Bismarck Rewane, the Chief Executive of Financial Derivatives Company Limited, has questioned the monthly Purchasers’ Manufacturing Index (PMI) released by the Central Bank of Nigeria (CBN).
Also, as financial experts continue to react to the latest Gross Domestic Product (GDP) data released by the National Bureau Statistics, Rewane, has also disclosed that the federal government needs urgent policy measures as the country’s economic performance in Q2 was “lacklustre”. He is of the view that the country should be expecting some critical times ahead.
The details: Speaking on a monitored programme on CNBC Africa, the director disclosed that while he did not expect anything more from the performance of the Nigerian economy in the second quarter, it shows the presence of a recessionary gap, which means the economy is growing below its potential.
When asked if he was disappointed in the country’s GDP, Rewane disclosed;
“To be disappointed is to have expected more than what happened, but it’s still lacklustre. It confirms the existence of a recessionary gap, because potential GDP is higher than real GDP. It also shows the potential problem of a growing population rate of 2.7% as against 1.94%.
“But more important is that the job elastic sectors, the sectors that actually employ people all of them without exception suffered set back.
“From agriculture which dropped from 3.17% to 1.79%, slowing, to manufacturing to trade and real estate. Trade (wholesale and retail) employs over 18% of Nigeria’s population.
“Real Estate after three years of languishing came out in Q1 positive, and has now dropped all the way to -3.24. That is a killer.”
A twist in CBN report: On the other hand, Rewane questioned why the CBN PMI would show expansion in the manufacturing sector between April and June, while the sector contracted during the same period. On the other hand, FBN Quest PMI conforms to the contraction in the manufacturing sector during the same period.
According to Rewane, there may arise a big question over the data integrity of what the CBN shun out.
“What is more interesting is, if FBN PMI is a valid predictor of output, it went down from 56 points in April to 50.9 in May, to 49.9 in June. Meanwhile, in these three months, the central bank’s PMI went in the other direction. So, there is a question about data integrity.
“Some people (CBN) would just go to the moon, come back and release some numbers. Some actually have data. So, data integrity is very important.”
Government failure: When asked if the CBN policy to force Deposit Money Banks (DMBs) to redirect loans to the real sector requires time to materialise, Rewane snapped;
“Fiscal business has nothing to do with monetary policy. The fiscal authorities are the ones to stimulate growth. Lower taxes, incentives, behaving properly (not harassing investors), creating an atmosphere of certainty rather than uncertainty, those are the things that bring about investment and investment multiplier.
“We are not getting enough investment, both domestic and international. Trying to substitute fiscal solutions with monetary interventions, those are bound heads, palliatives, they go nowhere.
“You can’t fake prosperity, you either have prosperity and the opposite is a hardship. We have enough challenges as it were, we were not going to substitute fiscal interventions to monetary interventions.
“For 12 months, we have not released our unemployment data, I can bet you, those numbers are going to come closer to 30% above the current 23% in Q3 2018.”
The financial expert disclosed further;
“Since we closed the borders, all the tanks are full and saturated with petrol, which means we don’t consume 60 million litres a day of fuel, we hardly consumer 30 million litres, that fraud and fallacy called 60 million litres of which part of it goes outside the country and the other half does not even come in, and people get money at N305 and bring it back, that scam must stop.
“The fiscal problems are not farfetched, very simple. Understand one thing, a mixed economic module, is better than the controlled economy. Accept a mixed economic module, where the pricing of these products and factor prices are driven partly by market forces, and in order sense some interventions by the government to achieve a mixed module.”
Some Positives: Meanwhile, Rewane stated that the Q2 GDP was not entirely bad as several other factors must have been responsible for the slow growth recorded.
According to Rewane, “even though it is 1.94%, this is the highest quarterly growth in the last three years. So, compared to in terms of seasonality. Also, this is the Q2 in which there was no cabinet, post-election blues, planting seasons. IMF has revised its GDP projection to 2.3%. So it means for Nigeria to attain that, we need to chunk out GDP growth around 2.4% in the next two quarters. If we actually disappoint in Q3, then we are done.”