Proactive Measures not Cyclical Factors can Revive Nigerian Economy – CSL

Proactive Measures not Cyclical Factors can Revive Nigerian Economy – CSL

As the economy slipped into recession, analysts at CSL Stockbrokers have hinted that proactive measures rather than cyclical factors are capable to revive the Nigerian economy.

the Minister of Finance, Budget & National Planning, Zainab Ahmed said at 26th Nigerian Economic Summit detailed some of the steps and investments the government is making to reflate the economy.

In the presentation, some of the points she highlighted were; measure to stimulate the economy by preventing business collapse ensuring liquidity, retaining and creating jobs with support in the labour intensive sectors such as agriculture.

The measure listed include undertaking growth enhancing and job creating infrastructural investments in roads, rails, and solar power and communications technologies.

It also include promoting manufacturing and local production across all levels as well as advocating the use of made in Nigeria goods & services.

She also highlighted focus on pro-poor spending as a strategy to mitigate the impact of covid-19 on poor households.

Recall that the National Bureau of Statistics (NBS) released the GDP report for Q3-2020 which officially confirmed the economy has slipped into a recession.

Following the 6.10% contraction recorded in Q2-2020, the economy further contracted though at a decelerating rate of 3.62% in Q3 2020.

Analysts at CSL Stockbrokers reckon that prior to the covid-19 crisis, economic growth had begun to slow with Q1-2020 GDP growth of 1.87% trailing prior 5-quarter average of 2.29% (excluding Q1 2020).

The economy has largely survived on an oil-led recovery which we consider cyclical with other core sectors lagging and reeling from the fallout of the impacts of the 2016/17 recession.

“In our view, the government needs to be proactive and strategic about policies it intends to adopt to resuscitate the economy.

“The focus on social welfare, fiat-led interventions in agriculture, emphasis on infrastructure development and advocacy for local manufacturing is reminiscent of prior strategies that can’t be really considered successful”, CSL stated.

The firm said   the economy is in dire need of influx of investments and adequate skill pool to spearhead resource allocation.

CSL Stockbrokers express optimism that this can be provided by the private sector.

The firm said the public sector should rather invest in tackling structural issues around ease of business operations.

It listed this to include borrowing costs, regulatory & licensing bureaucracies/inconsistencies, public agency corruption & FX policies etc.

In addition, analysts stated that there is need to strengthening regulatory and legal frameworks while the private sector drive the investments for accelerated growth in manufacturing, infrastructural development, agriculture  and other core sectors.

“In our view, supporting a free market led economy (given the more organised nature of the private sector than the public sector) would see return of foreign direct investments into the Nigerian economy”, CSL said.

Local entrepreneurs would be motivated to take more risks to develop businesses.

It said the outlook for oil prices remain weak and production levels may remain below historical levels as OPEC attempts to keep price stable.

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Thus, CSL said the possibility of a cyclical recovery is limited, only proactive measures to correct long term structural issues would restore the economy on the path of accelerated inclusive growth. 

Proactive Measures not Cyclical Factors can Revive Nigerian Economy – CSL