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Tag: recession

  • PDP lectures Buhari on management of economy, exit from recession

    PDP lectures Buhari on management of economy, exit from recession

    The Peoples Democratic Party (PDP) has advised President Muhammadu Buhari to permit a free market economy that will allow Nigerians actively participate in the economic space to boost productive sectors.

    Mr Kola Ologbondiyan, PDP’s National Publicity Secretary, in a statement in Abuja on Sunday said this would bring Nigeria’s economy back from recession.

    Ologbondiyan urged the government to bring in more competent, transparent and honest hands to effectively manage the nation’s economy, saying, this was the only way to save the economy.

    The spokesperson attributed the economic recession to restrictive trade policies, foreign exchange controls and monetary policies that impeded growth.

    According to him, these policies have led to an over-bloated public sector that encourages waste and corruption, looting and insecurity, which has destroyed economic activities in most parts of the country.

    He also listed lack of access to incentives, high taxes and levies as some of the factors that affected domestic production and competiveness, investors’ confidence and foreign direct investment, leading to the economic contraction.

    He said presently, no fewer than 60 million hard working Nigerians had been affected by economic policies, including protocols and high taxes.

    He noted that insecurity had also led to closure of businesses, with millions of farmers abandoning their farmlands, while commercial activities on Nigeria’s trade corridors had been destroyed.

    “Besides, our party had cautioned against the increase in fuel price, which has impacted negatively on the disposable incomes of Nigerians.

    “We however, insist that poor management and not the high cost of crude oil in the international market is responsible for high costs of domestic price of fuel,’’ he said.

    Ologbondiyan also said the negative impact of the closure of Nigeria borders, without encouraging local production, and its effect on food production was a contributing factor.

    He urged the government to lift its restrictive policies, reduce taxes, state imposed prices and get more competent hands to tackle insecurity.

  • Recession: SERAP gives Buhari ultimatum to cut cost of governance

    Recession: SERAP gives Buhari ultimatum to cut cost of governance

    The Socio-Economic Rights and Accountability Project (SERAP) has warned President Muhammadu Buhari to cut immediately the cost of governance in Nigeria.

    Africa’s biggest economy has entered another recession, the worst in decades.

    The rights group, in reaction, told Buhari to put the country’s resources at the service of the masses to enable them enjoy a good standing of living.

    A letter dated 21 November, 2020, signed by SERAP deputy director Kolawole Oluwadare, said the economic crisis provides an opportunity to prioritise access of poor and vulnerable Nigerians to basic socio-economic rights, and to genuinely recommit to the fight against corruption.

    It stressed that the nation cannot afford getting back to business as usual, and urged implementation of transparency and accountability measures would save money, address projected adverse human rights impacts of the recession, and fast-track the economic recovery process.

    SERAP said it is not too late to take urgent steps that would put the country’s wealth and resources to work for the common good of all Nigerians.

    The body decried that decades of mismanagement and corruption, and deep-seated deficiencies in public financial management have directly contributed to higher levels of borrowing and public debts, and consequently, the economic recession.

    It lamented that successive governments have squandered the promise afforded by the country’s natural wealth and resources.

    The letter read in part: “The paltry resources Nigeria invests in essential public goods and services that would benefit ordinary Nigerians can be partly explained by the high spending of public funds to finance a life of luxury for members of the National Assembly, state governors, and other powerful politicians.

    “The country’s resources appear to have been used almost exclusively for the benefit of the political elites rather than on projects that would ensure the right to an adequate standard of living, the maximum welfare, prosperity, freedom and happiness of every citizen on the basis of social justice and equality.

    “SERAP is seriously concerned about the adverse consequences of the economic crisis on the human rights of poor and vulnerable Nigerians, including denying them access to essential public goods and services such as healthcare, education, clean water, and regular electricity supply.”

    The organization urged Buhari to commence moves to cut spendings on government and officials.

    SERAP added that if this doesn’t happen in 14 days, it shall take legal actions against the administration.

  • Atiku suggests ways to tackle Nigeria’s 2nd recession in 5 years

    Atiku suggests ways to tackle Nigeria’s 2nd recession in 5 years

    Former Vice President Atiku Abubakar has said the proposed 2021 budget presently before the National Assembly (NASS) is no longer tenable.

    TheNewsGuru.com (TNG) reports Atiku stated this on Sunday as the Nigerian economy slipped into its second recession in five years.

    He suggested several ways the government can tackle the recession, including more taxes on super-rich Nigerians.

    Atiku wrote: “It is with a very heavy heart that I received the confirmation that for the second time in five years, Nigeria has entered into another recession.

    “Heaviness of heart, because this could have been avoided had this administration taken heed to patriotic counsel given by myself and other well meaning Nigerians on cutting the cost of governance, saving for a rainy day, and avoiding profligate borrowing.

    “Yes, the COVID19 pandemic has exacerbated an already bad situation, however, we could have avoided this fate by a disciplined and prudent management of our economy.

    *Be that as it may, it serves no one’s purposes to quarrel after the fact. We must focus on solutions. Nigeria needs critical leadership to guide her back to the path of economic sustainability.

    “We cannot afford hand wringing and navel-gazing. We must act now, by taking necessary, and perhaps painful actions.

    “For a start, the proposed 2021 budget presented to the National Assembly on Tuesday, October 8, 2020, is no longer tenable. Nigeria neither has the resources, or the need to implement such a luxury heavy budget.

    “The nation is broke, but not broken. However, if we continue to spend lavishly, even when we do not earn commensurately, we would go from being a broke nation, to being a broken nation.

    “As a matter of importance and urgency, every non essential line item in the proposed 2021 budget must be expunged. For the avoidance of doubt, this ought to include estacodes, non emergency travel, feeding, welfare packages, overseas training, new vehicle purchases, office upgrades, non salary allowances, etc.

    “Until our economic prospects improve, Nigeria ought to exclusively focus on making budgetary proposals for essential items, which include reasonable wages and salaries, infrastructural projects, and social services (citizenry’s health, and other human development investments).

    “Additionally, we have to stimulate the economy, by investing in human development, and increasing the purchasing power of the most vulnerable of our population. Only a well developed populace can generate enough economic activity for the nation to exit this recession.

    “We must invest in those most likely to be impacted by the effects of the recession, the poorest of the poor. As well as stimulating the economy, this also ensures that they do not slip further into extreme poverty.

    “For example, a stimulus package, in the form of monthly cash transfers of ₦5000 to be made to every bank account holder, verified by a Bank Verification Number, whose combined total deposit in the year 2019 was lower than the annual minimum wage.

    “Now, how will this be funded? By more profligate borrowing? No. I propose a luxury tax on goods and services that are exclusively accessible only to the super-wealthy. A tax on the ultra wealthy to protect the extremely poor.

    “A practical approach to this is to place a 15% tax on all Business and First Class tickets sold to and from Nigeria, on all luxury car imports and sales, on all private jets imports and service charges, on all jewellery imports and sales, on all designer products imported, produced or sold in Nigeria, and on all other luxury goods either manufactured, or imported into Nigeria, with the exception of goods made for export.

    “The proceeds of this tax should be exclusively dedicated to a Poverty Eradication Fund, which must be managed in the same manner as the Tertiary Education Trust Fund, or the Ecological Fund.

    “I further propose that a 1% poverty alleviation tax should be legislated by the National Assembly on the profits of every International Oil Company operating in Nigeria, and international airlines doing business in Nigeria, which should also go towards the proposed Poverty Eradication Fund.

    “It is inhumane for us as a nation to increase the cost of goods and services that affect the poor, while keeping the cost of luxuries fairly stable. We must flip this, and flip it immediately.

    “And above all, Nigeria must stop borrowing for anything other than essential needs. Again, for the avoidance of doubt, borrowing to pay salaries, or to engage in White Elephant projects, is not an essential need. This is particularly important as we need cash at hand, because the world and our economic and development partners are also focused on helping their home economies overcome effects of COVID19. We must be our own saviours.

    “The more we borrow, the more we will need cash to make interest and principal payments, and the less cash we will have to make necessary investments in our economy and our people. If we keep borrowing, we stand the risk of defaulting, and that will make recession a child’s play, because we will lose some of our sovereignty.

    “I urge the administration of President Muhammadu Buhari to swallow its pride, and accept its limitations, so that they can open their minds to ideas, without caring who the messenger is. For as Deng Xiaoping said “It doesn’t matter whether the cat is black or white, so long as it catches mice”.

  • Nigeria slips into second recession in five years

    Nigeria slips into second recession in five years

    The Nigerian economy has slipped into its second recession in five years as the gross domestic product contracted for the second consecutive quarter.

    The National Bureau of Statistics announced Saturday the nation’s GDP recorded a negative growth of 3.62 per cent in the third quarter of 2020.

    The country had earlier recorded a 6.10 per cent contraction in the second quarter.

    It is the nation’s second recession since 2016, and the worst economic decline in almost four decades.

    The Nigerian economy has been battered by the coronavirus pandemic, which caused a significant decline in oil revenues as global economic activities stalled for months.

    Crude oil accounts for nearly 90 per cent of Nigeria’s foreign exchange earnings although it contributes less than 10 per cent to the GDP. It contributed just 8.73 per cent to the economy in the latest report.

    Oil production fell to 1.67 million barrels a day from 1.81 million barrels in the previous quarter, according to Bloomberg figures, the lowest since the third quarter in 2016 when the economy last experienced a recession.

    The World Bank forecast the Nigerian economy will contract by 3.2 per cent in 2020, assuming the spread of COVID-19 is contained by the third quarter. The International Monetary Fund forecast a contraction of 4.3 per cent.

    Before the pandemic and its attendant disruption, the Nigerian economy was expected to grow by 2.1% in 2020.

    The pandemic as well as border closure have seen the country record sustained inflation for more than two years, with the October figure of 14.25 per cent the highest in the last 30 months.

    The Central Bank of Nigeria in September cut interest rates to 11.5 per cent to help boost borrowing and support the economy. It was the second reduction in months.

    The latest development is likely to trigger a further cut of the policy rate. The monetary policy committee, which sets the rate, is to begin its two-day meeting on Monday.

    The NBS said in its report that the performance of the economy in the third quarter of 2020 reflected “residual effects of the restrictions to movement and economic activity implemented across the country in early Q2 in response to the COVID-19 pandemic.”

    “As these restrictions were lifted, businesses re-opened and international travel and trading activities resumed, some economic activities have returned to positive growth,” it said.

    In all, 18 economic activities recorded positive growth compared to 13 activities in the second quarter.

    During the quarter under review, aggregate GDP stood at N39 trillion in nominal terms, higher than N37.8 trillion in the same quarter in 2019.

  • Nigeria is heading for another recession – Buhari

    Nigeria is heading for another recession – Buhari

    President Muhammadu Buhari on Thursday said the country was primed for a second recession in four years although the government has put in place plans to ensure rapid recovery in 2021.

    The President made the remarks during the presentation of the 2021 budget proposal to the National Assembly.

    Like many other countries, the Nigerian economy has been hit hard by the coronavirus pandemic which drastically cut the demand for oil, the country’s top revenue earner.

    Before the pandemic, the country was on a three-year trend of modest but positive GDP growth.

    The government’s plans to revive the economy include a focus on skills development exemplified by the Special Public Works programme which aims to provide employment opportunities to 774,000 young people across the country.

    “The 2021 Budget was prepared amidst a challenging global and domestic environment due to the persistent headwinds from the Coronavirus Pandemic. The resulting global economic recession, low oil prices and heightened global economic uncertainty have had important implications for our economy.

    “The Nigerian economy is currently facing serious challenges, with the macroeconomic environment being significantly disrupted by the Coronavirus Pandemic. Real Gross Domestic Product (‘GDP’) growth declined by 6.1 percent in the second quarter of 2020. This ended the 3-year trend of positive, but modest, real GDP growth recorded since the second quarter of 2017. I am glad to note that, through our collective efforts, our economy performed relatively better than that of many other developed and emerging economies.

    “GDP growth is projected to be negative in the third quarter of this year. As such, our economy may lapse into the second recession in four years, with significant adverse consequences. However, we are working assiduously to ensure a rapid recovery in 2021. We remain committed to implementing programmes to lift 100 million Nigerians out of poverty over the next 10 years.

    “As skills’ deficits limit employment opportunities in the formal economy, various skills’ development programmes are being implemented simultaneously to address this problem frontally. For instance, the Government is implementing the Special Public Works programme to provide employment opportunities to 774,000 youths across the 774 local government areas of Nigeria. We have also recently introduced the N75 billion Nigeria Youth Investment Fund, of which N25 billion have been provided in 2021 Budget.

    “We thank all Nigerians, for your perseverance and continued support during these difficult times. We remain unwavering in our commitment to actualize our vision of a bright future for everyone.”

  • Australia slips into first recession in 29 years

    Australia slips into first recession in 29 years

    Australia has officially fallen into its first recession in 29 years with the biggest fall in Gross Domestic Product (GDP) on record.

    According to national accounts data published by the Australian Bureau of Statistics (ABS) on Wednesday GDP contracted by 7 per cent in the June quarter – more than three times more than the previous biggest fall of 2 per cent in 1974.

    “This is, by a wide margin, the largest fall in quarterly GDP since records began in 1959,” said Michael Smedes, Head of National Accounts at the ABS.

    It marks the second consecutive quarter of economic decline, meaning that Australia is in a recession for the first time since 1991.

    “Today’s national accounts confirm the devastating impact on the Australian economy from COVID-19.

    “Our record run of 28 consecutive years of economic growth has now officially come to an end.

    “Behind these numbers are heartbreaking stories of hardship, being filled by everyday Australians as they go about their daily lives,” Treasurer Josh Frydenberg said on Wednesday.

    The ABS found that due to increased number of recipients and additional support payments, social assistance benefits in cash rose to a record 41.6 per cent.

    Meanwhile, Australians’ spending on services fell 17.6 per cent in the June quarter while hours worked fell a record 9.8 per cent and the household saving to income ratio rose from 6 percent to 19.8 per cent.

    Household expenditure declined by 12.1 per cent.

    However, Frydenberg said that the government has the “financial firepower” to stimulate the economy in the wake of the pandemic.

    “The road ahead will be long, the road ahead will be hard, the road ahead will be bumpy.

    “We didn’t go down the path of countries like Sweden which put few restrictions in place.

    “At the same time we didn’t go down the path of countries like France which accepted and adopted extreme lockdowns, totally shutting down large parts of their economy.

    “Instead we chose our own path, and put in place 314 billion Australian dollars (230.7 billion dollars) of support for Australians to build a bridge to the other side of this crisis,” he said.

    In spite of offering long-term optimism Frydenberg also warned of a grim short-term outlook, with the September quarter expected to be weighed down significantly by strict stage four coronavirus restrictions introduced in Victoria in August.

    Earlier on Wednesday Mathias Cormann, the Minister for Finance, said that the government stood by restrictions placed on the economy to prevent the spread of COVID-19.

    “We were hit by an unexpected crisis which came out of nowhere and clearly the first priority was to protect people’s health and save people’s lives by suppressing the spread of the virus and that was absolutely necessary,” he said.

  • FG raises alarm: Nigeria on its way to second recession unless…

    FG raises alarm: Nigeria on its way to second recession unless…

    The Federal Government said on Thursday that unless the country achieves a strong third quarter economic performance in 2020, the country stands the risk of going into a second recession with significant adverse consequences.

    The government also warns that Nigeria faces significant medium-term fiscal challenges, especially with respect to its revenues, which if not immediately addressed could snowball into a debt sustainability crisis.

    Minister of state for Finance, Budget and National Planning, Clement Agba disclosed this while speaking at an interactive session with the House of Representatives joint committees on Finance, Appropriation, Budget and Economic Development as well as Loans, Debt Management.

    Agba who represented the Minister for Finance, Budget and National Planning, Zainab Ahmed at the event said Nigeria is currently exposed to spikes in risk aversion in the global capital markets, which will put further pressure on the foreign exchange market as foreign portfolio investors exit the Nigerian market.

    Agba admitted that the Nigerian economy faced serious challenges in the first half of 2020 with the microeconomic environment significantly disrupted by the COVID-19 pandemic.

    According to him, crude all prices declined sharply in the “mild market with Bonny Light crude oil price dropping from a peak of US$72 pb on January 7, 2020 to below US$20 in April, 2020 as a result of which the US$57 crude oil price benchmark on which the 2020 budget was based became unsustainable.

    He said further that massive output cut by OPEC and its allies to stabilize the world oil market was another key development in the international crude oil market with Nigeria contributing about 300,000 bpd of production cuts.

    The Minister explained that the impact of these developments is about 65% decline in projected net 2020 government revenues from the oil and gas sector, with adverse consequences for foreign exchange inflows into the economy.

    He said further that Nigeria is currently exposed to spikes in risk aversion in the global capital markets, which will put further pressure on the foreign exchange market as foreign portfolio investors exit the Nigerian market.

    He stressed that as a result of the decline in revenue, Nigeria‘s Q2 GDP growth is in all likelihood negative, and unless we achieve a very strong Q3 2020 economic performance, the Nigerian economy is likely to lapse into a second recession in four year, with significant adverse consequences.

    He stressed that in response to the developments affecting the supply of foreign exchange to the economy, the Central Bank of Nigeria (CBN) adjusted the official exchange rate to N360/USD1, and more recently to N379/USD.

    He maintained that the disruptions in global trade and logistics would negatively affect custom duty collections in 2020, while the COVID-19 containment measures have inhibited domestic economic activities, with consequential negative impact on taxation and other government revenues.

    As a result of this, he said, the projections for Customs duty, Stamp Duty, Value Added Tax, and

    Company Income Tax revenues were recently reviewed downwards in the revised 2020 budget, adding that in spite of the challenges, Customs revenue has generally performed close to target over the last few years, exceeding target in 2019 as well as some level of improvement in Company Income Tax and VAT remittances.

    He said further that over the past 5 years, actual revenue performance averaged 61.4%, adding that some government reforms are yielding positive results, with significant improvements between 2018 & 2019, saying “we believe we can do more to improve revenues, especially remittances from Government Owned Enterprises, possibly up to N1 trillion p.a.

    He said further that the key parameters as well as other macroeconomic projections during the medium term revenue and expenditure framework have been revised by the government in line with the emergent realities.

    He maintained that “oil GDP growth rate has a strong positive correlation with real GDP growth in Nigeria. Consequently, changes in the underlying drivers of oil GDP will significantly affect real GDP performance.”

    He said further that although Nigeria‘s total production capacity stands at about 2.5 mbpd, current crude production stands at about 1.4mbpd in compliance with the OPEC production quota), and an additional 300,000bpd of condensates, totaling about 1.7mbpd.

    He said further that the World Bank has projected that crude oil prices will rise gradually from an average of US$42 pb in 2021 to $44.5 pb in 2022, and US$47 pb in 2023, while EIA expects Brent crude oil prices to average $41 pb during the second half of 2020 and $50 pb during 2021, reaching $53 pb by the end of 2021.

    Agba said further that with oil price projected to remain low and volatile in 2020, and Nigeria’s compliance with 0PEC cuts by reducing base production to between 1.412 mbpd and 1.579 mbpd from June to end of the year, growth in Oil GDP is expected to decline in 2020.

    The Minister said that the nominal GDP is expected to increase from N130,836.1 billion in 2020 to N132.1254 billion in 2021 and then up to N138,415.8 billion in 2023. Similarly, consumption expenditure ls projected to stay flat at N118, 735.2 billion in 2020 and N118, 468 billion in 2021 and grew to N124, 35815 billion by 2023, reflecting a gradual steadiness in the recovery.

    He stressed that inflation is expected to remain above single digit over the medium term, given the structural issues impacting on cost of doing business including high cost of and distribution.

    He explained further that fiscal measures are being instituted to improve government revenue and entrench a regime of prudence with emphasis on achieving value for money aimed at keeping the economy active through carefully calibrated regulatory/policy measures designed to boost domestic value addition, de—risk the enterprise environment, attract external investment and sources of funding, among others

    He stressed that improving the tax administration framework to optimize government revenue has been a major thrust of the Administration’s Strategic Revenue Growth Initiative (SRGI), saying “we have included in the 2021 – 23 MTEF/FSP, a Tax Expenditure Statement (TES) overview which seeks to dimension the cost of tax waivers/concessions, and evaluate their policy effectiveness.

    “To enhance Independent Revenue generation and collection, Government will aim to optimize the potentials operational and collection efficiency of GOEs with a view to generating significantly higher revenues required to fund the FGN budget.

    “Current revenue performance of GOEs will be addressed through the effective implementation of the enhanced Performance Management Framework. The key elements of the reform initiative include Performance Contracts for Chief Executive Officers (CEOs) and key management staff, which will set financial indicators and targets for each GOE

    “The cost-to-revenue ratio of GOEs has by a Presidential directive been limited to a maximum of 60%-70% while regular monitoring and reporting of revenue and expenditure performance of GOEs will be undertaken by both the Budget Office of the Federation and the Office of the Accountant General of the Federation.

    He however said that the Finance Bill 2020, which will accompany the 2021 Budget Proposal, will contain measures to advance the SRGI, saying “we shall also work closely with the National Assembly to amend relevant laws that need to be amended to help with the SRGL.

    ”We have revised the 2020 FGN budget and will accelerate implementation to maintain budget credibility, enhance GDP growth and promote social inclusion. The draft 2021 — 2023 MTEF/FSP has been prepared against the backdrop of a global recession and heightened global economic uncertainty.

    “The draft 2021-2023 Medium Term Fiscal Framework shows that there are continuing global challenges due to the COVlD-19 pandemic. The medium-term outlook for Nigeria suggests that fiscal risks are somewhat elevated, largely due to Covid-19 related disruptions which have exacerbated structural weaknesses in the economy.

    “In furtherance of our objective of greater comprehensiveness and transparency in the budget process, the FGN 2021 Budget will reflect the revenues & expenditures of all [about 60) significant GOEs (excl. NNPC), not just 10 as in the 2020 budget.

    “Weaker-than-expected economic performance threatens our ambitious revenue growth targets, as seen in the 2020 revised budget and the updated medium-term projections. Achieving fiscal sustainability and macro-fiscal objectives of government will require bold, decisive and urgent action. Government is determined to act as may be required.”

  • British economy plunges into recession after record second-quarter fall

    British economy plunges into recession after record second-quarter fall

    The British economy is in recession after contracting a record 20.4 per cent in the second quarter as the coronavirus crisis took hold, the Office for National Statistics (ONS) said on Wednesday.

    The quarterly contraction in the April-to-June period was the largest since 1955 when the agency began to keep quarterly records.

    Gross domestic product (GDP) fell 2.2 per cent in the first quarter, the ONS said.

    The ONS said there were signs of improvement in June as government restrictions on movement began to ease.

    “The economy began to bounce back in June, with shops reopening, factories beginning to ramp up production and house-building continuing to recover,” said Jonathan Athow, deputy national statistician at the ONS.

    Services, production and construction output saw record quarterly falls in the quarter, the agency said, noting “those industries that have been most exposed to government restrictions.”

    Private consumption was down by over a quarter and government consumption also dropped

  • Nigeria about to witness worst form of recession – World Bank

    The World Bank has urged Nigerians to brace for the worst recession since the 1980s.

    According to the global bank, the twin calamities of collapse in oil prices and COVID-19 pandemic are expected to plunge the economy into a severe economic recession.

    The World Bank, in its World Bank Nigeria Development Update (NDU) report, entitled: “Nigeria in times of COVID-19: Laying foundations for a strong recovery,” predicted that the country’s economy would likely contract by 3.2 per cent in the year.

    This is based on the assumption that “the spread of COVID-19 in Nigeria is contained by the third quarter of 2020”.

    The World Bank also warned that “if the spread of the virus becomes more severe, the economy could contract further”.

    It would be recalled that before pandemic broke out, Nigeria’s economy was projected to grow by 2.1 per cent in the year. This means that “the pandemic has led to a reduction in growth by more than five percentage points,” the World Bank report said.

    The Bretton Woods institution noted: “The macroeconomic impact of the COVID-19 pandemic will likely be significant, even if Nigeria manages to contain the spread of the virus.”

  • We have entered recession – IMF chief

    We have entered recession – IMF chief

    The coronavirus pandemic has driven the global economy into a downturn that will require massive funding to help developing nations, IMF chief Kristalina Georgieva said Friday.

    “It is clear that we have entered a recession” that will be worse than in 2009 following the global financial crisis, she said in an online press briefing.

    With the worldwide economic “sudden stop,” Georgieva said the fund’s estimate “for the overall financial needs of emerging markets is $2.5 trillion.”

    But she warned that “we believe this is on the lower end.”

    Over 80 countries already have requested emergency aid from the International Monetary Fund.