Vice President Yemi Osinbajo has put the blame for the economic recession on the bombings of oil installations in the Niger Delta.
The Niger Delta Avengers and other militant groups have been bombing oil and power installations.
Speaking at the Presidential Quarterly Business Forum at the State House in Abuja yesterday, Prof. Osinbajo said the bombings had more adverse impact on the 2016 budget and the economy than the low prices of oil in the international market.
According to him, the 2016 budget properly anticipated the low oil price, but did not expect the drop in oil production caused by the bombings.
He said the budgetary expenditure predicated on a daily crude oil production of 2.2 million barrels witnessed a drastic drop to less than 1.1 million barrels per day due to the bombings.
His words: “Perhaps it is important for us to understand the nature of this recession in which we have found ourselves. In discussing this issue of recession, there is the tendency for people to generalise; a lot depends on what sort of recession and how we got here.
“If we did not have vandalisation in the Niger Delta as we are currently suffering, we will not have this recession today. Moreover, in looking at the solutions, we should try to focus on the type of problem we have and what instigated it, then we can begin to come up with better solutions.”
But rather than analyzing how Nigeria came about the problems, Osinbajo noted that some were criticising the Federal Government.
Reiterating the government’s readiness to address power sector challenges, the Vice President said it would require a ‘revolution’ to shore up power to adequate level nationwide.
He said the government would do everything possible to attain the February 2016 power generation level prior to the pipeline bombings.
“We are doing a whole lot by interfacing with the private sector because we realise their role in the economy. If the Dangote refinery comes on stream, it will help us overcome some of those challenges, like the sub-sea gas pipelines; it will take care of vandalisation.
“Let me point out that there is no question at all that the private sector is crucial.’’
“The up-coming Dangote Refinery has 650,000 barrels per day capacity.
“If Dangote Refinery comes on stream by 2018, that would significantly affect the economy.
“About 30 per cent of our foreign exchange outlay today is on importation of PMS (Premium Motor Spirit),” Osinbajo said, adding:
“If we can deal with that 30 per cent, obviously there will be less pressure on our foreign exchange reserve.
“But I think the more important thing is how to clean up the mess in the power sector, especially infrastructure. In the short term, we will try to bring up power to an appreciable level to help the manufacturing sector,”he said.
“There is no place anywhere in the world where you can lose one million barrels per day in oil production when you are projecting 2.2 million barrels per day and you would not suffer tremendously.
“It becomes so, especially when that same revenue is what drives your non-oil revenues,’’ Osinbajo said.
He advised that the country should look for solutions peculiar to its circumstances.
“We have to look at what problems that we have and try to focus on some solutions that can come from there.”
Minister of Budget and National Planning Senator Udoma Udo Udoma, said the country was indeed in a recession owing to gross domestic product growth which showed negative output for the second quarter of 2016.
In a power point presentation on the state of the economy, he said inflation stood at 17.1 per cent as at July, with very marginal improvement in health, transport, recreation and culture.
While food inflation increased to 15.8 per cent in July, he said, core inflation reached 16.9 per cent.
Giving reasons for the recession, Udoma said that the unsustainable economic structure was characterized by dependence on a single commodity, crude oil, whose pricing was out of Nigeria’s control.
He said: “Oil sector contributes less than 9 per cent of GDP but about 80 per cent of government revenue and 95 per cent of forex.
“Collapse of crude oil prices from over $110 per barrel in 2014 to less than $30 per barrel in the 1st quarter (Q1) of 2016, market expectations are that it will be lower for longer.
“Foreign reserves declined from $37.3billion in Q2,2014 to $25.4billion by August 2016, with reduced confidence leading to declining equity and foreign investment capital inflows from $9.7 billion by the end of Q2, 2014 to $0.64 billion at the end of Q2, 2016”.
He said that unemployment rate stood at 19.3 per cent in the second quarter of 2016, rising with 400,000 persons, from 15.0 million to 15.4 million.
Minister of Finance Mrs Kemi Adeosun, said the economy had witnessed a declining Gross Domestic Product (GDP) growth over the years with increasing levels of unproductive debt.
Noting that there was significant drop in external debt between 2005 and 2006 as a result of debt forgiveness, she said that the debt levels rose at 16 per cent between 2008 and 2015.
Some stakeholders at the forum listed lack of access to finance, high interest rate and high energy cost, lack of access to foreign exchange, transport and infrastructure deficit as the top challenges facing business.
Others, they said, include weak export support, inconsistent government policies and ease of doing business challenges, including approval delays, low support for domestic manufacturing, delays from Customs officials and security issues.
The challenges, they said, are responsible for promising and vibrant businesses crumbling within the first five years of establishment.
President of Lagos Chamber of Commerce Micheal Cole, advised the government to show consistency in its policies to reflate the economy and place it on the path of sustainable growth.
He lauded the Presidency for initiating the quarterly forum, adding that the government could measure its progress by getting regular feedbacks from the citizens.
President of Manufacturers ýAssociation of Nigeria (MAN), President Frank Udemba said it was encouraging that government now realised the importance of the private sector as the engine room for growth.
“Its a wonderful development. The fact that government now engages the organised private sector and recognising the fact that the private sector is possibly the engine of growth, the driver of the economy.
“So we are happy about that. And this has given us opportunity to air our views concerning the policies they have and how to get this country out of the current recession. Its something that should be encouraged and we hope that it would continue.
“Already, government has promised to sell off some assets to beef up the foreign reserve, that is key. We have a lot of challenges of doing businessý but basically they have to pump in a lot of money into infrastructure because that is a quick way to reflate the economy,” Udemba said.