- Buhari seeks home-grown solutions to Africa’s economic woes
Manufacturers yesterday decried the
continued decline of capacity utilisation in the country, warning that
the situation posed a major threat to the already ailing real sector of
the economy, resulting in massive job losses.
The Chairman, Manufacturers Association
of Nigeria (MAN), Apapa Branch, Mr. Babatunde Odunayo, explained that
the manufacturing sector recorded a 20-per-cent drop in capacity
utilisation at the end of the second quarter of 2016, stressing that the
sector currently operates under 20 per cent of its capacity.
He blamed the decline primarily on the
scarcity of foreign exchange for raw materials replenishment and the
declining purchasing power of consumers in the country.
He said apart from the scarcity of forex
and declining disposable income, the sector was also plagued by
long-standing negative factors that are yet to be addressed, including
inadequate municipal power supply and poor access road networks.
Odunayo, during the association’s
seventh business luncheon, said the theme of the forum: “Nigerian
manufacturing sector in a time of economic crises-survival strategies”
was apt, considering the current tsunami blowing across the country,
adding that it was the most challenging economic storm the nation had
ever experienced.
He added that the reason behind this
economic downturn began with the mismanagement of the windfall that was
gained from exceptionally high oil prices between 2010 and 2014, saying
that the government at that time did not cultivate the culture of
savings.
“As soon as oil prices came crashing
down, the country became exposed. The challenge now remains how to
manage the aftermath of the oil price drop and its resultant 70 per cent
drop in revenue earnings for the country. The Buhari-led administration
is faced with this challenge,” he said.
He noted the efforts by the current
administration aimed at revamping the economy, saying that the federal
government’s plan for a $1 billion Euro bond for capital projects was a
welcome idea.
He said that the most critical of
objectives of the present administration was premised on policy,
governance and security, including ensuring a stable and predictable
currency exchange rate.
He said the exchange rate must be
supported from two sources such as flexibility and support from direct
foreign investment and inflows into the country.
He also called for external borrowing
to shore up the naira in order to support poorly funded government
businesses through funds injection into the forex market.
According to him, this would stabilise
employment, drive infrastructure development, develop, and prepare
grounds for non-oil export development through appropriate investments.
He added that many companies now declare
huge exchange rate losses, pointing out that these losses already run
into hundreds of billions of naira with many manufacturing outfits
closing down.
Odunayo said Nigeria’s gross domestic
product (GDP) had declined from a robust $568.5 billion in 2014 to
$481.07 billion in 2015, stressing that for the first time since 2010,
Nigeria has suffered a drop in its GDP with a year-on-year decline of
-15.3 per cent in 2015.
“This decline may continue unless dollar funds can be injected to support private and public sector needs,” he said.
He added: “The greatest challenge facing
Nigeria at the moment is low productivity. According to a recent CBN
report for the second quarter of 2016, industrial production stood at
near zero. It reduced to as low as 6.4 per cent in the second quarter of
2016.
“Whereas revitalised industrial
production seems to be the single most potent solution to the current
economic recession in Nigeria.”
Also speaking at the event, the Lagos
State Commissioner for Environment, Dr. Babatunde Adejare, said the
theme of the event could not have come at a better time than now that
the nation is facing serious economic challenges occasioned by the
country’s over-reliance on oil, adding that all hands must be on deck to
take Nigeria out of the present situation.
“To express it more succinctly, we must
think out of the box and look for a more creative, cost effective and
sustainable way of doing business,” he said.
He said the Lagos State Government aims
to make the state Africa’s model megacity through a clear set of
policies and strategies, stressing that it was against this backdrop
that the state government decided to partner with the organised private
sector (OPS) because of its role in achieving the global plan.
Meanwhile, President Muhammadu Buhari
has called on central banks in Africa to develop home grown solutions to
tackle the economic challenges on the continent.
Speaking at the opening of the annual
meeting of the Association of African Central Banks holding in Abuja,
Buhari advised central bank governors in Africa not to rely on
prescriptions from abroad.
He said: “I urge you to continue to
look for original home-grown solutions, not to rely on ‘fit for all
purposes’ prescriptions handed down from abroad. The world is a dynamic
place and with innovation, we can survive.”
Buhari noted that Africa was confronted with several global and domestic economic challenges.
“Most worrisome is the slowdown in
growth, weakening global demand, rising inflation, restrictions in
capital flows, rising debt levels, increased exchange rate volatility,
and depleting external reserves,” he added.
He said monetary policy alone are not
sufficient to bring about the desired economic growth, adding that there
must be carefully balanced monetary and fiscal policy measures to
achieve macroeconomic stability.
Buhari said Nigeria needs to surmount
its present economic challenges through the diversification of the
economy away from excessive reliance on oil and other primary products.
He added that government is implementing
policies that would ensure that the country is self-sufficient,
generates massive employment for millions of youths, and explores
untapped human and natural resources.
Nonetheless, the president said
alongside the current economic stimulus measures, efforts must be
intensified on surveillance as well as providing guidance to the
operations of financial institutions to reverse the trend of illicit
flows of funds out of the continent.
He said: “We should all be serious about
putting in place measures aimed at ensuring that the proceeds of these
illicit flows are repatriated to their countries of origin with minimal
bureaucratic hitches.”
In his remarks, the Governor of the
Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, said the theme of
the 2016 Governors’ Symposium tagged: “Unwinding Unconventional Monetary
Policies: Implications for Monetary Policy and Financial Stability in
Africa” was timely given the prominent space it has occupied in the
discourse among the central banks with the escalation of financial
crisis in 2008.
He said with the evolving literature on
the unwinding of unconventional monetary policies (UMPs) and the
overwhelming consensus among experts that the policy posed inherent
challenges including financial instability, it had become necessary for
central banks to evolve appropriate coping strategies as a safeguard
against any negative impact on financial system stability.
Explaining the relevance of the
discourse on UMPs, the CBN governor said: “You probably know that
sometime in 2008 when the global financial crisis started, that was when
unconventional monetary policies were adopted by central banks in the
world to help to stimulate and stabilise their economies.
“And of course, we also know that the
United States started the UMPs with the quantitative easing and followed
by Japan, the Bank of England and by the European central banks.
“And of course, in Nigeria, we had also
in our own little way adopted UMPs through the stimulation of the
agriculture and manufacturing sectors.
“Some of those intervention funds we
have injected in the area of agriculture as well as manufacturing were
our own version of the UMPs which were meant to stabilise the economy
and make cheap liquidity available to the agriculture and manufacturing
sectors.
“But of course, you will find out that
from last year, we’ve started seeing incidences of unwinding of the UMPs
to the extent that for instance, during the third quarter of 2015, over
$40 billion in foreign exchange flows moved out of emerging markets and
of course, it also had its own impact on not just Africa but also in
Nigeria.
“And that’s why you’ve seen most African
countries suffering from exchange rate pressure or inflationary
pressure. So we are saying that what we should we be focusing on at this
time, when we are seeing the unwinding of unconventional monetary
policies, is the government itself insisting that we can no longer
continue to depend on oil.”
Emefiele stressed that on this basis,
the CBN and the federal government would continue along the path of UPMs
in order to stimulate the economy.
Also contributing to the debate, the
Managing Director of the International Monetary Fund (IMF), Ms.
Christine Lagarde, cautioned on the possible dangers of unwinding UMPs,
given that they provide space for development finance to thrive.
Represented by an IMF senior official,
Mr. Atingi Ago, she said: “We must first determine why advanced
economies pursued UMPs and determine whether the conditions in Africa
warrant this policy and bear in mind the current risks faced by advanced
economies as a result.”
She said there should be policy coordination whereby monetary and fiscal policies focus on long-term growth.
She said whatever the objectives are for
African countries to pursue UMPs, they should be conscious of their
impact on African central banks.
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