MAN releases insights on experiences in Nigeria and global economy

The global economy is said to be experiencing a slowdown, driven by ongoing geopolitical tensions, rising inflation and monetary policy tightening. However, while some economies such as the United States, China and India are turning the corner, Nigeria’s macroeconomic headwinds persist. This was shared in the insight disclosed in MAN Quarterly Economic Report (Third Quarter 2024) write Editor Gentechnews, Tony Nwakaegho.

 

The Manufacturers Association of Nigeria (MAN) Quarterly Economic Report (Third Quarter 2024) has given an insight on how the global economy fared in the year under review noting that the global economy is experiencing a slowdown, driven by ongoing geopolitical tensions, rising inflation and monetary policy tightening.

The report noted that while some economies such as the United States, China and India are turning the corner, Nigeria’s macroeconomic headwinds persist.

According to the report, the US economy witnessed further slowdown growing by 2.7 percent in Q3 2024 from 3 percent in the preceding quarter of the year.

“After declining for seven consecutive months due to falling energy prices, the US inflation rate rose to 2.6 percent in October 2024 from 2.4 percent in the preceding month. Although the US inflation rate is the highest among the G7, the Fed maintained an expansionary monetary policy by further cutting down interest rate from 5.5 percent in July 2023 to 5 percent in September 2024 and currently to 4.75 percent in November 2024,” the report read.

Japan, the report said, ended its era of negative interest rates in March 2024 to curtail inflation and the Japanese interest rate was raised from -0.1 percent in February 2024 to 0.1 percent in March and 0.25 percent since July 2024.

“In response to the monetary stance, inflation has dropped from 3 percent in August 2024 to 2.5 percent in September and 2.3 percent in October 2024. However, inflation rate in Japan remains the second highest among the G7,” it added.

At 6.7 percent GDP growth rate, India is said to be the fastest-growing economy among the BRICS emerging markets while South Africa recorded the lowest growth of 0.3 percent.

It noted that India’s rapid growth is driven by increased high consumer demand, industrial production, and huge infrastructure development, while Brazil’s growth, though limited by structural bottlenecks, is mainly driven by improved productivity in agricultural and manufacturing sectors.

Despite a very high interest rate of 21 percent, the report noted that Russia’s inflation rate of 8.5 percent is the highest in BRICS due to the high investment risk while inflation rate and interest rate are lowest in China.

The report emphasized that these eight selected countries are among the top 10 biggest economies in Africa (including South Africa and Sudan). “Ethiopia recorded the highest GDP growth of 7.9 percent among the selected economies, followed by Coted’Ivoire and Kenya at 6.5 percent and 4.6 percent respectively. Nigeria recorded a higher growth of 3.46 percent compared to Egypt’s 2.4 percent. However, as at 2023, Nigeria’s GDP size of $363 billion has fallen behind Egypt’s $396 billion due to the devaluation of the naira. Nigeria, Angola and Egypt recorded the highest inflation and interest rates among the selected economies while Morocco recorded the lowest,” the report read.

Nigeria’s macroeconomic headwinds have persisted according to the report that since May 2023, Nigerian policymakers have embarked on bold economic reforms that have ignited macroeconomic crises with inflation, unemployment, poverty and hunger rising at alarming rates.

It explained that even though necessary, the reforms are bereft of proper planning and policy coordination as evident by the negative ripple effects on the populace, especially the vulnerable individuals as well as Small and Medium Industries (SMIs).

Accordingly, it noted that the fuel subsidy removal and exchange rate liberalization have resulted in high cost of borrowing, exorbitant exchange rate and escalated energy prices that have taken a heavy toll on households and businesses, especially manufacturers who have been worst hit.

It added that contradictions of monetary and fiscal policies rather compounded the prevailing structural challenges as the economy is currently at a critical juncture where policy misalignments must be urgently addressed, especially in the areas of inflation control.

There are still prolonged macroeconomic headwinds, despite numerous interventions by the CBN, it says which are clear indications that excessive adoption of monetary policies is not sufficient to tackle the inherent challenges as they only provide limited temporary succour without addressing the issues of high energy prices, infrastructure deficits, insecurity, low industrial productivity and limited export diversification.

The report stressed that there is a clarion call for monetary-fiscal policy synergy as the first step to addressing the country’s economic and structural problems.

Therefore, among several other recommendations, it said there is a  need for policymakers to expediently pause interest rate hikes to allow for an impact assessment; honour the unsettled $2.4 billion Forex forward contract to further increase market confidence and FDI; and fast-track the passage and implementation of the four tax reform bills aimed at restructuring and streamlining tax processes, establishing a unified revenue service, and simplifying financial obligations for businesses and citizens.