With two consecutive quarters of negative growth starting with -6.10 percent Q2 and then -2.48 percent in Q3, Nigeria is formally in a recession. As this is the second recession in a period of about 4 years, while there is an urgent need for a deep re-examination of monetary and fiscal policies, the crisis we have is beyond economic policies. We require an approach with a hybrid disposition combining mainly Economics, Science, Sociology, Politics and Law to rescue Nigeria from the litany of crises we are facing. A key weakness in policy making and economic management in Nigeria is the absence of a hybrid or integrated approach, an inherent unwillingness to appreciate how the interconnectedness of Economics, Science, Sociology, Politics, Law and other factors determine and influence economic outcomes.
Expectedly, with the announcement that we have entered recession again, there are litany of economic policy suggestions on how to rescue the economy. They include quantitative easing and more government direct intervention in development projects, reducing the cost of governance, increasing tax for some goods and services and segments of the society, reforming the port system and provision of critical infrastructure to enhance productivity and trade. Other suggestions include the need to open our borders, better and more transparent and stable management of our foreign exchange system and selling of government assets through privatization.
First, the urgent need to rejig and create an inclusive government by ensuring that all parts of Nigeria are equitably represented in key appointments of government. This will rekindle hope giving a sense of belonging and ownership to all Nigerian
While these suggestions are important and part of the solutions, they are insufficient given the lamentable and precarious situation we have found ourselves with many of the problems caused by poor and ineffective management of the economy and society. What we have now is beyond economics. Even if we focus on Economics, what we are suffering is far deeper and beyond recession. It has been described as the worst and worst situation since 1987.
According to the data from the National Bureau of Statistics (NBS), this is the second time in the past 30 years that we are experiencing recession twice in a decade. Using only economic evidence even shows that we have stagflation- a state of decreasing economic activity with rising inflation and unemployment. It is even beyond stagflation! Moving round Nigeria and interacting with Nigeria across different segments of the society especially the poor suggests that we are in a very deep depression! And this depression is beyond economic depression! It is a depression in all facets of our life and nation! We are in a psychological depression, political depression, social depression, religious depression, cultural depression, and security depression.
What caused all these? Expectedly, the government will quickly attribute our present situation to COVID 19. While COVID 19 is a factor, all it did is to open and exacerbate an already precarious situation. Just as we have suggested and counselled since 2015 when PMB took over, it is pertinent to deeply rethink Nigeria and provide solutions purely from an unquestionable patriotic disposition that appreciates our peculiarities and deep need for a hybrid approach. It is important to appreciate that treating a depressed man is sometimes beyond money.
Even extraordinarily rich people suffer depression. Why money is important, it is not the only solution. Nigeria is such a man that requires not only money but other factors to treat the deep-seated depression! Both the old and young are losing hope in Nigeria. While the rich and old are transferring significant parts of their wealth outside Nigeria, the young are transferring themselves to other countries evident in exponential migration. To move Nigeria forward and sustainably out of both recession and depression, the hope needs to be rekindled. It is the only approach that will lift the spirit of many Nigerians to create the much-needed enthusiasm and unity to move the country forward.
As earlier indicated, while the economic suggestions are important, they are not sufficient! They need to be complemented by – First, the urgent need to rejig and create an inclusive government by ensuring that all parts of Nigeria are equitably represented in key appointments of government. This will rekindle hope giving a sense of belonging and ownership to all Nigerians.
Second, while it is predicted that the current recession might end next year with positive GDP growth expected in Q3 or Q4, it will depend on how we handle other factors, particularly the political risks of the 2023 elections. For us to grow out of recession, we need both local and foreign direct and portfolio investments. As we know, investments only go where their safety and return on investments (ROI) can be guaranteed. What we do from now onwards particularly the two major political parties (PDP and APC) with regards to the zone that should produce the president will go a long way to lift us out of recession or deepen our crisis. If the presidency is retained in the North, then the recession and depression will likely continue. If the presidency is zoned to the South, it will help in creating an environment of stability to grow out of recession.
However, of the six regions, the one that will have the highest national positive socio-economic impact if the presidency is zoned to it is the South-East. It will send the right signal to both local and international investors that Nigeria is democratically maturing, united, and committed to sustainable economic development. With such a move, investors will be sure that their investments will be safe with stability guaranteed at least in the next sixteen years and more as it will be clear that the Presidency of Nigeria is deed and truth rotational between the North and South.
Third is the need to pursue devolution of powers particularly transferring some items from the exclusive legislative list controlled by the federal government to the concurrent and residual lists controlled by the states and local governments. This will help liberate our economy enhancing more private sector participation through the reduced regulation that can be achieved.
On the economic suggestions, one sector that is of utmost importance in creating a diversified economy and sustainable economic growth is Agriculture. With proper appreciation and utilisation of the opportunities in Agriculture, Nigeria should have nothing to do with recession with or without COVID 19. It is a sector that can give us over N20 trillion additional annual revenue with only N200 billion initial investment. Please note that I said over N20 trillion additional revenue which is almost double of our 2020 budget of N10.27 trillion. This will address our revenue problems, reduce insecurity through the millions of jobs that will be created and lead to a better exchange rate due to the massive foreign revenue that will be generated.
All that will be required to do is to clearly identify about ten economic trees that can generate about N25,000 annual revenue per tree and then mandate each state to plant a minimum of 20 million trees. Examples of such trees include Palm, Coconut, Soursop, Avocado, Guava and Bitter Kola. At a subsidised rate of N250 per tree, the 20 million trees will cost each state in Nigeria about N5billion and N180 billion for the 36 states.
Using improved seedlings that fruits after about three years means that each state in Nigeria will be able to generate about N500 billion every year which means additional revenue of about N18 trillion every year for Nigeria. In addition to the direct revenue that can be generated from selling the outputs as just raw materials, the value chain will be a magnet to foreign investors leading to more spill over opportunities and investments.
While Indonesia made about $18.4 billion from palm oil (about N7.2 trillion) in 2017, Nigeria’s encumbered 2020 federal budget is only N10.27 trillion! In the same vein, while India’s coconuts are valued at about $10 billion, Philippines $6.7 billion and Indonesia $4.5billion, the three countries account for about 60 percent of the $35.6 billion global coconut market. So, while Indonesia makes about $23 billion from just two economic trees- coconut and palm trees, Nigeria is planning to borrow about $1.2 billion from Brazil while searching for other borrowing sources!
Dr. Ngwu, is an Economist/Associate Professor of Strategy, Corporate Governance & Risk Management, Lagos Business School and a Member, Expert Network, World Economic Forum. E-mail- [email protected],
