What Nigerians did to survive recession in 2016

For many Nigerians, 2016 is the year they faced real economic hardship for the first time in their lives. The country fell into a recession with 27 of the country’s 48 economic sectors recording negative economic growth, plunging the whole economy into a recession.

The last time that the country faced a recession was in 1984 and for many adult Nigerians, this is the first time they have struggled to feed themselves and their families.

The evidence of a recession is seen in the sharp rise in the prices of goods and services, with many food items doubling in price. The price of rice, a Nigerian staple, has risen from about N10, 000 a bag in December 2015 to a current average of N20,000 a bag. Prices of garri, bread, grains, and all staple foods in the country have gone up by an average of 50 percent, forcing many Nigerians to re-order their feeding regimes.

The situation has been made worse by massive job losses experienced in the year. With unemployment rate at a current all time high of 13.8%, an estimated 1.7 million Nigerians have lost their jobs in the nine months ended September 2016, according data from the National Bureau of Statistics (NBS). The job losses have cut across sectors but the manufacturing, construction and the oil and gas sectors have felt the brunt more.
Faced with rising cost of living and stagnant incomes, many Nigerians have had go creative to survive. They endeavor to boost their incomes or cut down their expenses, or both.

A resort to ponzi schemes has been one of the most prominent ways many Nigerians have had to turn to boost purchasing power. More than ten different ponzi schemes are currently operational in the country. MMM, the most popular, which collapsed this month, had an estimated three million Nigerians in its net.
The scheme, which promised returns of about 30 percent in a month, which is an average of 360% per annum, soon caught fire among Nigerians who saw it as a “quick fix” for their dwindling incomes.

“I had to invest in MMM to boost my income even though I knew it was risky. I invested N100, 000 into the scheme and got N130, 000 after one month. Which bank can give me that return? I needed the money and MMM helped,” said Bola, one of those who invested in the now crashed ponzi .

For many who participated in MMM, it was just a matter of survival and a means to simply raise the needed cash to meet their obligations.

“I am embarrassed and a bit ashamed to say that MMM paid for me. You see, I am a “smart” girl and I know without a doubt that this scheme has elements of fraud. I mean, how do they magnify money in under a month? Something isn’t right. But all that is water under the bridge.
I did it, it paid me a higher amount than I put in and I think I will do it again,” another person who participated in MMM told BuisnessDay, when MMM was still active.

Nigerians also turned to gambling to boost their incomes, as suddenly, football, a passion of most Nigerians became more than just a passion and in 2016 also became a means of boosting weakening incomes.

“Daily bets have surged to N15 billion cumulatively across all the betting companies this year (2016),” Wale Okin, a representative of Nairabet, the oldest betting agency in Nigeria, told BusinessDay recently.

“Many are beginning to see this as a source of daily bread and it is not uncommon to see people appropriating a certain amount for betting daily, weekly or monthly, as the pressure on their wallets mount,” Okin said, adding that “More people will partake if there’s no dramatic change in their economic situation.”

Pay Day loans have also increasingly become a means of survival for many in 2016. Unlike before, when Nigerians borrowed to travel for summer holidays out of the country, this time, they borrow mainly to pay school fees or invest in business.

“What customers are borrowing to do have changed remarkably over the last two years,” Graham Lee, chief executive officer of consumer finance institution, RenMoney, with a client base of 25,000 people, told BusinessDay in a recent interview.

“If you look at July 2014, you could see a number of people borrowing money for overseas trips. Two years later, the same people are borrowing to pay school fees and fund education. There is always need for funding but what they would use that funding for changes with the state of the economy,” Lee said. Adding that, “What we have seen in recent months is a large increase in number of clients applying for loans.”

The total loan sales of RenMoney rose 511.6 percent to N685 million in August 2016 from N112million in January 2015, the company said.

But some other Nigerians also stayed within their tradition sources of investment to boost their incomes. To beat the economic recession, Jide Martins, a banker took advantage of the high yields on sovereign debt instruments, especially Treasury Bills, to boost his weakening income.
This is as the yields on Treasury Bills soared as high as 18 percent, the highest in two years, according to Central Bank of Nigeria data.
This means that for a N100,000 investment, Jide was getting as much as N18,000 in returns every year, a far better return than could be gotten from any savings account, especially since it is also risk free.

Some Nigerians also took to exports of their services or agro-products to the international markets to earn dollars and make huge returns selling their dollar proceeds at the parallel market.
Although they did this covertly, given that exporters were mandated by the CBN to route their dollar proceeds through official channels. BusinessDay findings showed that Coacoa farmers in Akure were diverting some of their dollar proceeds to the black market to boost their naira earnings.
BusinessDay Research and Intelligence Unit (BRIU) also did a report that found evidence that Nigerian exporters are increasingly routing exports through informal channels to boost their naira incomes.

But for Nigerians who could not boost their incomes to sustain their current lifestyles, they had to cut down on their expenses in the face of the weakening purchasing power. Expensive education took the biggest hit, as many parents withdrew their children from foreign schools and also from local schools regarded as expensive.
Returnee students from foreign universities tend to have a preference for private Nigerian universities, some of which have been growing in stature over the years.

“I have personally encountered parents who chose to bring their wards back to Nigeria, primarily because of the recession and limited access to dollars. They found Babcock a safe place, as well as having facilities comparable to schools in the global North” said Augusta Olaore, Head of Department, Social Work and Human Services, Babcock University, Ogun State.

Olaore added, “coincidentally, my office is charged with the responsibility of receiving and integrating international students through our International Student Care Unit. We have received a significant number of applications from students resident outside Nigeria and a good proportion have been offered admission and accepted.”

The change in education status also affected low-income earners.

Chibueze Mere and his wife Vivien, a middle class family told BusinessDay that they had to withdraw their two sons from a mission school to a public school in Egbu area of Owerri. He said: “I can’t continue with the fees; it is not too high, but our family business has gone down.”

But David Okonji, a middle-aged man living in one of the Lagos suburbs and working as a clearing and forwarding agent at the Tin Can Island Port, also told BusinessDay that he has withdrawn his three children from a high-paying private school in Lagos, to public schools and forced all of them (girls) to be going to the barber to have hair cut, instead of visiting the salon every weekend for hairdo at much higher cost.
Also, the three children now go to school with one lunch box unlike before when everybody had her own box with an accompaniment of fruit juice.

 

BY OUR REPORTERS