Economic recession

BY USMAN SHEDRACH

ECONOMIC RECESSION IN NIGERIA

          The international monetary fund (IMF), as well as the Central Bank of Nigeria (CBN),  have all agreed that Nigeria Economy has plunged into recession, they assert that Nigerian economy may not regain stability until early 2017 with low growth rate 1.5%.

          Recession according to the National bureau of Economic research (NBER) can be defined as " a significant decline in economic activities spread across the economy , lasting more than few months, normally visible in real Gross Domestic Product (GDP).

What causes economic recession in any economy includes.....

·      Mass unemployment and general loss of confidence on Government due to economic indices.

·      High inflation; general raise of prices of goods and services leading to low purchasing power.

·      Accumulation of debts servicing especially foreign debts.

·      Fall in aggregate demand, fall in wages income.

what caused Economic recession in Nigeria.

Obasanjo’s administration earned N17trn from crude oil sales within eight years and left behind 45bn dollars external reserves and 3.348bn dollars external debt.

Yaradua grew the reserves to 64bn dollars within just one year and the administration was able to finance 15 months of imports despite the 2008/2009 world economic meltdown. Hence, Nigeria survived the melt down because of the political will by the administration to save. Despite the tough economic reality at that time, Yaradua left $47.7bn in reserves and an external debt of 3.94bn dollars. Meanwhile, the administration earned only N9trn from crude oil sales within that short period.

          Now, Jonathan administration witnessed an oil boom when Brent crude sold for over 100 dollars per barrel, with the regime earning N51trn within a period of 5years. But because of corruption, the administration did not only spend the oil revenue but even depleted the reserves left by Yaradua, leaving just $32bn and a huge external debt of 63bn dollars for Buhari. The same Brent crude sold for as low as 35 dollars/barrel at a point shortly after Buhari took over power and had only managed to climb to about 48 dollars just recently.

These are facts that can be verified. So, it’s amazing hearing people criticize Buhari for the hunger in the land.

          According to Fashola, Buhari’s administration inherited 206 uncompleted road projects and contract arrears worth N2.1trn from Jonathan; and for about 2 to 3 years the contractors where not paid. This slowed down the economic activities, with most of the companies laying off their staff. This was when the seed of recession was sowed.

It’s obvious that Buhari came in to rescue Nigeria, because if Jonathan had continued in power, the nation’s economic crisis would have been worse, perhaps even the Federal government wouldn’t have been able to pay salaries of civil servants by now.

          According to Okonjo Iweala, Nigeria started borrowing money to pay salaries since October, 2014; but today Nigeria now borrow money for investment in capital projects.

·      Poor economic planning: The current recession faced by Nigeria is due to poor economic planning where there is no concrete implementation of her economic planning also budget delay and exchange rate policy. though the government have indulged in the usual generalities that every government indulge in when faced with such problem (economic recession), like....

- Diversifying the economy.

- Try to raise the agricultural output.

- Paying attention and improving the manufacturing and mining sector.   - Courage foreign investors.

     The Nigeria government have taken some steps to improve the economy by elimination of dollar purchase privileges for importers of 40 items like rice, cement,meat and private planes etc.

the government on the other hand has caused poverty in the  country, the government policy has widen the gap between the rich and the poor which is causing more hardship to the economy.

     When CBN was selling dollar at N197 and buying at N300, the highly placed people in the country were putting calls across the banking industry to get dollar at the official rate which they later sell  at the parrael market rate of N300.

               According to the former CBN governor  (Lamido Sanusi), people could make N1billion  without doing anything. The people that were profiting this told the government that if they didn't devalue the Naira people will suffer, and now the poor are paying for the devalue of Naira, while the rich schemed up.

·      High interest rate: the interest rate in Nigeria is extremely high on investors and this  is discouraging the investors, because of this poor rate of investment, there is high rate of unemployment in the country.

·      High inflation rate; the removal of fuel subsidy shouldn't have been  simultaneous with the banning of the importation of essential products like rice. Another cause of inflation is the speculation in the stock market due to budget delay and raise in oil price.

·      High taxation; it is only Nigeria that will charge heavy tax rate during economic recession even those with small business, they are charged heavily.

Suggested economic policy Nigeria should adopt to end economic recession

Knowing the economic hardship the country is faced with, policymakers need to pursue policies that will work like:

·      Reduce tax rate: The government should reduce the rate of tax on individuals, small business and coorperations. When tax rate is reduced, it will encourage foreign investors, this will increase the inflow of dollar to Nigerian economy, and ultimately increase the investors standard of living. It will also solve the problem of high exchange rate.

·      Spending effectively: It is not when the government are spending merely that the problem of recession can be solved, they should spend strategically on areas with high multiplier effect. When money is being put in areas like Agriculture and Manufacturing sectors, there is certainty that Nigeria will be stabled.

·      Nigerian Government should encourage entrepreneurship: Entrepreneurship makes people less independent. Other countries unlike Nigeria encourages entrepreneurship which makes the people to be less independent of the government, and also the Government should make her expenditure on skills acquisition programs, like most countries that believes that it is skill that leads to production are doing well in times of their economy. Government should invest on skills acquisition, industrial training, sport, telecommunication agro-allied and many more, and the training should be 80% practical. We knowing that Nigeria major problem is unemployment, entrepreneurship and skills acquisition should be encouraged among youth.

·      Increase agricultural produce: I want to lay more emphasis on agriculture, because if we can trace back in the 60's, agriculture was the main of Nigeria in times of GDP, foreign earnings and employment, but today Nigeria spends about $10 billion on the importation of agricultural products. the Government should put mechanism in place to grow the sector, they should empower and encourage the youth to go into the sector.

·      Nigeria Government should also invest in the energy sector,  and also engage  the Niger Delta Militants in a dialogue. The borrowing from both domestic and foreign should be invested more on infrastructure.

Nigeria should stop blaming President Buhari for the current problem of Economic recession and focus on making the economy stable again..