Opinion: Nigeria’s Worsening Finances, and the Untravelled Reform Path, By Uddin Ifeanyi
The numbers released, last week, by the Central Bank of Nigeria on the economy’s current account performance for the first quarter of this year are backward looking. In other words, they speak to what has happened. While number crunchers and economists are wont to build their forecasting models on an analysis of past trends, they never remember to add the caveat that these numbers are not destiny. Nonetheless, these numbers did not bode well for the economy’s near- to medium-term outlook.
If the outlook for crude oil , which accounts for more than four-fifths of our export earnings, is critical for near-term improvements in our current account balance, the trajectory of portfolio investments ― flowing rapidly out ― has hurt our financial accounts. This moved into negative territory in the first three months of 2020, from a positive balance over the same period last year.
On the matter of portfolio investment, however, the wise and prudent spot a cautionary tale. Current managers of the economy are minded to remind us that a large part of the current financial problems that the country faces is one consequence of portfolio investors reacting to heightened global economic uncertainties and fleeing to safe havens. True.
However, there is further lesson here. It is a little more obvious in our new circumstance that our economy will not be undone so much by the economic uncertainty that the pandemic has heightened so dramatically, nor by the adverse external trade environment that has arisen on its back. What will matter most for how our economy performs, irrespective of the horizon over which this judgment takes place, is how we respond to these and other stimuli.
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