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A history of iterative recessions and recoveries – The Nigerian story

A recession is two quarters of negative economic growth. The main metric for a nation’s economic growth is the GDP. The GDP, which is an acronym for Gross Domestic Product, is defined as the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period. It is the ultimate score card of how well our nation is doing. Sadly, thanks to wrong leadership, gross mismanagement and the global COVID-19 pandemics, we are not doing well as it is.

Normally our economy is expected to grow incrementally as every quarter passes us by.  But when it doesn’t consecutively, we say in macroeconomics, that we are in a recession. Recession is generally a period of job losses, inflation, uncertainties, high debt and temporary economic decline.  Also, most trade and industrial activities are reduced. Beyond recession is a depression. A depression is a long period of recession.

Through history, natural disasters, pandemics or bad economic policies or unfavourable disruptions have been the major cause of most recessions. Ours is mainly caused by ill policies or the mismanagement of macro-economic crisis that affects major sectors of the economy. As we stroll into a new quarter, and as Nigeria heads into a likely recession in the coming days, we’ve been here before.  Panic is not a strategy. To get out, let’s see what history reveals first of all.

Historically, Nigeria’s first recession was in 1966 lasting 3 years, ending 1968. In fact, it was a depression. It was caused by the political instability and successions of coups. This eventually led to the bloody two and half years of civil war.  Prior to it, oil had just been discovered in Nigeria. But the Biafran War crisis and the corresponding embargo placed on the secessionist East in mid-1967, led to weakening in the chances of exploiting optimally the oil output. Thanks to the war, came the damage of capital, death of millions of humans, disruption of trade and the destruction of properties. These were triggers of the first recession.

After the war came stability and growth. Nigeria enjoyed some level of prosperity in the 70s. The oil boom of the 1970s was responsible for revenue, but also the emergence of disorderliness in Nigeria.   There was a remarkable increase in the foreign exchange earnings during the oil boom era. Right around it, in 1975, we experienced our second recession. This lasted for a year. It was also the year of a bloodless coup.

Two years later, in 1978 we experienced another recession, which also lasted for a year, this time. It was caused by falls in oil prices. Within two years again, we found ourselves in another depression. It was the second depression in our great history. Once again it was plagued by a shift in political power. This depression lasted for years spanning from 1981 to 1984. Major part of the 80s saw a global crisis in the Middle East that played to our favour as oil producers. In between all of these prosperity and recessions, we really didn’t diversify our economy. We were mainly dependent on oil. And even in the value chain, we didn’t quite have a thriving midstream. And our upstream was mainly played by foreign multinational firm that didn’t care much about our national interest.

We saw another depression in 1993, ending in 1995. 1993 also saw the nefarious leader, Sani Abacha, come into power. It was a dark period. International embargos were placed on us as looting thrived. There was also disregard for human rights and lack of support for the private sector.  This affected our economy. After the death of Abacha and the restoration of Democracy, we saw a decade of glory as Obasanjo tried to restructure major parts of the economy. Debts were forgiven; the telecom sector saw a boost with the advent of the GSM network as well as the attempt of privatisation of major areas of our infrastructural holdings. Our economy was in steady growth but then came 2016. In 2016, we slipped into a recession in the second quarter of that year. And that recession maintained downward (negative) growths through the rest of the year.

Recessions are not new to Nigeria or Nigerians. So, we always assume or expect that this too shall pass. Usually, an economic recovery follows a recession as the economy adjusts and recovers. But there will always be gains lost and massive job cuts during a recession. The indicators of economic recovery include, employment decline, higher debt profiles by businesses and general panic and loss of confidence by investors. But there is usually a recovery.

It is also important to note, there are different types of economic recoveries. These recovery types are based on different alphabetical letter shaped, business cycle curves. The V –Shaped Recession: the economy suffers through a sharp recession but quickly recovers. It is usually caused by minor political crises and natural disasters. The U – Shaped Recession: The economy takes a much longer period of time to recover (usually in the neighbourhood of 12-2 government, usually caused by financial crises and major political crises (Overthrow of a democratically elected government). The L – Shaped Recession (Depression): Sharp recession, followed by years of stagnant growth (5-10 years) Stagflation, high unemployment of over 25 percent, and high crime rate.

Presently, we are faced with a global recession driven by the lethal COVID-19, the first medically induced recession in a century. This recession is characterised by; economic lockdown for months, social distancing, ban on gathering of more than 20 persons at time, closure of places requiring the gathering of large number of people (banks, companies, markets), ban on interstate travel, limited movement within cities, and functioning of limited essential activities – food markets, grocery stories, limited banking activities like ATMs, Online banking etc.

However, for SMEs to survive and thrive through this COVID-19 recession, they must; find creative ways to survive, conserve cash flow, adopt technology, follow the economic news, take cheap loans when available. Internally, they also need to have honest conversation with their staff about the economic situation. This requires payroll cuts, suspension, and temporary layoff.

In total, we have had 3 recessions and 3 depressions. They were driven by political instability and oil price collapse. This reminds us that we have been here before, and it is important to note, blue chip companies mostly are born during recessions and survivors become champions.

Now, over to you. If you’ve lost your job or closed shop to this pandemic induced recession, it may be a perfect time for digital transformation, self-discovery, corporate remodelling and self-development.  This is beyond luck and mere grace. Grace doesn’t help mentally idle people, neither do people whom it has sent for you. They are disguised in a robe called work. Get busy. The biblical mystery of capital is mathematical; it ministers seed to the sower not by miracle (but insights, people and ideas). It only multiplies the little you have that is at work. For those who have lost jobs, I saw to you that it is better if you are learning on a pay cut or at your client’ s office working for free than for you to be at home, waiting for palliatives. I still think that a bad economy is an opportunity in wolf’s clothing.

Also, always remember that panic is not a strategy. Stop being overly concerned. There’s a difference between circle of influence and circle of concern. The economy is the latter, focus on what you can influence. You may not stop the recession, but you can at least stop your depression. My friend, recession is not a good reason to not be awesome!

Let me end with this analogy of why the lion triumphs over others. The lion stumps its feet at the gang of buffalo, to determine the wounded, and attacks it out of the many. That’s how the universe works. The universe is known to attack the weak, don’t look like that, and exit the pity party. Get up. Recessions come and go. Don’t let it stop you. Ten years from now, your kids will either be eating or starving from the decisions you’re making today.  In the words of Nas and K’naan, “Difficulty is an excuse history never accepts”… Opportunities multiply only as it is used.  Get busy.

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