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State of the economy: Where do we go from here?


The Minister of budget and planning pledged that, with what the government has planned to do, the economy will come out of the recession by the year end. 

This is a key role as enshrined in the Act establishing it. We know that every player in a soccer game is expected to work toward scoring goals for his team for its pleasure and that of the team’s fans/country. 

A disaster sets in where we have an “own goal”, where displeasure sets in.

Similarly, if a doctor gives a wrong prescription or fails to diagnose correctly, cure will fail to be achieved or even fatality, death, may arise.

We doubt not of the fact that the proper functioning of money is extremely valuable in terms of promoting economic efficiency. 

Thus, the CBN tries to always regulate the supply of money so that it is sufficiently scarce that it can serve as a store of value.

Sometimes however, it does so forgetting that money must, yet be, sufficiently abundant that there is enough for it to service all the desired transactions. 

Therefore, the banking sector, the CBN system tries to regulate, must be sufficiently robust and stable. 

It must provide, (and be seen to be doing so) proper incentives for lending to go to viable and plausible projects, rather than wildly risky ones.

The level of price rise over the last one year had been enormous. 

Those that carry out the responsibility for its measure, place it at 16.8%, quite high by any measure. 

Individuals even see it differently placed it more than double what it was at last year when prices of rice, maize, sugar and more were at N8,500, N4,000 and N6,500 respectively and now at N17,000, N15,000 and N15,000. 

People even take it to electoral front by saying that it is not the change they voted for. Households ration their consumptions and change their way of life. 

Effects have reached children education and even stable food on the table. Family, social and even family relationships are threatened.

The CBN might have, or obviously, looked at the situation as resultant of cash supply, whether from the banking system or whichever source a control of the banking sector can also stem.

As a cure, therefore, the CBN raised its rate from 12% to 14%. However, this prescription, we believe, is wrong. 

If such a prescription has any effect on our financial system, even though Gen. Ibrahim Babangida, the then President, once said that our economy has defied all economic principles, will only worsen our travails.

The source of the inflation killing us today is not money supply. It is not also prosperity. 

It is recession, as we see with the IMF’s forecast reversal from a positive to a negative (-1.8%) growth. 

It is not from increased salary pay-out.

Indeed, it is lack of these that face us today. We are in recession, at least that is what our Ministers of Finance and that of Budget and Planning tell us. 

Minister of Finance, Mrs. Kemi Adeosun admitted the country “is technically in economic recession”, though believe we can come out of it shortly by dwelling on where we are going – as reported by Daily Trust on July 22nd, 2016.

The Minister of Budget and Planning, Mr. Udoma accepts same but disagrees with the IMF – thus “we expect to be marginally positive by the end of this year.” Salaries are owed by many states; and companies have, mostly, performed poorly last year which also translates into their dividend pay-out.

Government are only advertising for jobs, and thus, not paying for them, yet. 

So far, only about N300bn has been released and only nominally, too, from a capital budget of over N6.06 trillion, just about 5%. 

The Federation Account had been sharing about 50% of last year’s allocation in the last 11 months, except this month (July 2016) when about N550 billion was shared up from the usual sum of about N250billion to N300billion monthly.

Again, lending by banks had been tight. Banks hardly lend out. 

Further, the level of “hand out” being given by mostly corrupt persons has almost dried out due to the government corruption war, now being waged. 

People now stay within the basic need, in fact at their bare. Capital and fixed assets markets have crashed; especially housing and tokunbo cars. 

So where is the money?

There seems to be consensus on the real causes of the current inflation; at least outside the CBN.

The foreign exchange has seen changes within this period more than ever, in both official under the CBN and in the private markets; Banks and Bureau de change. 

The dollar had moved from N196 and N230 to about N282 and N374 respectively.

With our near total dependence on imported goods, the translation in the rise in their prices is obvious. The pump price of petrol had moved from N86 to a cap of N145.

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