Kingsley Ighomwenghian
The chief executive of Economic Associates, Dr. Ayodele Teriba, has said that despite the lingering gloom in the polity, arising from the sweeping global economic turmoil, analysts believe that Nigeria may not run a deficit budget this year. He added that the Nigerian government sent the wrong signals to the market when it hinted in the budget
presented on December 6, 2008 to the National Assembly that it would run a budget composed of over N1 trillion deficits, to be funded by internal and external borrowings.
Unfolding the country’s First Quarter Economic Assessment report at a one-day conference in Lagos, organized by the company on Tuesday, Teriba noted that the feelers wrongly sent by the announcement was that the country’s excess crude account was empty
“The truth is that the government is unlikely to run a deficit or borrow,” he noted however, adding that the $45 per barrel benchmark for oil price at the international crude market was fairly pessimistic. A benchmark of about $59pb, he believes would have been more appropriate, arguing that while $45pb can send shock waves to the private sector as it has done, causing irreversible damage, $59pb is capable of stabilizing expectations and insulating the economy from global economic crisis.
Such worse case scenario benchmark, he continued, treated a temporary and cyclical drop in oil prices as though it was permanent. The former Lagos Business School (LBS) faculty sees crude oil prices rising to $60pb in the not too distant time, stressing that the government over estimated the global economic crisis thereby scaring everybody away.
He also predicted that the crunch would not last long in Nigeria since it was driven by panic and different from the bad credit situations that played out in the developed economies.
Such hints, he continued, sent rates overboard, adding that as such, there was little the Central Bank of Nigeria (CBN) would do on the monetary side to clear the mess.
Teriba also expressed concern as to why the National Assembly passed the Appropriation Bill the way it did, without reference to the savings made from the previous Act passed last year.
Government, he also believes, ought to have delayed the capital projects elements of the budget to about the second half of the year when grey areas would have become clearer and several other issues sorted out.
He hinged his optimism on the fact that people would soon resume spending, a situation that would spike global demands for oil and consequently drive oil prices up once more to the advantage of Nigeria.
He also noted that although consumer price index used to measure inflation has been on the rise since October 2007, it was not driven by money supply but primarily by food prices, recalling that there had been a global food crisis long before the economic turmoil. This has however been reversed since October 2008, due to the global commodity prices.
The Nigerian inflation situation is exaggerated comparatively, he added, as it has been increasing at a decreasing rate in recent months, just as there was some deflation between October and November last year.
The Economic Associates boss urged government to allow Nigerian banks regain custody of its deposits now domiciled at the CBN at transparent market determined interest rates. It was not all knocks, as he expressed happiness with the rise in medium to long-term FGN bonds issuance, as government continues to successfully deepen the long end of its domestic debt.
Agreeing with the submission, Dr. Doyin Salami, a senior lecturer at the LBS who spoke on “Nigeria: The economy in 2008,” assured that in the coming days, while the nation’s economy would grow at a slow pace, it is unlikely to go into a recession.
He noted that the country did not exhibit any adverse impact from the global economic meltdown last year. The economy, he noted grew by almost 8.0 per cent for the third straight year since 2006, a situation he linked to the huge 42 per cent contribution from agriculture, a non traded item unlike oil and other commodities.
The Standard & Poor’s report on the fate of the Nigerian economy, as reported recently in the media, he believes, “is unduly pessimistic,” as Nigeria would not be so hard hit by the crisis, “except the global crisis will adversely affect climatic condition and (then) impact negatively on agriculture. But as far as the economic outlook is concerned, agriculture will continue to behave true to type, growing by as much as 50 per cent.”