Declining personal income, rising consumer goods prices and the economic fallout from the first wave of the coronavirus pandemic have pushed many more Nigerians below the poverty line.
This is why notable economic experts at a Webinar themed ‘How to get out of this Economic Crisis’, have offered solutions on how Africa’s biggest economy can recover from its crisis and prepare to combat future occurrences.
Speaking at the webinar, Bismarck Rewane, the managing director of Financial Derivatives Company Limited said that it is important that we differentiate between a crisis and a problem. “Economic crisis is cyclical and whether you like it or not, you can’t avoid it. So, you have to know the lessons you have learnt from the past just like other countries like China and the U.S did,” he said.
“After learning from the past, the next thing is to know how to use the crisis as an opportunity to make sure that when it happens next, we are going to be more insulated so that our economy does not suffer the consequences of these economic crises cycles. Because they are inevitable and you can only manage it,” Rewane further added.
He also advised that the country has to stop doing dumb things but instead start acting smart in doing things and modernize those things.
In the past five years, Nigeria’s economic crisis has worsened due to two recessions. And despite its exit from these recessions, the country is yet to recover to its pre-recession levels.
The consequence of the crisis has weakened consumers’ purchasing power, elevated prices and loss of jobs. According to data from the National Bureau of Statistics (NBS), headline inflation, which serves as a measure of consumer prices, rose by 17.75 percent in June 2021 while Nigeria’s unemployment rate rose to 33.3 percent in 2020.
Also, the World Bank stated in a Development Update report that the country’s surging inflation rate has pushed seven million Nigerians into poverty. According to the report, before inflation started rising steadily, there were 82.9 million poor Nigerians but the number has risen to 90.1 million as a result of the price shock.
Kayode O. from NBS who represented Yemi Kale the statistician-general at the webinar stated that there will be a higher frequency of these shocks which will materialise at some point. So, the government is in a better situation to build up fiscal buffers to prevent such reoccurrences but it is not just a short term orientation but a long term view.
Currently, households have adapted negative strategies to cope with elevated food prices. According to the NBS, 60 percent of households that experienced the shock between July and December 2020 reduced food consumption, while 26 percent indicated they reduced their no food consumption.
“The emphasis on building up government revenue is good but what is more important and what we should think about is how the revenue is utilized, the impact of spending and the investment it has on the well-being of the people,” Rewane said.
Apart from rising poverty levels, Foreign Direct Investment which is significant for developing economies has reduced to its lowest level in four years declining by 61 percent to $2.78 billion in the first six months of 2021 from $7.15 billion in the same period of last year.
Yewande Sadiku, the executive secretary of the Nigerian Investment Promotion Commission (NIPC) advised that Nigeria should build the foundation and capacity to compete between states than challenging economies.
“We need to help the states by educating them on the need to prepare for this investor challenge. I often encourage states to almost think they are competing with each other because the competition for capital is real,” Sadiku further said.
On his part, Andrew Nevin, partner & chief economist, PwC Nigeria identified three key areas that need structural and policy reforms to drive Nigeria’s economic growth
“The exchange rate, fuel subsidy and power sector need total structural and policy reform as they are largely distorted. The Central Bank is trying to operate at a market-determined rate; however, this has not been implemented. When you have multiple exchange rates, it is confusing for investors and when they are confused, they won’t come and this is not healthy for the economy,” he said.