Recession: experts urge strong fiscal policy as oil recovery delays

The necessity to create a strong reflationary fiscal policy for Nigeria in the next three years takes on uncommon urgency as OPEC, McKinsey, Goldman Sachs and the International Energy Association say oil prices will remain below $50 per barrel oil in longer than they expected.

Also, the impending production uptick from Nigeria and Libya could potentially add an additional 800,000 barrels per day making a bad problem worse.

Last week Exxon Mobil said it was ready to resume shipments of Qua Iboe crude, Nigeria’s biggest export grade with a 400,000 bpd capacity. Shell Petroleum Development Company is gearing to add 200,000 bpd. Libya last week was ready to add 300,000 bpd of supply.

A recent report by Moody’s rating agency projected stagnation in Nigeria’s real GDP in 2016 and only subdued growth at 2.5 percent in 2017.

It said Nigeria’s economy has contracted by negative 1.23 percent in the first half of 2016 on the back of low oil prices, volatile oil production, a spike in inflation that has eroded purchasing power, foreign exchange scarcity pushing the economy into recession.

Stakeholders say this situation demands that policy makers understand the urgency of crafting pragmatic fiscal and monetary policies that will lift the economy out of the current recession quickly.

“There are no quick fixes to the country’s economic situation as the recession started about four years ago and economic indicators show it may persist for another 12 – 18 months, said Bismarck Rewane, CEO, Financial Derivatives Company.

Temitope Oshikoya, economist and CEO of Nextnomics Advisory counselled that government interventions on both the aggregate demand and supply side can make a difference as unemployment rates climbs to 33 percent. He recommends fiscal and monetary policy measures to support job creation.

Experts are counselling the federal government to deepen engagement with the private sector and create policies that will address structural deficiencies in Nigeria’s economy as monetary policies alone may be inadequate to contend with the present challenges.

“Our inflation cannot be addressed using monetary policy alone. So, if you are using monetary policy alone, we are in trouble. The situation we have was driven by structural issues. We don’t have enough foreign exchange. And because we don’t have enough foreign exchange, the currency is losing its value,” said Zeal Akaraiwe, CEO of Graeme Blaque Group, a financial advisory firm.

ISAAC ANYAOGU