Q3 numbers are out and the slump continues. Real GDP contracted by 2.24% with contractions continuing in almost every sector. Those looking for a silver lining will say well non-oil growth was positive for the first time in three quarters, although 0.03% growth is no growth in my books. When you add the big one-time jump in financial services, which is probably from FX gains, then its even less interesting. Agriculture appears to be picking up though. Maybe we really are destined for a return to the farms.
To put the Q3 numbers in context, this is the quarter when we hoped the FG and CBN had changed its price fixing ways. The federal government “deregulated” fuel prices in May and the CBN launched it “floating” exchange rate policy in the middle of June. So Q3 should have been good given that those two issues were at the core of the economic slump.
Of course we now know that those two policies were not really what they said they were. The exchange rate is not really floating but is fixed by unofficial means. The fuel price is not really liberalized but is fixed via opaque FX subsidies. We are back in full circle to the high black market premium for FX and fuel supply that is dominated almost exclusively by NNPC. The cries of forex scarcity are back. The rumors of fuel price increases are back with aviation fuel scarcity already here. In short, we haven’t learned our lessons from just a few months ago. So expect the slump to continue in Q4.
The CBN governor in remarks a few days ago claimed everything cannot be blamed on the FX problems. To some extent he is right, the problems are a lot deeper than the currency crisis. However, macroeconomic stability is the foundation for any growth. Without macroeconomic stability every other policy will fail, and there can be no stability without resolving the problems in the FX market. Kind of like building a house on weak foundations, something the APC knows all about seeing as they touted that line throughout the last campaign.
The really sad part is that we a about a year away from election season. Which means implementing the right policies will soon be tantamount to political suicide. Politicians are not in the habit of committing political suicide, especially not Nigerian politicians. If the policy decisions are not made now it is safe to say they will not be made before 2019.
Anyway, enough lamenting.