We all heard about the story of a man who committed suicide by jumping off a tall building because he could not live to watch his family die of hunger. Well if you did not, I am telling you now. This is not surprising to hear or the first case of it happening. There are so many who killed themselves because they could not bear the thought of seeing their family suffer.
Nigeria is in a state of economic recession-The finance Minister tagged it as a state of technical recession. I personally feel that we are closer to economic depression.
An economic recession is a negative economic growth for two consecutive quarters and a business cycle contraction which results in a general slowdown in economic activity normally visible in real GDP, Real income, employment, industrial production and wholesale and retail trade. We can all feel the effects of this in our static or declining allowances or as we fondly call it ‘Pocket money’.
We know from our beloved Economics that a country that specialises in exporting primary products and importing manufactures would end up having terms of trade shifting against it. Having a speciality in exporting primary products is okay for a short period of time, but when a country does not move to start using its raw materials to diversify its economy and export this produce, the country does not move from ‘developing to developed’ and we are all in trouble in the long run. This is the norm in Nigeria, where our primary exports are even on the decline and we have increased imports.
Nigeria’s economic recession is caused by a decline in oil prices which in turn means a decline in Government revenue and when there is a decrease in government spending there is a decrease in consumer spending which also leads to a drop in investment activities because of this, the gross domestic product of the country does not increase but rather it decreases. The indicators of Nigeria’s economic recession are evident in the increase in unemployment rate, Decrease in our national output, decrease in profits of businesses because of their low purchasing power and rising prices.
The Nigerian economy has slid into recession after negative growths recorded in the first two quarters of the year. According to National Bureau of Statistics, the nation’s gross domestic product contracted by -2.06% in the second quarter of 2016 in real terms. This was lower by 1.70 % from the growth rate of 0.36% in the preceding quarter and also lower by 4.41% from the growth rate of 2.35% recorded in the corresponding quarter of 2015. Nigeria’s forecasted inflation rate for this year is said to be at a rate of 18.2% in September with an actual rate of 17.1% recorded in August. I know too many figures, you are starting to question them and look a bit confused. Just have it at the back of your mind that all we are trying to say in essence is ‘Nigeria is in an economic downturn’.
What is the way forward?
It cannot be overemphasized that Nigeria needs to diversify its economy. Oil does not form a critical part of the GDP or growth. People assume the oil sector contributes a high percentage to the GDP. But sadly it does not! The contribution of the crude petroleum and natural gas subsector, according to NBS only accounts for about 10.27% of the total GDP. The highest paying sector is the services and trade sector. Now, oil prices are falling and Niger delta avengers are blowing up oil wells. Is oil a blessing or a curse to Nigeria? The Government should leverage on its expansive revenue base and spend its way out of the recession. To assist the economy, the Government needs to pump money into Capital expenditure projects such as infrastructural development and into social intervention policies to increase people’s purchasing power to consume locally made goods rather than spend so much on importation. If the oil GDP of Nigeria only accounts for less than 15% of the total GDP and the world is experiencing falling oil prices then what is really causing the recession? Where does that put the services sector? Diversification is highly needed.
Another way forward for Nigeria is to attract foreign direct investment into the country. Due to the falling oil prices, many investors have pulled out of the country and many companies have shut down. Nigeria needs to create an enabling environment for businesses to attract foreign direct investment. The poor infrastructure is one of the greatest challenges when it comes to attracting capital into the country and also the lack of constant and stable power supply. Privatisation of power holding companies have been done to combat this, however it has not been productive.
Despite the unrest, the decision to abolish Nigeria’s fuel subsidy is a good one and it is one of the methods or ways Nigeria has undertaken to combat recession. Nigeria’s high spending on fuel subsidy does not give room for the money to be used on more pressing areas that can lead to development. It continues to crowd out other development spending. Keeping the domestic price of oil artificially low with the fuel subsidy has discouraged investment into Nigeria’s oil sector. The fuel subsidy which is aimed at benefitting the poor instead puts more pressure on the poor and benefits the rich. It is those who consume the most that have a greater advantage from subsidy. Fuel subsidy has led to a number of corrupt activities in the country. Neighbouring countries have benefitted from the subsidy scheme through smuggling. The removal of fuel subsidy is a step the Government has taken toward the right direction.
One cannot but stress the need to build refineries in the country. How can a producer of oil produce so much and have to take the oil to be refined elsewhere? Then import it back into the country and charge the people a high rate because we do not have refineries. Nigeria needs to look inward and put their money into areas which will create development in the country. We cannot continue to be a nation who is in debt and continue to borrow to create recurrent expenditure and have huge consumptions that do not produce development for the country. What money will we use to pay our debts if we continue like this? Nigeria needs to look inward and start putting their money into areas that will create employment, growth and development.
Science and technology should be the cornerstone for development. Science and technology is a field or a sector in which developed countries have used to seal their development. They are key drivers to development. As an engine of growth the potential of technology is endless and largely untapped in Nigeria and Africa as a whole. Technological and scientific revolutions have created economic advances, improvement in health systems, education and infrastructure. The Government needs to invest in research based projects, quality education for the youth and continuous skills training for workers. Countries like China, USA, and the UK are concerned about their countries development that’s why we hear of people like Mark Zuckerberg and Steve Jobs at the forefront of science and technology. Yet we are the brand ambassadors of their products. The iPhone 7 is worth half a million naira and a huge amount of orders have come from Nigeria, despite the recession. We are helping other economies grow rather than helping our own. The government should invest in research based science and technology projects to bring about the nation’s development.
The Government needs to see to the dumping of sub-standard goods and protect its infant industries. The importation of substandard goods and dumping of goods into the country cannot give room for local businesses or industries to thrive, and development to take place. There are so many non-indigenes in the country who are factory owners that are using our very own resources to produce. They package it, sell it to us and call it “imported goods” So we continue to buy because we like imported goods. Meanwhile we are helping another nation to grow and develop. The government needs to support indigenous production, improve power supply and encourage the financial service sectors to make loans available for investors at low interest rate. These measures will attract investors, promote local industries and bring the economy back to life again.
After all has been said. The giant of Africa needs to wake up and start listening to its economic advisers, The most vital way to get Nigeria out of the recession is by looking inward, investing in capital projects and diversifying the economy.