An economic recession is typically defined as a decline in gross domestic product (GDP) of a country for two or more consecutive quarters. It is often characterized by high inflation, business decline, lower revenue, higher unemployment, less consumer spending amongst others.
Several factors had led to the recent economic recession in Nigeria, but a key factor was the sharp and continuous decline in crude oil prices since mid-2015. This led to a fall in oil revenue and foreign exchange earnings by over 60 percent, coupled with a failure to diversify the sources of revenue and foreign exchange in the economy
Nigeria suffered greatly from the shock of oil prices because the economy did not have any other significant source of revenue to support the decline from oil export. The challenge was further aggravated by the sabotage of oil export terminals in the Niger Delta, which further reduced government revenue and export earnings. The volume of government spending was equally constrained by lack of fiscal buffers to absorb the shock, as well as leakages of public resources due to corruption and inefficient spending in the recent past. The drop in oil prices triggered capital outflows and then a loss in value of the Naira leading to an increase in the price of imported goods and services.
The Economic Recovery and Growth Plan (ERGP) eventually was unveiled to save the nation from total collapse. Following a 0.11 percent increase in GDP in the year 2020, the CBN declared that Nigeria has finally exited the period of economic recession. As of the second quarter of 2021, the National Bureau of Statistics (NBS) revealed that the Nigerian economy has recorded a 5.01 percent growth in real GDP while the economy is projected to grow by 2.9 percent in the year 2022.
From one thing to the other
In the year 2019, the current administration decided to adopt some protectionism measures in a bid to encourage domestic production by closing the major borders of the country. Although the borders have been partially reopened, other protectionism measures such as restriction of import quotas, limited access to foreign currencies, increased trade tariff still remain at large. The policy led to an increased rate of inflation in the commodity market, as local production have not been able to meet up with the huge level of domestic demand. The average inflation rate for the year 2021 has risen to about 17 percent as against 11.02 percent prior to the period of border closure which implies that the spillover effect of the border closure still remains at large.
In the year 2020, the economic situation of the country was further aggravated by the outbreak of the Covid-19 pandemic. Like the rest of the world, the impact of the Covid-19 pandemic was greatly felt by Nigerians following a lockdown that started in March 2020. By December 2020,
Nigeria entered the second wave of the pandemic which led to a spike in the numbers of people infected. In order to curtail the spread, the government restricted social gatherings of any kind as schools and offices were closed and religious gatherings were temporarily banned. By January, 2021 various research institutions had started rolling out the vaccine they discovered to be the long awaited answer to the dreaded pandemic. Following the roll out of the vaccine in batches, Nigeria gradually eased movements and reopened its borders.
At the end of the pandemic, the Nigerian naira was exchanged for N361 per dollar and more recently to N413 while inflation rate increased to 17 percent and the low demand for oil as a result of the restricted movement further reduced oil production and export thus consequently reducing the level of revenue generated. Various fiscal and monetary policies were introduced to cushion the effect of the pandemic. Despite all these interventions, empirical and statistical evidence still reveals that Nigeria is yet to fully recover from the economic shock of the Covid-19 pandemic which threw the nation’s economy off balance.
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GDP rises but many continue to grumble
The use of GDP as a real tool of economic measurement has remained questionable overtime. Economists have come to a conclusion that a rising GDP does not automatically equate a better standard of living. Recently published research works and data from viable sources attests to this fact. For instance, in the aspect of food security, the Nigerian populace still largely faces severe difficulty in meeting their food needs like never before as incessant attacks by Jihadists and bandits have continued to threaten the performance of the agricultural sector. For instance, a Nigeria Living Standard Survey carried out by the (NBS) revealed that in the last 3 years, many households in Nigeria have been affected by negative life events as more than 37 percent of the household sector are being exposed to the rising inflation in the food market. While 46.5percent of the populace was discovered not to have any coping strategy to curtail the effects of food inflation, 11.7percent resorted to reducing their level of food consumption.
The average inflation rate for the year 2021 has risen to about 17percent as against 11.02percent in the year 2019. It is also projected that the persistent rise in inflation is not expected to reverse at least not in the short run as the Nigerian government recently revealed its intention to remove fuel subsidy by the year 2022. This has generated a lot of reactions by Nigerians who see the move as an avenue to further worsen the economic situation of the country. Also, the recent discovery of the Covid-19 Omicron variant is not providing enough evidence that life will get better in Nigeria as many countries have resorted to close their borders. Depending on the rate of spread, Nigeria might also follow suit.
In the aspect of poverty reduction, there is no evidence that a rise in the growth of GDP has translated to a reduced rate of poverty reduction in Nigeria. For instance, the research report of the World Bank submitted that over 45percent of the Nigerian populace will live in extreme poverty by the year 2022 as against 38 percent in the year 2018. The World Bank has also allayed fears that by the year 2023, the pandemic and population growth would raise the level of poverty to almost 100million. While another report by Brookings Institutions, estimated that the poverty rate in Nigeria will continue to increase by 6 people every minute.
Furthermore, the upward trend of the rate of unemployment and increased rate of migration in search of greener pastures also points to the fact that Nigeria has not made much economic progress. As it stands now, Nigeria is also having its fair share of “The great resignation” a concept that explains the widespread of job resignation after the Covid-19 pandemic.
In the aspect of infrastructure, a report by “The Economist” one of the world’s leading research organisations also reveals that “electricity blackouts are maddeningly frequent; roads are often poor while ports remain clogged up”. For exchange rate, “The Economist” maintained that businesses are neither getting a stable currency nor are they getting access to dollars despite all the unorthodox controls.
It has been reported overtime that Nigeria’s economic growth is witnessing significant turnaround but this assertion largely remains questionable as both empirical and numerical facts say otherwise. This implies that beyond face value growth, the government needs to embark on massive economic reforms by employing the best capable hands; more expansionary fiscal and monetary policies need to be put in place to attract investment and the government should be bold enough to embark on massive economic reform through fiscal federalism.
