BY EMEKA EJERE
With the Nigerian economy officially sliding into the worst recession in over three decades as announced on Saturday, it is now clear that the much touted efforts to avert same by the nation’s economic managers have failed and a lot more efforts needed to reverse the situation.
The National Bureau of Statistics (NBS), Gross Domestic Product (GDP) report for the third quarter of 2020 had shown that Nigeria’s economy contracted by 3.62 per cent to record its lowest growth rate in 33 years.
Business Hallmark’s checks reveal that the last time Nigeria had this magnitude of economic decline was under the regime of Ibrahim Babangida, when the economy recorded consecutive decline of 0.51 per cent and 0.82 per cent in first and second quarters of 1987.
This is also the second recession under the President Muhamadu Buhari’s democratic reign, the first being in 2016, and the fourth under him as head of state. An economy is said to be in recession after contracting for two consecutive quarters
Disaster waiting to happen
Buhari had while presenting the N13.1 trillion budget for 2021 with a deficit of N4.8 trillion that will be financed mainly by borrowing, said the country’s economy may slip back into another recession in the third quarter of 2020.
“GDP growth is projected to be negative in the third quarter of this year. As such, our economy may lapse into the second recession in four years, with significant adverse consequences,” Buhari had said.
“However, we are working assiduously to ensure rapid recovery in 2021. We remain committed to implementing programmes to lift 100 million Nigerians out of poverty over the next 10 years,” he added
Buhari said the Nigerian economy was currently facing challenges with the macroeconomic environment being significantly disrupted by the Coronavirus pandemic.
“Real Gross Domestic Product (‘GDP’) growth declined by 6.1 per cent in the second quarter of 2020. This ended the 3-year trend of positive, but modest, real GDP growth recorded since the second quarter of 2017,” the president said.
The Minister of Finance and National Planning, Zainab Ahmed also shared the same sentiment in August 2020. Ahmed said unless Nigeria achieves a very strong third quarter 2020 economic performance, the country may slide into recession.
“Nigeria is exposed to spikes in risk aversion in the global capital market, which will put further pressure on the foreign exchange market as foreign portfolio investors exit the Nigerian market,” the minister said.
“Nigeria’s Q2 GDP growth is in all likelihood negative and unless we achieve a very strong Q3 2020 economic performance, the Nigerian economy is likely to lapse into a second recession in four years with significant adverse consequences.”
Also, the World Bank predicted that the collapse in oil prices coupled with the COVID-19 pandemic was expected to plunge the Nigerian economy into a severe economic recession, the worst since the 1980s.
The report, “Nigeria In Times of COVID-19: Laying Foundations for a Strong Recovery,” estimated that Nigeria’s economy would likely contract by 3.2 per cent in 2020.
It stated that this projection assumed that the spread of COVID-19 in Nigeria would be contained by the third quarter of 2020.
“The macroeconomic impact of the COVID-19 pandemic will likely be significant, even if Nigeria manages to contain the spread of the virus”, the report stated.
“Oil represents more than 80 per cent of Nigeria’s exports, 30 per cent of its banking-sector credit, and 50 per cent of the overall government revenue.
“With the drop in oil prices, government revenues are expected to fall from an already low eight per cent of GDP in 2019 to a projected five per cent in 2020.
“This comes at a time when fiscal resources are urgently needed to contain the COVID-19 outbreak and stimulate the economy.”
Before COVID-19, the Nigerian economy was expected to grow by 2.1per cent in 2020. What it means is that the pandemic has led to a reduction in growth by more than five percentage points.
Economy in a hole
But in a telephone interview with Business Hallmark, a frontline development economist, Barr Fred Nzeako, argued that the nation’s economy never really exited recession as all the signs of economic recession have been there contrary to government’s claims, hence the glaring socio-psychological impacts everywhere.
He expressed fears that what has happened now is that the economy has gone deeper into recession, describing the situation as terribly bad and Nigerian economy as one on autopilot.
“Nigeria never really exited recession because we’ve been living with all the signs of economic recession and you can see the socio-psychological impact here and there”, Nzeako said.
“What has just happened now is that we have gone deeper into recession.
“If you don’t know what it means for a country to be on autopilot that is exactly the situation that Nigeria has found itself today.
On whether there is still hope for the common man, Nzeako said, “There is no hope for the common man really. You have a government that has no programmes, no policies.
“The only programme this government has is to borrow and you’re not seeing what the money is being used for; and the debt keeps mounting.”
The finance minister recently disclosed that the total public debts of Nigeria is projected to hit N38trillion by December 2021.
Corroborating Nzeako’s position, a former president, Chartered Institute of Bankers of Nigeria (CIBN), Mr. Okechukwu Unegbu, said he had always been of the view that the economy never exited recession as claimed by the nation’s economic managers.
Unegbu told Business Hallmark that an economy cannot be said to have exited recession with all the economic indicators pointing negatively.
He said, “We were never out of recession because all this while, all the economic indicators were still pointing negatively.
“So, now that they’ve announced that Nigeria is in recession, it means we’re in deep hole.
Unegbu lambasted the governor of Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, who he said is not managing the economy but playing politics.
“It is unfortunate that the CBN governor is aligning himself with politicians. In fact, he’s playing politics, he’s not managing the economy”, Unegbu fumed.
Before now, Unegbu had cautioned that to achieve the much needed growth, the federal government needed to create more jobs, support the growth of Small and Medium Enterprises, and keep inflation under control.
“Economic growth is still low, and inflation rising. But diversifying the economy could help government achieve the desired growth,” he had advised.
According to recent Consumer Price Index (CPI) report released by the NBS, Nigeria’s inflation rate rose to 13.22% in August 2020, the highest recorded in 29 months, since March 2018 when it was 13.24%. Similarly, the nation’s unemployment rate rose to 27.1% in the second quarter of 2020, according statistics from the NBS.
However, the United Kingdom Trade Envoy to Nigeria, Helen Grant, has said that Nigeria was the fastest growing economy in Africa. Grant was speaking on Saturday at the two-day Nigerian Diaspora Investment Summit (NDIS) organised by Nigerian in Diaspora Commission (NiDCOM), in collaboration with Nigeria Diaspora Summit Initiative (NDSI).