Download Impact of Global Economic Developments on

Dr. Raheem Adisa Oloyo
Former Rector, Federal Polytechnic, Ilaro
Being a lead paper delivered at the ASUP National Conference held on Tuesday
November 8 and Wednesday 9, 2016 at Kano State Polytechnic, Kano
Scope of Presentation








Introduction
Status of the Global Economy
Impact of the Global Economy on Nigeria’s
Economy
Status of the Nigeria’s Economy as at the 2nd
Qtr of 2016
Consequences of Economic Recession on the
Wellness or Otherwise of the Country
Why is the Nigeria’s Economy in Recession?
Diversification of Nigeria’s Economy – A way
Out
Conclusion
Being a lead paper delivered at the ASUP National Conference held on Tuesday
November 8 and Wednesday 9, 2016 at Kano State Polytechnic, Kano
Introduction

In line with the principles of global
economic village, the state of any
nation’s economy is a consequence of
several variables including time, context,
actors and even what happens beyond
the shores of the country, that is, the
international political economy.
Being a lead paper delivered at the ASUP National Conference held on Tuesday November 8
and Wednesday 9, 2016 at Kano State Polytechnic, Kano
Introduction
Currently, four challenges largely prevail in
this country. They include:
 moving away from an oil-revenue economy
for our public expenditure and foreign
exchange earnings;
 transiting from the current subsistence
farming to technology-driven agriculture;
 implementing consistent policies that make
it easy to do business in the country; and
 urgently addressing the problem of the
unemployed population of Nigerian youths.
Being a lead paper delivered at the ASUP National Conference held on Tuesday November
8 and Wednesday 9, 2016 at Kano State Polytechnic, Kano
Introduction
Indeed, the CBN Governor admitted that the
present economic predicament Nigeria finds
herself is as a result of the global crisis.
 Of particular importance are the:
 dropping of commodity prices;
 geo-political tension all around the world,
that is, political tension between Russia
and Ukraine; Brexit and the European
Union; and political tension between Iran
and Saudi Arabia.

Being a lead paper delivered at the ASUP National Conference held on Tuesday November 8
and Wednesday 9, 2016 at Kano State Polytechnic, Kano
Introduction

The Governor concluded that all of the
above had impacted positively and
negatively on emerging markets and
frontier markets, where Nigeria
unfortunately stands today
Being a lead paper delivered at the ASUP National Conference held on Tuesday November 8
and Wednesday 9, 2016 at Kano State Polytechnic, Kano
Objective of the Paper

This paper discusses the need for
diversification of the Nigeria’s economy
in the face of current global economic
recession.
Being a lead paper delivered at the ASUP National Conference held on Tuesday
November 8 and Wednesday 9, 2016 at Kano State Polytechnic, Kano
Status of the Global Economy
The picture of the global economy and how it has
impacted on Nigeria economy as described in CBN 2014
Annual Report showed that:

Global output growth stabilized at 3.3 per cent in 2014,
the same as in 2013, due to low oil prices, driven by
higher supply arising from shale oil production in the
US.

Growth was, however, dampened by weak recovery in
the euro area and recession in Japan.

Inflation moderated in 2014, due, mainly, to the low
average price of food and persisting output gaps in the
advanced economies.
Being a lead paper delivered at the ASUP National Conference held on Tuesday November 8
and Wednesday 9, 2016 at Kano State Polytechnic, Kano
Status of the Global Economy

The development was driven by low commodity
prices, due to weak demand and sluggish economic
recovery in most regions.

Uncertainty in the international financial markets was
heightened by the gradual normalization of US
monetary policy, appreciation of the dollar and low
oil prices, which led to capital flow reversals from the
emerging markets and developing economies with
attendant pressure in the currency markets.

In response, the central banks of most emerging
markets and frontier economies raised their policy
rates to stem currency depreciation and restore
market confidence.
Being a lead paper delivered at the ASUP National Conference held on Tuesday November 8 and
Wednesday 9, 2016 at Kano State Polytechnic, Kano
Impact of Global Economic Developments
on Nigeria’s Economy
The period under review witnessed a number
of global developments with significant
consequences for Nigeria's economy. Key
developments of interest included:
 stronger growth in the United States;
 sluggish recovery in the other advanced
economies, particularly Europe, and
recession in Japan;
 continuing slowdown in China;
 growth moderation and capital flow
reversals in emerging markets;
Being a lead paper delivered at the ASUP National Conference held on Tuesday November 8 and
Wednesday 9, 2016 at Kano State Polytechnic, Kano
Impact of Global Economic
Developments on Nigeria’s Economy

normalization of the US monetary policy,
and continued quantitative easing
measures in advanced economies;

low global inflation; and

falling commodity prices. Some of these
developments had adverse impact, while
others had favourable effects on the
country's macro-economic performance.
Being a lead paper delivered at the ASUP National Conference held on Tuesday November 8 and
Wednesday 9, 2016 at Kano State Polytechnic, Kano
Impact of Global Economic
Developments on Nigeria’s Economy

Falling global consumer prices had a positive
effect on consumer prices in Nigeria, particularly
for products with significant import content.

Inflation remained in single digit in 2014,
supported by tight monetary policy, which helped
to stabilize currency and inflation expectations.

Domestic output remained robust, rising to 6.2
per cent from 5.5 per cent in 2013, despite the
adverse international developments.
Being a lead paper delivered at the ASUP National Conference held on Tuesday November 8
and Wednesday 9, 2016 at Kano State Polytechnic, Kano
Impact of Global Economic
Developments on Nigeria’s Economy

The decline in crude oil price in 2014, which
lowered government oil revenue, resulted in
increased borrowing to cover fiscal deficits.

Shale oil production increased the United
States' energy independence and reduced her
import of Nigeria's crude oil.

Domestic financial markets, although resilient,
reacted to developments in the international
economic environment.
Being a lead paper delivered at the ASUP National Conference held on Tuesday November 8
and Wednesday 9, 2016 at Kano State Polytechnic, Kano
Impact of Global Economic
Developments on Nigeria’s Economy

Capital inflows weakened as yields and interest
rates in the advanced economies started
recovering, following the normalization of US
monetary policy.

Increased outflow intensified pressure in the
foreign exchange market and on the country's
external reserves towards the end of the year.

The effect of the development was also visible in
the domestic stock market as the Nigeria All-Share
Index (ASI) declined by 16.1 per cent to
34,657.15, from 41,329.10 at end-December
2013.
Being a lead paper delivered at the ASUP National Conference held on Tuesday November 8
and Wednesday 9, 2016 at Kano State Polytechnic, Kano
Impact of Global Economic
Developments on Nigeria’s Economy

Similarly, the equities market capitalization
(MC) fell by 13.1 per cent, from 13.23 trillion
on December 31, 2013 to 11.49 trillion.
Being a lead paper delivered at the ASUP National Conference held on Tuesday November 8 and
Wednesday 9, 2016 at Kano State Polytechnic, Kano
Status of Nigeria’s Economy as at
2nd Qtr 2016
The combined report of the CBN (2nd Qtr 2016),
Nigerian GDP Report and the statistics of
unemployment and inflation rates published by
National Bureau of Statistics revealed the following
about the status of the country’s economy:

The nation’s real GDP year-on-year growth
declined progressively from 6.3% in Q1 of 2014
to -2.03% in Q2 of 2016.

The Nigerian economy can be more clearly
understood according to the oil and non-oil
sector classifications.
Being a lead paper delivered at the ASUP National Conference held on Tuesday November 8
and Wednesday 9, 2016 at Kano State Polytechnic, Kano
Status of Nigeria’s Economy as at
2nd Qtr 2016

During the period under review, Oil production was
estimated at 1.69million barrels per day (mbpd),
0.42 million barrels per day lower from production in
First Quarter of 2016. Oil production was also lower
relative to the corresponding quarter in 2015 by
0.36million barrels per day when output was
recorded at 2.05mbpd.

Consequently, real growth in the oil sector was 17.48% (year-on-year) in Q2 of 2016. Growth
declined by 10.68% points and 15.59% points
relative to growth in the Second Quarter of 2015 and
First Quarter of 2016 respectively. Quarter-onQuarter, growth also slowed by -19.11%.
Being a lead paper delivered at the ASUP National Conference held on Tuesday November 8 and
Wednesday 9, 2016 at Kano State Polytechnic, Kano
Status of Nigeria’s Economy as at
2nd Qtr 2016

Growth in the Non-oil sector was largely driven by the
activities of Agriculture, Information & Communication,
Water supply, Arts entertainment and recreation,
Professional scientific and technical services,
Education and Other Services which all grew positively.

The non-oil sector accordingly, declined by 0.38% in
real terms in the Second Quarter of 2016. This growth
rate was 0.20% points lower than the First Quarter of
2016 (-0.18%), and 3.84% points lower from the
corresponding quarter in 2015 (3.46%).
Being a lead paper delivered at the ASUP National Conference held on Tuesday November 8 and
Wednesday 9, 2016 at Kano State Polytechnic, Kano
Status of Nigeria’s Economy as at
2nd Qtr 2016

The growth of the agriculture sector’ dropped from
4.47 per cent in the third quarter of 2014 to 3.46
percent in the same quarter of 2015, a decrease of
1 percent.

The industrial sectors contributions to GDP declined
from 24.20 per cent in the third quarter of 2014 to
23.5 percent in the same quarter of 2015.

In real terms, the Non-Oil sector contributed 91.74%
to the nation’s GDP, higher from shares recorded in
the First Quarter of 2016 (89.71%) and the Second
Quarter of 2015 (90.20%).
Being a lead paper delivered at the ASUP National Conference held on Tuesday November 8 and
Wednesday 9, 2016 at Kano State Polytechnic, Kano
Status of Nigeria’s Economy as at
2nd Qtr 2016

Nigeria Unemployment Rate was recorded at
13.3 percent in second quarter of 2016, up from
12.1 percent in the three months to March,
reaching the highest since 2009.

The number of unemployed persons rose by
12.2 percent to 10.644 million, employment
barely rose by 0.06 percent to 69.04 million and
labour force increased 1.78 percent to 79.9
million.

Meanwhile, youth unemployment increased to
24 percent from 21.5 percent.
Being a lead paper delivered at the ASUP National Conference held on Tuesday November 8 and
Wednesday 9, 2016 at Kano State Polytechnic, Kano
Status of Nigeria’s Economy as at
2nd Qtr 2016

The picture of Nigeria Inflation Rate can be
appreciated from consumer prices in Nigeria,
which went up by 17.9 percent year-on-year in
September of 2016, following a 17.6 percent rise
in the previous month and in line with market
expectations. It was the highest inflation rate
since October 2005 boosted by cost of food,
housing and utilities and transport.

Inflation Rate in Nigeria averaged 12.22 percent
from 1996 until 2016, reaching an all time high of
47.56 percent in January of 1996 and a record
low of -2.49 percent in January of 2000.
Being a lead paper delivered at the ASUP National Conference held on Tuesday November 8 and
Wednesday 9, 2016 at Kano State Polytechnic, Kano
Status of Nigeria’s Economy as at
2nd Qtr 2016

The foregoing scenario cum the wave of
rising youth unemployment, increasing
inflation rate, and other uncomfortable
social welfare matters tended to suggest
that the Nigeria economy is already going
into recession or depression if not already
there.

Indeed, many economists, financial
experts, and researchers have actually
pronounced the Nigeria economy as an
economy in recession.
Being a lead paper delivered at the ASUP National Conference held on Tuesday November 8 and
Wednesday 9, 2016 at Kano State Polytechnic, Kano
Consequences of Economic
Recession on the Country

Dip in Government Revenue – A dip in
government revenue is a very good sign that a
country is sinking into recession. In this country, we
have seen government revenue dip so much that
most states have to seek for a bailout to enable
them pay for something as basic as salaries.

Decline in economic activity spread across the
economy - in both the manufacturing and nonmanufacturing sectors and lasting more than a few
months. Production level, business activity, new
orders, employment level and raw material
inventories all decline at a faster rate.
Being a lead paper delivered at the ASUP National Conference held on Tuesday November 8 and
Wednesday 9, 2016 at Kano State Polytechnic, Kano
Consequences of Economic
Recession on the Country

Decline in income and profits reported by
businesses – A pointer to economic recession
is when publicly quoted companies mostly
declare a drop in their revenues or profits. In
fact, most companies post massive losses
during the recession.

Companies go bust – In economic recession,
most companies in key sectors of the
economy such as manufacturing, financial
services and insurance typically go bankrupt.
Industries that also rely heavily on government
expenditure suffer from a recession.
Being a lead paper delivered at the ASUP National Conference held on Tuesday November 8 and
Wednesday 9, 2016 at Kano State Polytechnic, Kano
Consequences of Economic
Recession on the Country

Job losses – There are massive layoffs as
most companies cut cost to remain afloat.
Since consumer and government spending
has dropped, businesses can no longer
produce at same level and therefore cut back
to remain in business. The National Bureau of
Statistics revealed a few months ago that over
528k jobs were lost.

Unemployment is particularly high and it is on
the increase. Low-skilled, low-educated
workers and the young are most vulnerable to
unemployment in this economy downturn.
Being a lead paper delivered at the ASUP National Conference held on Tuesday November 8 and
Wednesday 9, 2016 at Kano State Polytechnic, Kano
Consequences of Economic
Recession on the Country

Inflation rate gallops –Because we mostly import,
cost of goods and services sold locally increase thus
forcing consumers to even spend less. In Nigeria, the
drop in oil prices triggered capital outflows and then a
loss in value of the Naira. This meant imported goods
and services recorded a hike in prices.


The living standard of people dependent on wages
and salaries are not more affected by recessions than
those who rely on fixed income or welfare benefits.
The loss of a job is known to have a negative impact on
the stability of families, and individuals' health and wellbeing. Fixed income benefits receive small cuts, which
make it tougher to survive.
Being a lead paper delivered at the ASUP National Conference held on Tuesday November 8 and
Wednesday 9, 2016 at Kano State Polytechnic, Kano
Why is Nigeria’s Economy in
Recession?

Overreliance on crude oil as a major source of
foreign earnings, and its associated problems.
That is, drop in crude oil production and its price,
decline in oil demand by USA, internal security &
unrest in the oil-producing region of Nigeria, etc.

Stoppage of pipelines contracts & Crackdown on
Niger Delta Militants.

Decline in the growth and contribution of the
agricultural and the industrial sectors to the
national gross domestic product.
Being a lead paper delivered at the ASUP National Conference held on Tuesday November 8 and
Wednesday 9, 2016 at Kano State Polytechnic, Kano
Why is Nigeria’s Economy in
Recession?

Depletion of the foreign reserves.

Sudden implementation of Treasury Single
Account (TSA) policy by the Federal
Government.

Near non-existence of capital
infrastructures to support industrial growth.

And Others
Being a lead paper delivered at the ASUP National Conference held on Tuesday November 8 and
Wednesday 9, 2016 at Kano State Polytechnic, Kano
Diversification of Nigeria’s
Economy – A Way Out?

There is no doubt that we need to diversify the sources
of our foreign exchange earnings as country because
overreliance on crude oil for FOREX has failed us and
led us nowhere as a nation.

Before the discovery of crude oil, agricultural produce
was the major source of FOREX and the country
witnessed significant growth and development in the
era.

The nation’s economy growth were dependent on
export of cash crops such as Cocoa from the West, Oil
palm from the East, and Groundnut from the North.
Being a lead paper delivered at the ASUP National Conference held on Tuesday November 8 and
Wednesday 9, 2016 at Kano State Polytechnic, Kano
Diversification of Nigeria’s
Economy – A Way Out?

Cocoa House, Lekan Salami Stadium, and
Radio and Television Stations (WNBC &
WNTS), the first in Africa, etc. were all in
the West and were built from agriculture
income. Indeed, agriculture provided
employment, boosted the economy and
improved the lives of rural dwellers.

Agriculture was the highest contributor to
our Gross Domestic Product.
Being a lead paper delivered at the ASUP National Conference held on Tuesday November 8 and
Wednesday 9, 2016 at Kano State Polytechnic, Kano
Diversification of Nigeria’s
Economy – A Way Out?

Frustrated by the crude oil performance at
the global market, Government of the
Saudi Arabia recently declared her
intention to shift attention away from oil as
foreign exchange earnings to other
sources.

Norway, an oil producing country does not
rely on oil for foreign exchange earnings,
rather it focuses more attention on
aquaculture (fish farming) as the major
export produce.
Being a lead paper delivered at the ASUP National Conference held on Tuesday November 8 and
Wednesday 9, 2016 at Kano State Polytechnic, Kano
Diversification of Nigeria’s
Economy – A Way Out?

Going by the performance and contribution of the non-oil
sector to the GDP, it may be said that the sector has the
potentials of accelerating the growth of the nation’s GDP if
given the attention it deserves! If the needful is done, both
the agricultural and industrial sectors of the economy will
turn around the ever-declining GDP and create
employment.


For obvious reasons I will lay more emphasis on
agriculture, education, technology and human capacity. On
the contrary I will de-emphasize the solid minerals sector
because it may suffer similar fate as crude oil. Because
the latter yielded foreign income easily than other sectors,
as nation we did not invest in infrastructure to develop
other sectors and it has turned out to be a ‘curse’ than
being a blessing.
Being a lead paper delivered at the ASUP National Conference held on Tuesday November 8 and
Wednesday 9, 2016 at Kano State Polytechnic, Kano
Diversification of Nigeria’s
Economy – A Way Out?
Agriculture:
 The Government needs to improve on the
agricultural production to be able to achieve this
feat. That is, our agricultural practices must be
revolutionized from near primitive ways and
scientifically and technologically driven.

Although cultivatable land is in abundance in
every parts of the country the question of quality
of crop seeds and seedlings, animal breeds,
fertilizers and other inputs materials,
machineries including for agricultural production
and processing, storage, etc. remain unsolved.
Being a lead paper delivered at the ASUP National Conference held on Tuesday November 8 and
Wednesday 9, 2016 at Kano State Polytechnic, Kano
Diversification of Nigeria’s
Economy – A Way Out?

The Ministry of Agriculture, Agricultural
Development Programmes, Agricultural
Research Institutes, Universities of
Agriculture, Universities of Technology and
Polytechnics and Colleges of Technology
should be adequately equipped and their
activities coordinated to address, through
research and product development, the
problems of agricultural production in the
country. The Government must adopt the
necessary enabling agriculture policy.
Being a lead paper delivered at the ASUP National Conference held on Tuesday November 8
and Wednesday 9, 2016 at Kano State Polytechnic, Kano
Diversification of Nigeria’s
Economy – A Way Out?
Education:
 Most higher education institutions are more
committed to academic excellence in the delivery
of their core missions. Also, they are conscious
of World University rankings by external
agencies and they desire to partake of the huge
revenue income in foreign exchange derivable
from global mobility of international students.

It is doubtful if any of Nigerian Universities or
Polytechnics have non-Nigerian students making
up to 1% of its total student enrolment for
obvious reasons.
Being a lead paper delivered at the ASUP National Conference held on Tuesday November 8 and
Wednesday 9, 2016 at Kano State Polytechnic, Kano
Diversification of Nigeria’s
Economy – A Way Out?

On the contrary, Nigerian government is loosing
substantial foreign exchange as payment of school fees
on her nationals schooling abroad in pursuit of better
education standards. We can all imagine how much of
the TETFUND grant intervention for capacity building is
going into training of academic staff from Nigerian
universities, polytechnics and colleges of education in
foreign universities! Your guess is as good as mine.

Indeed, National Bureau of Statistics (2015) reported
that Nigeria remain the largest source of students from
sub-Saharan Africa to the United States of America,
and that as at January 2012 6,568 Nigerian students
were studying in over 733 regionally accredited U.S.
colleges and universities.
Being a lead paper delivered at the ASUP National Conference held on Tuesday November 8 and
Wednesday 9, 2016 at Kano State Polytechnic, Kano
Diversification of Nigeria’s
Economy – A Way Out?

If Nigerian Government grants degree-awarding
status to the polytechnics, and invests adequately in
the upgrading of infrastructures in the institutions
purposely to raise them to world-class standards,
the following will happen:
 The Nigerian youths that were unable to gain
admission into the universities will be absorbed by
the polytechnics;
 Movement abroad in search of quality university
education will be reversed and thus sparing the
country’s hard earn foreign exchange; and
 The institutions will attract foreign students and
thus generate substantial foreign income.
Being a lead paper delivered at the ASUP National Conference held on Tuesday November 8 and
Wednesday 9, 2016 at Kano State Polytechnic, Kano
Diversification of Nigeria’s
Economy – A Way Out?
Technology & Intellectual Capacity:
 Learning from the experience of Stanford University and the
development of Silicon Valley, Nigeria’s Universities of Technology,
Polytechnics and Colleges of Technology can develop their human
intellectual capacities export same to earn foreign exchange.

The famous Silicon Valley developed from what we know as
Industry-University linkage where the university supports industrial
growth through research and consultancy.

Silicon Valley, is now an industrial region around the southern shores
of San Francisco Bay, California, U.S., with its intellectual centre at
Palo Alto, home of Stanford University. Its name is derived from the
dense concentration of electronics and computer companies that
sprang up there since the mid-20th century, silicon being the base
material of the semiconductors employed in computer circuits.
Being a lead paper delivered at the ASUP National Conference held on Tuesday November 8 and
Wednesday 9, 2016 at Kano State Polytechnic, Kano
Diversification of Nigeria’s
Economy – A Way Out?

The economic emphasis in Silicon Valley has now partly
switched from computer manufacturing to research,
development, and marketing of computer products and
software.

The Research & Development headquarters of leading Internet and
information communication technology industries namely Oracle,
Facebook, Google, Apple, Intel, Cisco Systems, Uber, Airbnb,
Dropbox, etc. are located in the Valley.

About every 10 years there is a new industry emerging in
Silicon Valley. Of the top 15 companies [in the region], 12 of
those companies were formed in the past 15 years, they
generate $600 billion of revenues, and employ about threequarters of the people in Silicon Valley, and they were all
entrepreneurial companies 15 years ago. So we continue to
see this sort of churning and creating of new industries.
Being a lead paper delivered at the ASUP National Conference held on Tuesday November 8 and
Wednesday 9, 2016 at Kano State Polytechnic, Kano
Conclusion
From the foregoing, it may be concluded that:
 reliance on Crude Oil as a major source of
foreign exchange earnings and on which the
Federal Government’s budget is being funded
has continued to be a letdown in the
implementation of such budget and the
wellness of Nigeria’s economy. Unfortunately, it
will continue to remain so for many years to
come.

It is an irony that Nigeria’s economy is poor in
the midst of many naturally endowed resources
because attention was not paid to the latter.
Being a lead paper delivered at the ASUP National Conference held on Tuesday November 8 and
Wednesday 9, 2016 at Kano State Polytechnic, Kano
Conclusion

Consequently, the presenter supports the call
for diversification of the economy as a partial
solution to the problem of perpetual nonperformance of the budget due to low oil
revenue.

Scientifically and technologically driven
agriculture, education, and technology and
intellectual capacity coupled with
industrialization will take Nigeria’ economy out
of recession.
Being a lead paper delivered at the ASUP National
Conference held on Tuesday November 8 and
Wednesday 9, 2016 at Kano State Polytechnic,
Kano
Thank you and God bless
Being a lead paper delivered at the ASUP National Conference held on Tuesday November 8 and
Wednesday 9, 2016 at Kano State Polytechnic, Kano