Despite the prevailing harsh economic situation in the country, experts are optimistic that there are clear indices indicating economic recovery and growth in 2017.
A research document packaged by a team of financial and economic experts at GTB and made available to The Nation attempted a prognosis of the challenges that bedeviled the economy these past months and offered plausible solutions aimed in their view at getting the country out of the doldrums.
While x-raying performance in the outgone year, the experts noted that: “Despite the economic challenges, the business community found a way to stimulate economic activities albeit at a rather slow pace relative to the previous year. It is however believed that the non-implementation of full terms of the CBN flexible exchange rate policy brought about a multiplicity of exchange rates with tough consequences for all sectors of the economy rather than foster effective price discovery.
“In view of the heightened regulatory oversight, we expect corporates to conduct their businesses within the ambit of law whilst displaying the highest level of professionalism and compliance to regulatory provisions. Should our first scenario play out, we expect to see an improvement in foreign exchange earnings with attendant impact on foreign exchange supply, business activities, and economic wellbeing. On the flipside, any further deterioration could lead to a worsening of the foreign exchange environment, a depression of business activities and protracted economic contraction.”
On the exchange rate, they said, it is their considered opinion that a credible FX market is an important factor in building a thriving economy, we expect a full implementation of the terms of the flexible exchange rate policy, which will aid effective price discovery and eliminate multiplicity of rates.
“The combination of such policies with an improvement in foreign exchange earnings will ultimately lead to a moderation of inflation, and narrowing of the gap between the official and parallel rates. Further delays can only create further fragmentation and escalate FX scarcity, with attendant consequences for the economy.”
Expatiating, they said: “With productions costs driven primarily by exchange rate concerns, we expect that an improvement in foreign exchange availability and stability, coupled with base effects will cause a further moderation in inflation.
“A continued illiquidity of foreign exchange will however result in increased inflationary pressures on the economy. We believe that the present inflationary pressure is not entirely a monetary phenomenon and the use of monetary policy tools alone might be ineffective.
“Consequently, we expect the government to commence the implementation of fiscal policies that will not only augment the monetary policies in place, but also spur productivity and encourage local production.”
Concluding, the team said it was heartening to note that: “Despite the beating the Nigerian economy has taken in the last 24 months, one thing is still clear; the fundamentals of the economy, which includes the market size, population, enterprise competency of Nigerians, demographic, natural resources etc., are still very strong. In our opinion, the harmonisation and implementation of the right policies (both fiscal and monetary), that will optimise these fundamentals into stimulating economic activities and maximising productivity, appear to be the missing link.”