Nigerian economy is officially in recession

Nigeria officially entered into recession for the first time in more than 20 years as the National Bureau of Statistics (NBS) said on Wednesday that gross domestic product (GDP) contracted by 2.06 percent after shrinking 0.36 in the first quarter, Reuters reports.

This economic recession comes as no surprise to millions of Nigerians. Many say they've never known it so tough. The country has now seen two consecutive quarters of declining growth, the usual definition of recession.

According to the National Bureau of Economic Research (NBER), recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real gross domestic product (GDP), real income, employment, industrial production and wholesale-retail sales.

Crude-addicted Nigeria has been hit hard by the global fall in oil prices, which has reduced government revenues and driven inflation to an 11-year-high of 17.1 percent in July.

The slump in global oil prices has hit Nigeria hard. The government depends on oil sales for about 70% of its revenues but the crash has left the government cash-strapped and struggling to pay civil servant wages. The price of oil has fallen from highs of about $112 a barrel in 2014 to below $50 at the moment.

We have many contributors to this issue we found ourselves in; first of all, the maladministration of previous government at all lead to the situation we are in toady. For instance, they were predictions that the oil prices will fall and countries like United Arab Emirate (UAE) and Saudi Arabia started building their economy away from oil (tourism is a major revenue source), now their economy is now robust and energetic.

But the Nigerian economy is not that robust and we may blame the previous administrations, from the Military administration down to Obasanjo administration down to Jonathan administration. Also even now, the incumbent administration should also be blamed.

The road to this current recession started in 2012 when Nigerians refused to accept fuel subsidy removal, when the government continued to rely heavily on petroleum thereby putting a lot of pressure on the demand of the foreign exchange.

Remember in 2008 when we had global financial meltdown, Nigeria was not even aware that we had crisis then and this was because of the way the government of the day handled the situation. The country responded by bringing in the best economist on the table, they opened up discussions and used the best available methods and people did not feel it that much.

Goodluck Jonathan’s administration was marked with several allegations of corruption (which several of them have not been substantiated) and the allegations was that they billions of naira was stolen. But then, they were economist on board and that was the first time we had the co-ordinating Minister of the economy.

Jonathan knew that his brain was small to handle Nigeria’s economy, so he brought back people like Okonjo Iweala and people that know their onions when it comes to running Nigerian economy and he allowed them to work freely, he also give them leverage to come out with policies.

In 2015, President Buhari’s administration when we had the oil crash (slash in oil price), unfortunately we did not have the best of brains in government and they mismanaged the situation. Of course they inherited a lot of mess, but they worsen the situation. We have leaders in the present government who think that they are better than financial experts and you cannot run an economy as strong as Nigeria economy by the brain of one man.

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Following enormous pressure, the government changed tack this summer, allowing the naira to float.

That's led to a spike in inflation, but the hope is that it will attract foreign investors. The government also says the country needs to import less: it wants to see more products made in Nigeria.

Nigeria isn't only hurting from low prices. Its oil output also fell sharply because of a series of rebel attacks on infrastructure. Other sectors suffered too, with manufacturing and retail hit by chronic power outages.

The slump in oil prices has drained Nigeria's foreign currency reserves. To stem the outflow of cash from the country, the government introduced strict restrictions on importing goods that it said could be produced locally. But that decision has reduced the flow of raw materials to the country's manufacturers.

"Much of the blame for this must fall on Nigeria's government. Import restrictions have crippled the manufacturing sector, which was long seen as a potential driver of non-oil growth," said John Ashbourne, Africa economist at Capital Economics.

Outside the oil industry, the figures show the fall in the Nigerian currency, the naira, has hurt the economy. It was allowed to float freely in June to help kick-start the economy, but critics argued it should have been done earlier.

The government, however, has found some positive news in the figures.

"There was growth in the agricultural and solid minerals sectors... the areas in which the federal government has placed particular priority," said presidential economic adviser Adeyemi Dipeolu.

Nigeria, which vies with South Africa for the mantle of Africa's biggest economy, is also battling an inflation rate at an 11-year high of 17.1% in July.

The suspension of services by Aero Contractors came on the heels of the ongoing economic recession sweeping through and crippling various sectors of the economy and bringing down supposedly viable and vibrant organizations in the nation. The suspension of operations has thrown not less than 1000 staff into the labour market that is already over bloated by graduates and other job seekers.

Not only airlines are receiving the hard knock of the harsh economy in Nigeria, giant oil firms, beverage companies, brewing firms, construction companies, government and financial institutions are not left out as the hard implication of the recession is telling hard on the firms, leading to mass sack of workers and reduction of earnings.

For oil giants, Chevron, Shell, the story is not different. By the end of 2016, Chevron revealed that it would lay off 8,500 staff in addition to the 1500 it announced earlier in 2015, according to a 2015 report. Shell had also revealed its plans to sack 10,000 staff and slash direct contractor positions in the company.

Mobil Producing Nigeria, operator of the Nigerian National Petroleum Corporation MPN/NNPC Joint Venture in Akwa Ibom laid off about 150 contract staff and 40 drivers from its employ, while Total fired 100 in its Nigerian operations. Other companies such as ExxonMobil, Total are said to have also sacked about 4,000 workers secretly in their global operations. This is a result of the economic crisis rocking the nation in the second year of President Muhammadu Buhari.

Due to the current economic recession in the country, most money deposit banks and insurance firms have slashed their workers’ salaries by between 20 and 50 per cent.

Investigations by Saturday PUNCH revealed that Diamond Bank Plc, Heritage Bank Plc, Zenith Bank Plc, First Bank Plc and Wema Bank Plc have reduced their workers’ salaries as of August 31, 2016. This has also been confirmed by management sources and workers in the affected banks.

In the construction industry, not less than 65,000 workers have been sacked following the economic recession plaguing the nation. This followed their inability to meet up with their obligations to the workers as the recession hits the sector with over N600billion debt which the federal and state governments owe the sector.

President of Federation of Construction Industry (FOCI), Solomon Ogunbusola, explained that the 135 construction firms registered and operating under the association are being owed, a situation which has compelled some to lay off their staff.

Economic experts have pointed out that the full implementation of the federal government’s Treasury Single Account (TSA) policy, which commenced in October last year, as a key reason for the current wave of job losses and economic mess weighing down the nation.

The policy mandates all Ministries, Departments and Agencies (MDAs) to remit revenue into a single account, thereby denying banks a cheap source of funds to transact business with customers. According to available figures, the policy led to MDAs pulling out N1.2 trillion, about $60 billion from commercial banks to the Central Bank of Nigeria. Also, over 20,000 accounts were said to have been closed as the process was speedily executed.

An economic expert, Anayo Nwosu, blamed President Muhammadu Buhari for the pains Nigerians are passing through at the moment. He listed certain actions of Buhari that added to the speedy recession of the economy. He identified the speedy implementation of the TSA as one significant cause of the recession.

He said the withdrawal of huge funds from the commercial banks reduced the ability of banks to grant loans to customers, thereby reducing money in circulation. Painfully, some banks had to stop funding projects halfway hence making completion impossible and resulting in bad loans. Though he agreed that the TSA was good, he faulted its speedy implementation.

He also blamed the stoppage of pipeline surveillance contracts and probing contracts awarded by the previous administration and suspending the amnesty programme to militants, saying that action gave the militants the excuse to go back to their arms and the sad reality is the blowing of pipelines and destroying oil facilities. This activity, he said, has affected the revenue from crude oil.

Too broke to pay for costly imports of rice and palm oil, Nigeria is looking to agriculture to help lift itself out of a recession.

The once-flourishing sector was abandoned during the oil boom but has the potential to grow as Nigerian President Muhammadu Buhari pushes to diversify Nigeria’s economy.

Agriculture seems a good place to start. With 84 million hectares of arable land spanning the jungles of the south to the Sahara desert in the north, Nigeria can produce a range of food and cash crops for local needs and exports.

Today Nigeria’s food imports are estimated at over 20 billion dollars annually, according to the agriculture ministry.

A development economist and financial Expert, Odilim Enwegbara, who is the Chairman/CEO at Pan Africa Development Corporate Company (PADCC), said the government should leverage on its expansive revenue base and spend its way out of the recession.

He said: ”To help our economy, the government needs to pump trillions of naira into infrastructure projects and trillions of naira into social intervention policies so as to make more money available to the citizens to boost their purchasing power, which will make these cash-strapped citizens start consuming, not imported goods and services, but mostly locally made goods.”
By consuming locally made goods, Enwegbara said, more money will get into the hands of local people and artisans. This, he said, will kick-start the once excluded grassroots economy.

According to the LCCI chief, the energy issue has remained a sore point as a result of the poor supply and the high cost of gas, which in most cases is not available.

He said: “Economic empowerment of majority of our citizens by increasing the purchasing power of the economically excluded is the magic wand which increasing their consumer power should increase production and new jobs. In other words, if by empowering the marginalised and excluded millions deep-seated economic malaise will finally be resolved.”

The Vice President (North West Zone), Manufacturers Association of Nigeria (MAN), Ibrahim Usman, said to move away from recession, the government must embark on infrastructure development to attract money into the system.

He said in other climes, the government drives the economy, giving it direction, but he admitted that there is no quick fix to get out of the recession.
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