Prof. Joseph Ajibola, is a Financial Economist, who lectures at the Babcock University, Ogun State, and also a former President, Chartered Institute of Bankers of Nigeria (CIBN). In this interview, he told the Managing Editor of Sustainable Economy, Clara Nwachukwu that devaluation and inflation are drawbacks to future growth. Excerpts:
How did you receive the 360 degree turnaround in Nigeria’s Q2 2021 GDP growth rate?
From October last year until now, the economy was fully opened up and there is no more lockdown, you then say that economic activities bounced back almost fully up to this June before the new 3rd wave set in, even at that activities are still almost in full swing. If you look at the 2nd quarter (Q2), economic activities were in full swing, all the sectors of the economy were operating fully except for other hindrances like devaluation of the currency, the inflation that is still biting hard. We saw an improved level of activities, that’s one.
Secondly, as you are aware, there have been many incentives that were rolled out by various agencies of the government. The Central Bank of Nigeria for example, doled out almost N3trillion to various sectors – Agriculture, Manufacturing, Textile, SMEs, even NIRSAL, which is a CBN-owned microfinance bank disbursed about N50billion to small scale businesses. All of these were disbursed between late last year and early this year, and the effect will not be immediate, but will come later. We can then say that all of the things we are seeing now are the result of those initiatives and policies that were rolled out last year to early this year.
Thirdly, we could also look at some segments of the economy that are becoming brand new like information communication technology (ICT), Fintech; you will also note the drive for financial commodities by banks and other Fintech agents and reactivating many sectors of the economy, which also hold a lot of growth potential. You will also note as part of the incentives like tax, tariff waivers, then mega businesses like Dangote Refinery, transportation, government bonds to finance some of these sectors. When you look at the vibrancy of these sectors and you put all of them in a basket, you will see an economy that has made some improvement.
Let there be effective and faithful implementation of all the policies already rolled out, especially the incentives to the various sectors of the economy.
The surprise is that the growth rate surpassed every projection made, whether local or international. What is responsible for this?
Like you said, they were all projections and these are based on assumptions, it’s a function of how realistic they were; year-on-year we are looking at 3%+. When you look at the IMF, World Bank projections were below 5% growth. When you annualise, we are still operating within this trajectory unless you can keep this 5% growth rate to the end of the year, which I doubt because of the impact of the pandemic 3rd wave ravaging many parts of the world including Nigeria. You also have devaluation, which may constitute some drawbacks on the economic performance.
Are you then saying that this level of growth may not be sustainable?
It may not for the remaining two quarters because of the issues I raised – the impact of the 3rd wave, second, devaluation is affecting businesses, third is inflation and our type of inflation is cost-push inflation. All these put together with restrictions of movement between Nigeria and the rest of the world will constitute some drawbacks in the 3rd and 4th quarters.
This is the highest level of growth recorded by this administration. What can the government do to sustain growth even if not at 5.1%?
Let there be effective and faithful implementation of all the policies already rolled out, especially the incentives to the various sectors of the economy, credit facilities to the MSMEs, we’re seeing that in stages. We are also talking about improvement in the ease of doing business, which the government still needs to work on; there is the security issue. If the government can address these four to five issues then there is hope for sustainability, because these are factors that influence the performance of the private sector.