By Nduka Chiejina and Vincent Ikuomola, Abuja
NIGERIA got yesterday a wake-up call on the economy.
Be prudent or risk a recession, Finance Minister Dr. Ngozi Okonjo-Iweala told the government.
She cited the situation in Greece and Spain, which require a bailout from the European Union, to buttress her argument that the economy is not insulated from a recession. She urged the government to be cautious.
The Coordinating Minister for the Economy urged the government to be prudent in managing its finances.
She spoke yesterday at the Federal Executive Council (FEC) during a debate on the state of the economy.
Minister of Information Labaran Maku, who told reporters what transpired at the FEC, however, said Mrs Okonjo-Iweala debunked the rumour that Nigeria is broke.
Maku said the government’s delay in meeting its obligation to creditors is not a sign of weakness.
Some Federal Government workers do not receive their monthly salaries on time. The minister said this is due to the ongoing Integrated Payroll and Personnel Information System (IPPIS).
“Presently, we have no problem in terms of our finance management. There have been rumours here and there, especially because of delay in payment. This is due to the new electronic payment system being implemented by the Federal Ministry of finance.
“There has been occasional delay in payments in some departments. But, that has nothing to do with Nigeria’s financial position.
“Our economy is sound; our economy is growing, the fastest in the continent and we also know that our external reserve has gone up to about $35billion now.”
He said government would continue to improve on the nation’s external reserve through probity and prudent management of the economy.
The World Bank also raised the alarm over the ripple effect of the fragile economic situation in Europe on developing economies. It, however, said the economy of countries in sub Sahara Africa is growing.
In its Global Economic Prospects (GEP) for June 2012, the World Bank, which urged developing countries to prepare for tougher times, said: “A resurgence of tensions in high-income Europe has eroded the gains made during the first four months of this year, which saw a rebound in economic activity in both developing and advanced countries and an easing of risk aversion among investors.”
“Since the beginning of May 2012, developing and high-income country stock markets have lost some seven per cent, giving up two-thirds of the gains generated over the preceding four months.
“Most industrial commodity prices are down, with crude and copper prices down by 19 and 14 per cent, respectively, while developing country currencies have lost value against the US dollar, as international capital fled to safe-haven assets, such as German and U.S. government bonds.
“So far, conditions in most developing countries have not deteriorated as much as in the fourth quarter of 2011. Outside of Europe and Central Asia and the Middle-East and North Africa, developing country Credit Default Swap (CDS) rates, a key indicator of market sentiment, remain well below their maximums from the fall of 2011”, the report stated.
It added that increased uncertainty will add to pre-existing headwinds from budget cutting, banking-sector deleveraging and developing country capacity constraints.
The World Bank projects that developing country growth will slow to a relatively weak 5.3 per cent in 2012, before strengthening somewhat to 5.9 per cent in 2013 and 6.0 per cent in 2014.
However, growth in high-income countries will also be weak, 1.4, 1.9 and 2.3 per cent for 2012, 2013 and 2014 respectively – with GDP in the Euro Area declining 0.3 per cent in 2012. Overall, global GDP is projected to rise 2.5, 3.0 and 3.3 (1) per cent for the same period.
Should the situation in Europe deteriorate sharply, no developing region would be spared. Developing Europe and Central Asia is especially vulnerable because of its close trade and financial ties with high-income Europe, but the world’s poorest countries will also feel the fall out – especially countries that are heavily reliant on remittances, tourism or commodity exports or that have high-levels of short-term debt.
Economic growth in Sub-Saharan Africa, the report said, remained robust in 2011 at 4.7 per cent. Excluding South Africa, growth in the rest of the region was stronger, at 5.6 per cent, making it one of the fastest growing developing regions.
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