The World Bank has warned that Nigeria’s economic growth is too slow to address the challenge of extreme poverty in the country.
Meanwhile, the bank has retained its economic growth (Gross Domestic Product, GDP) forecast of 2.8% for Nigeria in 2023, citing challenges of high inflation, foreign exchange shortages, and shortages of banknotes caused by currency redesign.
The World Bank gave the warning in the Global Development Prospect report for June 2023.
Among other things, the bank downgraded its economic growth forecast for Sub Saharan Africa to 3.2% for 2023, from 3.4% projected in its April World Economic Outlook. It also projected that global economic growth will slow to 2.1% in 2023, with prospects clouded by financial risks.
The World Bank stated: “After growing 3.1 percent last year, the global economy is set to slow substantially in 2023 to 2.1 percent, amid continued monetary policy tightening to rein in high inflation, before a tepid recovery in 2024, to 2.4 percent.
“Growth in Sub-Saharan Africa (SSA) continued to decelerate earlier this year owing to various country-specific challenges and heightened external economic headwinds.
“Growth in the three largest SSA economies – Nigeria, South Africa and Angola – slowed to 2.8 percent in 2022 and continued to weaken in the first half of this year. In Angola and Nigeria – SSA’s largest oil producers – the growth momentum has stalled amid lower energy prices and stagnant oil production.
“The post-pandemic rebound in Nigeria’s non-oil sector cooled earlier this year because of persistently high inflation, foreign exchange shortages, and shortages of banknotes caused by currency redesign.
“Growth in SSA is expected to decline further to 3.2 percent in 2023 before picking up to 3.9 percent in 2024. The recovery in South Africa is projected to slow to 0.3 percent this year as widespread power outages weigh heavily on activity and contribute to the persistence of inflation.
“Growth in Nigeria is expected to remain barely above the population growth – far slower than needed to make significant inroads into mitigating extreme poverty.
“Outlook downgrades, however, extend beyond the major regional economies with elevated cost of living restraining private consumption and tighter policies holding back a pickup in investment in many countries.
“More broadly, worsened domestic vulnerabilities together with tight global financial conditions and weak global growth are expected to keep recoveries subdued.”
Edo, GIZ Strengthen Partnership To Enhance Ease Of Doing Business
As part of reforms to boost ease of doing business in Edo State, the state government has strengthened partnership with the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ).
Addressing journalists after the meeting with the representatives from the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) at the Edo State Investment Promotion Office (ESIPO), in Benin City, the Managing Director of ESIPO, Mr. Kelvin Uwaibi, said the primary objective of the meeting was to evaluate the outcomes of prior collaborations and chart a more robust path, aimed at elevating Edo’s standing in the Presidential Enabling Business Environment Council (PEBEC) ratings.
He noted that GIZ has been a steadfast partner to Edo State over the years, offering invaluable support in the state’s mission to enhance the Ease of Doing Business.
He added, “This partnership has yielded noteworthy successes, and the recent meeting provided an opportunity to assess the tangible achievements and strategise for the future.
“One of the top priorities identified during the meeting was the enhancement of EODB for Micro, Small and Medium Enterprises (MSMEs). Both parties were committed to ensuring that these businesses encounter fewer obstacles and experience a more streamlined process.
“A key area of focus was simplifying business-related processes and reducing bureaucratic complexities. Streamlining these procedures can significantly enhance the overall EODB environment.
“Recognising the importance of reducing the cost of doing business, both parties underscored the need to implement measures that make it more affordable for enterprises, particularly small and medium-sized ones.”
Representative of the Head of Component, Policy and Strategy, Mr. Omoware Akinropo, and Access to Finance Policy Advisor, GIZ, Mr. Pearse Akinwande, reiterated GIZ’s unwavering commitment to supporting Edo State in its EoDB initiatives.
Naira To Dollar: Edo Businessman Wants FG To Intervene
An Edo State businessman, Mr. Osazee Gift Osazuwa, has called on the Federal Government to wade in and tackle the falling rate of the naira against the dollar.
He made the call in Benin while addressing Journalists as regards the current exchange rate of the naira against the dollar.
Osazuwa said on Saturday, the naira was sold for 1,000/$ at the black market, a trend he described as “very worrisome.”
He said the falling strengthen of the naira against the dollar is not helping them in the electronics business as they have to spend more to buy goods due to the exchange rate.
Osazuwa said if the naira keeps falling without any action from the Federal Government to salvage the situation, it might get worse and thereafter push them out of business.
Osazuwa, while expressing confidence on President Bola Tinubu’s ability to revamp the nation’s moribund economy, said those of them in the electronics business still have hope that he has the magic wands to turn it around.
He called on the Federal Government to arrest the situation before it gets out of hands.
He said if the government can check the falling rate, stem the tide and restore the dignity of the naira against the dollar, the country will be better for it.
Also speaking, Mr. Matthew Oshodin, decried the high cost of living in the country which is made worse by the fuel subsidy removal.
He said Nigerians are currently finding it difficult to cope rising from the high cost of fuel that has robbed off on every other aspect of the economy.
Oshodin further used the medium to call on the federal government to fix up the nation’s moribund refineries rather than sharing N5 billion as palliatives to states.
Manufacturers Express Fear Of Closure Over Worsening Naira Value
Operators in the Nigerian economy have expressed fear that there might be further rise in cost of goods and services, and more shutdowns of their operations over the worsening naira value.
They called for urgent intervention in the sector to prevent more hardship on Nigerians.
The National Vice Chairman of the Nigerian Association of Small-Scale Industrialists, Segun Kuti-George, said higher prices would be the unavoidable consequence of the current exchange rate.
He expressed dismay that the floating of the naira which was supposed to curb speculation of currency speculation, had consequently escalated the activities of speculators.
According to Kuti-George, unless the government moves swiftly to stem the tide of the naira depreciation especially at the parallel market where more customers access the FX, more factories would be forced to shut down.
He said, “It is ironic that what works in other places don’t work in Nigeria. The cost of production is rising, because we still import a large part of our input, especially equipment. Most of the raw materials that we use are imported.
“So, when the cost of input goes up, the cost of production also goes up. This will happen to the price of products. The question now is – will people be able to afford our products now? Will imported products not be cheaper than our own to the extent that people will be rejecting our products for imported ones? Unless the tide is stemmed, there will be more factories closure.”
The President of the Manufacturers Association of Nigeria, Francis Meshioye, said the current exchange rate would inevitably lead to a hike in the prices of products given the toll it would take on manufacturers to access foreign exchange.
According to him, the floating of the exchange rate will not mean anything to operators if the naira continues the free.
Meshioye said, “It is an unpleasant development because that is the major currency through which we purchase our goods outside the bounds of our nation. It means that the cost of raw materials will continue to skyrocket.
“It is unpleasant. We hope that the government will do something about it. While we float the exchange rate, it should not be allowed to be somersaulting and skyrocketing to unreasonable levels which will not augur well for the country, knowing full well that we are not just trading amongst ourselves.”
He added that, “We have to trade outside of our bounds. The implication of this is that our prices may be unreasonably higher than prices of other countries. That implies, among other things, that our products may be found to be too expensive. If you want to look at the unavailability of disposable income among the citizenry, the choice of buying Nigerian-made products, which may be expensive and foreign products which are cheaper is low. It is pathetic.”
The President, Association of Bureaux De Change Operators of Nigeria, Dr. Aminu Gwadabe, said the volatility of the local currency had continued to underpin the nation’s slow economic growth.
He said, “The high demand pressure at the 1&E window and the parallel market due to lack of sufficient liquidity have been fuelling the widening gap between the I&E Window and the parallel market rates.
“Combination of several factors including the investors’ backlog estimated at $6.8bn and disincentives to bring fresh funds into the economy is one of the major concerns.
“In the same vein the dwindling receipt of Diaspora remittances and resurrection of subsidy on petrol are major deterrents and big concerns to fresh liquidity in the market.”
According to him, the uncertainties and loss of public confidence on the local currency has heightened demand pressure in all segments of the market.
He said, “In addressing the challenges of the I&E window, there is need for the legislation of the willing buyer and willing seller concept. This will lead to enhanced liquidity in the foreign exchange market and enhance public confidence.
“It is also imperative in this regard to recognise the inclusion of the BDCs at the I&E window to continue to play their roles of moderating and correcting the markets.”
He advised the Federal Government on how to bring in more Diaspora remittances.
The CBN had recently announced operational mechanism for the BDCs to trade foreign currencies at similar rates obtainable on the Investor & Exporter forex window.
It gave the directive to all BDCs and the general public in a circular number TED/FEM/PUB/FBC/001/007 dated August 17, 2023, titled, ‘Operational mechanism for Bureau De Change operations in Nigeria’.
The circular stated, “The spread on buying and selling by BDC operators shall be within an allowable limit of -2.5 per cent to +2.5 per cent of the Nigerian exchange market window weighted average rate of the previous day.
“Mandatory rendition by BDC operators of the statutory periodic reports (daily, weekly, monthly, quarterly and yearly), on the financial institution forex rendition system which has been upgraded to meet operators’ requirements.”
The Director/Chief Executive Officer, Centre for The Promotion of Private Enterprise, Dr Muda Yusuf, said the new CBN Governor, Dr Olayemi Cardoso, was assuming the leadership of the CBN at a very crucial time in the economic history.
He said, “There is a serious confidence crisis in the foreign exchange market fuelling an unprecedented speculative onslaught on the naira. The economy is grappling with severe adverse effects of depreciating exchange rate, soaring energy costs, ravaging inflationary pressures, huge backlog of foreign exchange obligations that needs to be cleared and debt service obligations that need to be redeemed. Sadly, these outcomes are manifesting at a time when the country’s foreign reserves have been substantially encumbered.
“There is an apparent deceleration in the pace of economic reforms as the outcomes are at variance with expectations. The social costs of the reforms were substantially higher than anticipated, resulting in push-backs from the civil society.”
He said the economic management orthodoxy of market forces was being called to question in the light of the social outcomes of the market-oriented reforms.
He said there was a measured re-emergence of political economy with the reappearance of fuel subsidy and divergence in exchange rates.
This was evidently an economic management quandary that the new economic team would have to manage, and urgently too, he said.
Yusuf said, “Meanwhile, the CBN must ensure strategic and transparent intervention in the forex market to minimise volatility, as far as the reserves can support. In addition to the I and E window, it has become necessary to create an autonomous window in the banking system where the currency can trade freely without any encumbrances. This is necessary to avert the diversion of remittances to other jurisdictions or the black market. We cannot afford to live in denial at this time.
“The clearance of the backlog of forex obligations should be accorded high priority to restore the confidence of domestic and foreign investors.”
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