In September 2015, the Central Bank of Nigeria (CBN) warned that Nigeria might experience economic downturn by 2016 if proactive measures were not taken to guard against it.
CBN Governor Godwin Emefiele, who made the assertion at the end of a Monetary Policy Committee (MPC) meeting, bemoaned the slow economic growth of the country.
“With two consecutive quarters of slow growth, the economy could slip into recession in 2016 if proactive steps are not taken to revive growth in key sectors of the economy.
“The overall economic environment remains fragile. The economy further slowed in the second quarter of the year, making it the second consecutive quarterly less-than-expected performance,” he said.
Going from the general to the specifics, the National Bureau of Statistics (NBS) said that Nigeria’s real Gross Domestic Product (GDP) growth rate declined to 2.11 per cent in the fourth quarter of 2015.
The bureau reported that the GDP declined in the fourth quarter of the year, compared to 2.84 per cent in the third quarter.
The NBS also reported that the economy witnessed a negative growth of 0.36 per cent year-on-year in real terms in the first quarter of 2016.
Economists, therefore, insist that the negative growth is an indication that the national economy is shrinking and experiencing some setbacks.
Some of the experts argue that the country may soon experience an economic recession if some indicators, enumerated by the National Bureau of Economic Research (NBER), continue to manifest in the economy.
According to NBER, an economic recession is associated with high unemployment, slowing GDP and high inflation, as well as reduction in real wages and consumer confidence.
“These are the indicators to watch if you want to know when the economy is in a recession.
“The most important indicator is real GDP. When the real GDP growth rate turns negative, it could be a recession.
“Sometimes, growth could be negative and then turn positive in the next quarter; so it is difficult to determine if you are in a recession based on GDP alone.
“That is why the NBER measures monthly statistics from employment, personal income and manufacturing sector, in addition to the inflation and GDP.’’
The bureau also stated that a recession could turn into a depression if it lasted long enough.
“In a recession, the economy contracts for two or more quarters, whereas a depression will last several years.
“In a recession, unemployment can rise to 10 per cent; in a depression, the unemployment rate will be 25 per cent.’’
However, Dr Aminu Usman, an economist, described the 12-per-cent unemployment rate in first quarter of 2016 as the immediate fallout of the economic recession.
“Unemployment is the immediate fallout of an economy that is in recession but the problem with Nigeria is that the preponderance of the unemployed is in the active youth category.
“This category of Nigerians is the ones that fought for the emergence of this government, with the hope of getting some relief from their state of joblessness and hopelessness.
“The government can do better by coming up with clearly defined policies for each sector of the economy and move from the `wish list’ to actual work of getting things done.
“That way, it can enlist the cooperation of the private sector to re-jig the economy.
“The economy, which is going through recession, will be moving toward depression if appropriate actions are not taken to address the economic crisis,’’ he said.
Commenting on the state of the economy, Dr Olisa Agbakoba, a former President of the Nigerian Bar Association (NBA), said that some of the Federal Government’s policies might be responsible for the economic current situation.
Agbakoba said that while it was commendable that the administration was saving money by blocking financial loopholes, its failure to spend the money was inadvertently making the country slide into recession.
“Now, if this situation continues, we are likely to see an economic depression where growth becomes absolutely negative,’’ he said.
Agbakoba emphasised that if the national economy was properly evaluated, Nigeria was already in a state of economic recession even if the NBS had not used the word.
“If you carry out your research accurately, recession is two equal negative growths in two quarters. So, we have to be extremely careful,’’ he added.
Similarly, Prof. Akpan Ekpo, an economist, said that the Nigerian economy had already entered a state of recession, judging from relevant macroeconomic and social indices.
“The morphology of growth indicates an economy with positive growth trajectories but no development,” said Ekpo, the Director-General of West African Institute for Financial and Economic Management.
He said that the high rates of unemployment suggested that the economy was in a sphere of “stagflation’’ (persistent high inflation combined with high unemployment and stagnant demand in a country’s economy).
According to him, the unemployment rate, combined with reduced output in two quarters of 2015, suggested an economy in the sphere of “stagflation’’ — a prelude to an economic recession.
Ekpo, however, advised the Federal Government to put in place effective policies to alleviate the economic hardships facing the common man.
He underscored the need to initiate policies that would stimulate massive investments in infrastructure development and employment generation.
“The government should come up with policies that will promote investments in housing construction, rebuilding the public school system, building strong institutions, and an aggressive monetary and fiscal policy.
“It is expected that President Muhammadu Buhari has a committed team that would put the economy on the path of sustainable growth and inclusive development,’’ he said.
Tacitly confirming Ekpo’s viewpoints, Chief Bola Tinubu, a chieftain of the ruling All Progressives Congress (APC), urged Nigerians to fight recession.
He, however, urged Nigerians to do everything possible to resist recession at this point, rather than focusing their attention on how to tackle inflation.
Tinubu’s reaction was sequel to a NBS report that Nigeria’s inflation was now in two digits for two consecutive months, rising to 13.7 per cent in April from 12.8 per cent in March.
He said that the country has entered into a period of stagflation where recession or shrinkage of the economy was accompanied by higher prices.
“Given the rate of joblessness and poverty, it is more fitting to fight recession at this point than to focus on inflation.
“We can endure a bit more inflation if it means more jobs and greater aggregate demand that can develop the velocity needed to free of the economy from recession’s gravitational pull.
“We must resist recession; it is harder to shake off recession once if it takes grip of an economy,” he added.
Nevertheless, the Minister of Budget and National Planning, Sen. Udoma Udo Udoma, said that the Federal Government was quite concerned about the economic difficulties which Nigerians were going through.
He said that the government was adopting short-term and long-term measures to ease the hardships.
“In the immediate term, we are looking at ways to fast-track budget releases, particularly, some of the N500 billion social intervention fund, so as to bring immediate succour to Nigerians.
“Our aim is to stabilise the economy by putting a halt to the economic slide, and ultimately reversing it and getting the economy back on the path of sustainable growth,’’ he said.
All the same, Mr Aro Rasaq, an economist, insisted that the first thing which the government ought to do was to revive the agriculture and manufacturing sectors so as to increase productivity.
“The country needs to increase the quantum of its agricultural and manufactured products so that it could export the products abroad and increase its foreign exchange earnings.
“For several years, over 90 per cent of our revenue is from oil and we have not been exporting enough goods to diversify the economy.
“We once used proceeds from agriculture and manufacturing to boost the economy in the past; so we should go back to what we were doing before,’’ he said.
Economic analysts agree that the Federal Government can overcome the current economic crisis via job creation schemes and stimulating micro, small and medium enterprises.
They, nonetheless, insist that jobs can only be created if the manufacturing sector, among other key sectors of the economy, is overhauled and streamlined to facilitate economic revival in a pragmatic way.
By Cecilia Ologunagba, News Agency of Nigeria (NAN)
