Nigerians will feel impact of exit from recession soon, says Godwin Emefiele

Exiting recession is not all there is right now, as the economy remains fragile even at 1.40 per cent growth in the third quarter of 2017. In this interview with The Guardian’s IGHO AKEREGHA (Abuja Bureau Chief) and CLARA NWACHUKWU (Business Editor), the Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, admits that there is still a lot more work to be done to get the economy fully stabilised and cruising at the growth level where everyone will be comfortable, assuring that it will not be long.
It’s often said that the CBN is a major instrument to Nigeria’s exit from recession, how do you see that?
You will recall the whole idea of Nigeria getting into recession came about because of certain unexpected exogenous shocks, beginning from the drop in commodity prices. For Nigeria, drop in the price of crude oil was almost close to 70 per cent drop at a time price of crude was about $140 per barrel sometime in 2013. For five straight years, between 2009 and 2014; we had the price of crude averaging almost $110 per barrel. And then suddenly, from around the third quarter of 2014, we began to see the effect of drop in commodity prices. Price of crude dropped from those high levels sometime in February 2015, to as low as $30 per barrel, and that was one aspect of the shock. It affected our reserve and at the same time, our economy still remained a significantly import-dependent economy.

Another major shock was the impact of the geopolitical tensions – like you recall, Russia and Ukraine, and of course till now, you still see the issue of Saudi Arabia and Iran and all the flexing muscles in the Gulf area. These, all naturally, have the tendency to affect the flow of capital or the flow of funds along trade routes. You see funds moving, in this case from the emerging economy, while we embarked on safer havens.

The third shock was the U.S. dollar and the normalisation of the U.S. economy. At the time, the U.S. economy was pumping liquidity into the world market, but eventually it started to tapper, and now, we are in the era of gradual raising of rates. What that means is that when the U.S. economy raises rates, you will see the flow of capital again from the emerging markets back to the developed markets.
Having said all that, the Central Bank of Nigeria will not take credit for being the sole institution responsible for taking Nigeria out of recession. The government, beginning from the President will take the credit for all the roles that everybody played in getting Nigeria out of recession, and I’m happy that we are here today. Yes, we did play some roles particularly from the monetary and fiscal stand point, but my own answer to that question is that Central Bank cannot, and will not, take the sole responsibility for getting Nigeria out of recession. It is a joint effort of government complemented by the monetary, fiscal, and trade authorities.

Still on the recession, although our GDP is now at over 1.4 per cent; and for a while now, the PMI (purchasing managers’ index) has been on the increase. However, the manufacturing index is still in the negative at over -2 per cent, how do you justify these?
Well the point is this, when you start a process and that process involves many parts, you will find out that there are certain parts of that process that will react faster, while other parts will react much later. So what you are seeing is that some aspects of the policy are reacting, and we are seeing the impact faster in some areas than in others. But eventually, we would see even the manufacturing index growing.

The CBN started in February, but the latest round of interventions in February, but the intensity of our intervention started in April 2017. During the month of April in the second quarter, which ended in June, we saw the GDP numbers at 0.7 and no longer 0.55, and that’s like the beginning. If you take April, May, and June, and now, July, August, and September, as we have seen it now at 1.4, it shows that more sectors are now reacting to whatever interventions and actions that are being taken by the monetary and fiscal authorities towards seeing to it that we really get out of recession.

But the point is that everybody accepts that where we are, even at 1.4 still puts us in a very fragile situation. There is an understanding and acceptance of the fact that we need to work harder, to see to it that we really begin to attain the kind of growth level that we saw in the country in the past.

I have also heard some people say: “yes, they say we are out of recession, but our people have not started to feel it.” Yes, our people will eventually feel it as the growth numbers improve. If you recall, Nigeria at a time was growing at an average of six to seven per cent, but it receded to a point where we got to the third quarter of 2016, to -2.3 per cent. So it’s like a sick baby that is on an intravenous fluid, and so it takes time for the positive impact of the intravenous fluid to really circulate the entire body, so the baby can begin to move fast, agile and run.

For Nigeria, the growth rate will have to be at about six per cent for you to say, yes, we are really there. And we are cruising on very strongly because if population grows at an average of three per cent, and we are growing at 0.7 in the second quarter, 1.4 in the third quarter. It means that we still have a long way to go because growth numbers, growth productivity must surpass population growth for everybody to begin to feel it, and say, yes, we are truly out. It will take time, but it will take tenacity of purpose, and focus, and aggression by all arms of the policymaking institutions to push it forward, and attain the kind of level that we are talking about.

So then why does it appear that the CBN is kind of shy to take some risks, in the sense that for over a