Nigeria is technically in recession with her 10% growth rate dramatically reduced to 3%-- Agbakoba

Dr. Olisa Agbakoba

Renowned Legal Practitioner and Human Rights Activist, Dr. Olisa Agbakoba has said that Nigeria’s economy is facing a recession in the face of dwindling oil revenue, and a challenged manufacturing sector plagued by funding gaps.
Agbakoba stated this at an interactive forum convened by the Olisa Agbakoba Legal in Lagos.

He told newsmen that although the anti-corruption crusade and the Treasury Single Account initiative had saved over 3 trillion Naira, the benefit must translate into using the milestones to stimulate the economy.

As a solution, he advised that the Central Bank of Nigeria (CBN) played a significant role of ‘’creating money by buying securities such as government bonds from banks, with electronic cash that did not exist before.

He said the “new money swells the size of bank reserves in the economy by the quantity of assets purchased—hence "Quantitative" Easing.

“Like lowering interest rates, QE is supposed to stimulate the economy by encouraging banks to make more loans.

“The idea is that banks take the new money and buy assets to replace the ones they have sold to the CBN.

 “That raises stock prices and lowers interest rates, which in turn boosts investment,” Agbakoba said.

He blamed the non-achievement of a diversified economy on dearth of infrastructure to support economic activities in various sectors.  

He, however, advised that Nigeria should revisit the option of receivable financing.
“The proposal that Nigeria pledges her oil to receive loan from countries like China, should be revisited.

“We need to fill our huge deficit gap by receivable financing. It is only such huge receipt of funds that could plug the serious infrastructural deficit that impede diversification in Nigeria.”

According to him,  the ‘’comatose state’ of the manufacturing sector resulting from high cost of doing business had made job creation difficult, even as small businesses are staved of capital.

“Jobs can only be created when we have a vibrant manufacturing and real sector.

“Currently, the manufacturing sector is in a comatose state with the Manufacturers Association of Nigeria constantly complaining of the need to reduce the cost of doing business.

“Small Businesses are hindered because of absence of capital: they cannot easily access loans from banks. Interest rates are high and banks are shy to lend because of the problem of bad debts, exacerbated by inefficient regulatory environment,” Agbakoba said.

As a key point, Agbakoba advised on the importance of getting the Financial Services Sector right, which he said should include having the CBN focus on lending, interest rate and exchange and not being overburdened.

He spoke in favour of deregulation, advising that market forces be allowed to determine the exchange value, while the CBN should not restrict the flow of foreign exchange, an act that restricts critical stakeholder’s participation.

“The problem with Forex is that CBN does not have enough, but if we expand the space, we would be surprised that many Nigerians can participate and increase the stock.

“All that is needed is to create a legal framework to encourage this participation, subject to Money laundering Rules.”

Agbakoba bemoaned the conditions of Nigeria’s State-owned Public Enterprises, saying that the privatization model had not been successful in Nigeria’s case, compared to a country like China.

“In fact, none of the privatized entities in Nigeria could serve as a model. It is urgent therefore, that Nigeria reviews her Public/Private Economy.

“Government must control the overarching sectors of the Economy. There is need for a strong Public/Private Sector Framework.”

He, however, applauded Nigeria’s rating as the 20th largest economy in the world, noting that reviewing the nation’s public/private economy would go a long a way to turning potentials into reality and moving the economy forward.