Dele Shobowale, a financial analyst, in this interview with CLEMENT ORILOYE and ADEJUWON OSUNNUYI, x-rays the Nigerian economy, and forecasts what 2009 has in store
Q: How would you assess the economic outlook for 2009?
A: There is no doubt that the budget for next year is one of despair. The fact remains that there is going to be a recession. The factors that are responsible for this recession are the falling crude oil price which will go toward $30 before it rises again. But I don’t think it would rise above $50 in 2009. The revenue will drop. I don’t think the deficit that the Federal Government intends to finance by withdrawing money from the African Development Bank, ADB can work. This is because, when the ADB fund was created, it was done under a specific agreement by all the parties, so I don’t think President Yar’Adua can unilaterally access the fund. Even if he would get the fund he cannot get more than $200m. Hence if we get $200m, where are we going to get the $300m? If we think we can depend on other countries such as USA and Germany for bail-out we should just forget it, because they also have their own problems.
Q: With the budget benchmarked at $35 per barrel, how do you think that this will work out well? A: The final thing is that we are not going to get the revenue re-appreciated.
Q: What about the depreciating naira value? A: I have already said the value of the naira should be expected to be around 140 to a dollar in 2009. Right now, we are going toward N145. It might even go for as high as N150 per dollar. Q: What about the stock market situation? A: The stock market would depend on the state of the economy and how much money is there to spend. There is not much money now and the foreign investment in the Nigerian stock market is changing by the day. The foreign investors are removing their money and they are not likely to come back soon. I don’t even think Nigerians have the money to make up for the shares. I can’t see the stock market coming out stronger than what it was in 2008.
Q: So what can we do to effect a change? A: There is so much to be done in the Nigerian Stock Exchange.
Q: What can the government or stakeholders do? A: The government can do a lot. But it is not the conventional attitude that they are undertaking now. All the matter of the market makers that they are proposing now will not work, because the market maker would have to take his money to buy shares at higher prices than what is selling at the market at the moment. That would not work. There are lots of idle shares and unpaid dividends that still need to be resolved. The Federal Government and the authorities involved, the Nigerian Stock Exchange, can manipulate to bring about a rapid change by withdrawing some of those millions of shares that are idle, but just pretending to be active in the market.
Q: With the appointment of five market makers, what change can they bring to the market? A: I am not bothered about the change they would have to bring because if they don’t bring in money what are they going to do? They can’t just be asked to surrender their shares at whatever price because there is no money. And where is the money? That is the point.
Q: What about the global food crisis? A: Well, the global food crisis has affected stocks to some extent because after prices went up, they started coming down because of the drawback. But they would stabilise by next year.
Q: What are the effects on the common man? A: The common man would have to tighten his belt. The government should be able to address the level of inflation. No doubt, the inflation would be higher and it would affect everybody, common man or not. The unemployment would be higher next year, so the common man should be ready to find himself a job to do. The economy is supposed to address the exchange rate. The exchange rate is expected to be higher next year as well. It is also expected to affect the general welfare.