NIGERIA, a few days ago, entered its second recession under the present administration as official figures from the National Bureau of Statistics (NBS) showed that the Gross Domestic Product (GDP) contracted by 3.62 per cent in the third Quarter of 2020 with major sectors of the economy in deep slump. According to data from the World Bank, this could be the worst recession for Nigeria in 36 years. During the first recession in 2016, the GDP contracted by 2.1 per cent in the second quarter (Q2). This followed the -04 per cent recorded the previous quarter on account of the global crash in oil prices.
The NBS report explained that the recession was quickened because the performance of the economy in the Q3’ 2020 “reflected residual effects of the restrictions to movements and economic activities across the country in early Q2 in response to the COVID-19 pandemic.” No doubt, the EndSARS protests and the attendant destruction of public and private assets and businesses must have exacerbated the situation.
All of these adversely affected key sectors of the economy, including oil and nonoil sectors. The decrease in sales, erosion of profit margins, and escalation of production cost, and rising national debt must have contributed significantly to the recession.
There is no doubt that high inflation, unemployment, rising poverty and sharp drop in government revenue did not equally help matters. All these must have weakened the purchasing power of the citizens as businesses grappled with unfavourable government policies, institutional and regulatory challenges.
Also, experts have predicted that the recession could be very significant and potentially severe, a dire situation that will require a combination of fiscal and monetary measures to surmount. That is why the government should rejig the economy and stimulate growth. Though the current recession was long foretold, the slump in GDP was made worse by the COVID -19 pandemic that aversely affected economy. Therefore, overcoming the present economic crisis requires that all hands must be on deck. It also requires creativity and implementation of good economic policies by those in government. We urge the Federal Government to make use of our economic experts to get the country out of recession.
We also enjoin the government to do more to stimulate sustainable growth in key sectors and let the impact of such policies be felt. It is good that the government is aware of the present economic situation and is working hard to reverse the trend and restore the economy on the path of economic growth. According to the Vice President Yemi Osinbajo, and Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, the government will stimulate the economy by preventing business collapse and ensuring liquidity. It will also create more jobs through labour intensive sectors, such as agriculture and direct labour interventions.
In addition, there is urgent need for the government to undertake growth enhancing investments in infrastructure such as roads, rails, bridges, solar power. Let it implement projects that will encourage the growth of small and medium enterprises. Unfortunately, little has been heard of the implementation of the recommendations of the Presidential Economic Advisory Council to stimulate the economy. The government should do that now.
Besides, government must restore normalcy to Foreign Exchange (FX) market and key institutions in the international trade processes, like the ports system that should be more investment friendly. It must avoid frequent change in policy, which makes investors to be afraid of coming to the country. Let government give more tax cuts to promote business capital investment while encouraging local and foreign investments.
The Federal Government should take critical steps to diversify the economy and make the country less dependent on oil revenue. This is the time to start the exploitation of the nation’s abundant solid minerals. More than ever before, there is need to drastically reduce the cost of governance and free up funds for other sectors that need urgent interventions to support small businesses and production.
The government must avoid profligate borrowing, which has notched up the nation’s debt servicing burden. As a matter of urgency, every non-essential item in the proposed 2021 budget should be expunged forthwith. The government should strive to get the country out of the recession.