Nigeria in economic recession

The federal government last week acknowledged what every discerning Nigerian knows already.
Finance Minister, Kemi Adeosun, told the Senate on Thursday, July 21 that Nigeria is in technical recession and struggled to allay public fears about the implication.
Her attempt to qualify the recession by injecting the word “technical” did not help to deodorise the precarious economic situation. Nor did her assurance that there should be no panic because “the economy is in good hands and we are absolutely doing our best.”
An economy is in recession when it records two consecutive quarters of negative economic growth measured by Gross Domestic Product (GDP).
In the past one year, there has been a significant decline in activity across the economy ranging from industrial production, employment, real income to wholesale-retail trade.
Two days before Adeosun’s bombshell, Central Bank of Nigeria (CBN) Governor, Godwin Emefiele, painted a scarier picture when he told senators in a closed-door meeting that the economy was suffering from stagflation.
Stagflation means little or no growth in an economy and relatively high unemployment, accompanied by rising prices.
Simply put, Nigeria’s economy is buffeted by hyperinflation and a very steep decline in GDP.
Emefiele lamented that the economy was gloomy, stagnant and worsening. He warned that if the trend continues, the government may not be able to pay salaries from October.
Agreeing with the projections made by both Adeosun and Emefiele, the International Monetary Fund (IMF) last week released on its website forecast on Nigeria in its latest World Economic Outlook (WEO) titled: “Uncertainty in the Aftermath of the UK Referendum.” Again, it was a miserable picture.
The nine-page report revised Nigeria’s GDP growth forecast for this year downwards from 2.3 per cent in April to -1.8 per cent, the lowest in 29 years.
It also forecasts a 1.1 per cent growth for Nigeria in 2017, down from 3.5 per cent it made in April.
“In Nigeria, economic activity is now projected to contract in 2016, as the economy adjusts to foreign currency shortages as a result of lower oil receipts, low power generation, and weak investor confidence,” the report said.
On Monday, July 18, the National Bureau of Statistics (NBS) also disclosed that Consumer Price Index (CPI), which measures inflation, rose 0.9 per cent to hit 16.5 per cent in June, the highest in 11 years. It was 15.6 per cent in May.
That was the fifth consecutive month that the headline index had risen.
It is frightening that all the economic indices are steadily heading south. For instance, GDP growth contracted to -0.36 per cent in the first quarter of this year (Q1 2016) compared to 2.11 per cent in Q4 2015 and 3.86 per cent in Q1 2015.
The most frightening thing is that other than blaming the administration of former President Goodluck Jonathan, which admittedly was a disaster, the Buhari government seems not to have a clue as to what to do to reverse the gloomy economic trend.
While it is true that the over 70 per cent decline in oil price from about $116 per barrel in June 2014 to about $30 per barrel earlier in the year has not helped matters, Nigeria is not the only country facing the same challenge.
Unfortunately, while Adeosun is upbeat that things will get better, none of the measures she marshalled out seems to be the key.
While discipline regarding how public money is spent and declaration of war against waste is the right thing to do, it will not pull the economy out of recession.
For the economy to regenerate, wealth must be created. To do this, there must be increased productive activities. Industries must be up and running to create employment and put money in the hands of Nigerians and enhance their spending power.
The government ought to declare a state of emergency and give the economy the attention it requires. There is no sense of urgency and one wonders whether the economy ranks high in Buhari’s priorities despite the protestations to the contrary.
As we noted in an editorial in April, what is required in circumstances like this is creative financial engineering. The government must think outside the box which was what United States President, Barack Obama, did when he assumed office in January 2009.
Unfortunately, the Nigerian government has not exhibited any inclination towards that. Buhari, being a president frozen in time, has not seen the need to adopt 21st century economic policies in solving 21st century economic problems.
He would rather stick with 20th century economic policies, the ones he is comfortable with.
There is need to have an economic team of well-tested economic pundits. Nigeria is not lacking in such human resource; turnaround economic artists.
It is not only reduced oil proceeds that has put economic activity in Nigeria in jeopardy. The most potent threat to economic rebirth is the politics of sharing which has triumphed over cake-baking and job creating policy.
Both the federal and state governments must agree that as long as everybody heads for Abuja at the end of the month to share ever dwindling revenue, Nigeria’s economy will remain in a pit.
For too long, both the leaders and followers have lived in a fool’s paradise. The looming economic disaster may well be a wakeup call.