the lack of growth “then we should see not smaller but potentially a larger deficit.”
We are hoping the managers of our economy will rise to the challenge in the days ahead.
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