By Omoniyi Salaudeen
There is no reprieve yet from the multiple challenges foisted on the global economy by COVID-19 pandemic. Nigeria, as a player, has had more than its fair share of its damaging effects both in terms of causalities, as well as socio-economic sphere.
According to the National Bureau of Statistics, the nation’s economy slid into recession following the 3.62 per cent contraction recorded in the third quarter of 2020. It also put the cumulative GDP for the first nine months of the outgoing fiscal year at -2.48 per cent.
This is the second recession to be experienced under President Muhammadu Buhari-led All Progressives Congress (APC) administration. The first happened in 2015 immediately after he took over the mantle of leadership, but the country managed to come out of the woods sooner than expected. This time around, going by the World Bank projection, the economy might be in for the most severe recession in almost 40 years due to the combined effect of oil price instability and the second wave of the Coronavirus disease.
Therefore, the conversation now is how soon Nigeria can get itself out of recession? Already, the CBN has assured that the economy would pick up again by the first quarter of 2021 based on the performance recorded in the third quarter of the fiscal year.
The CBN governor, Godwin Emefiele said: “A sectoral assessment of economic activities in the third quarter indicates that the economy witnessed positive growth in key sectors such as Information and Communications Technology, Agriculture, Health, Construction, Finance and Insurance and Public Administration.
“With sustained implementation of our intervention measures, we do expect that the Nigerian economy could emerge from the recession by the first quarter of 2021, due to high frequency data that indicates continued improvements in the non-oil sector of our economy. We also expect that growth in 2021 would attain 2.0 per cent.”
The CBN boss further explained that the agricultural sector had continued to record positive growth supported by productivity gains in the sector, interventions by the government, and improved demand for local produce.
Some economic experts are, however, quick to pick holes in the CBN analysis, saying it does not reflect the reality of the impact of the security challenge in the country on farming activities.
Dr Tayo Bello, an associate Professor of Law and Development Economist, Babcock University, Ilisan, Ogun State, speaking with Sunday Sun in a telephone interview, disagreed with the postulation for lack of analytical data.
He said: “We are not honest with ourselves. The government is not honest, the citizens are not honest, the policy makers are not honest, the regulators are not honest. We are only deceiving ourselves. Where are the parametres that will take us out of recession next year? There is no economy that can come out of recession when there is insecurity. How do we increase the GDP in an atmosphere of insecurity? The productivity level across all sectors has gone down. Go to Northwest, there is problem of banditry and kidnapping, among others. Go to Northeast, Boko Haram is ravaging them there. And this has come down to some parts of the Southwest.”
But in a sharp reaction to the criticism, a renowned Economist and former President of the Nigerian Institute of Bankers (NIB), Prof Segun Ajibola, said that the issue of threat of insecurity to farming activities was over exaggerated, adding that “we don’t have the full facts about farmers not going to farm.”
His words: “The fact that we have an incident in Borno State is not enough to make a generic statement that farmers are no longer going to their farms. Don’t forget that subsistence farming is still a major practice in Nigeria. So, farmers need to go to their farms to even survive, feed their families and earn income. Farmers are struggling everywhere to remain in their farms. I don’t think the threat has got to a level where we can say that farmers are no longer going to their farms.
“What has affected agriculture this year is the COVID-19 lockdown during the planting season. Traditionally, the planting season is between March and June. Poultry farming was also affected by the restriction of movement of people and equipment. Besides that, there are also a few places where they complained about the weather. The rain came late in most places. These are significant factors that have affected agriculture in 2020. And, of course, effects of herdsmen/farmers clashes also had a major impact.”
According to him, if the performance recorded in the second and third quarters of 2020 is replicated in the fourth quarter and the SMEs take full advantage of the stimulus packages coming from the CBN and other government agencies, Nigeria would be on its way out of recession.
He argued: “Nigeria can exit recession in the first quarter of next year. This is based on the fact on ground, bearing in mind the performance of the economy from second quarter till date. In second and third quarters, there was a tremendous improvement from negative 2.8 to negative 2.0. That was a mark improvement. If we can replicate that in this fourth quarter, then we will be near positive. And if the trajectory continues, it means will be out of recession by the first quarter of 2021.
“Not only that, if all the measures already put in place to stimulate the various segments of the economy are well utilized, there is the possibility of exiting the recession by the first quarter of next year. Already, there are lots of incentives coming from the Central Bank, Federal Inland Revenue Service, and other organs of government to ensure that businesses pick up again. If we don’t lower the guard, definitely, we should be out of recession by the first quarter of next year.
“However, we have to bear in mind that a new wave of COVID-19 is in town. That particular projection was made based on the presumption that the pandemic had been overcome. But with what is happening again now, there are fresh fears of another lockdown which is already having its ripple effects. Countries are banning UK from flying into their countries. And if you look at the relationship between Nigeria and the UK, we are big trading partners to each other. That is a major factor that will cause a lot of setback to the projection we have on ground. We just hope that the new wave will not have much telling effect; otherwise, it will throw everything off balance.”
Dr Bello, while expressing disagreement with Ajibola’s submissions, raised a number of posers, saying: “How many people have benefitted from the so-called stimulus packages they are talking about? Everything is just on paper. Majority of Nigerians have turned to beggars. Is it a government that cannot give palliatives during the lockdown that you will now expect to fund the economy?”
Suggesting ways to get the country out of recession, he posited: “For an economy to exit recession, it needs massive funding. Do we have the money to fund the economy? Have we not been borrowing? Check the statistics and data from various banks; you will discover that there is liquidity crunch. Don’t you see what is going on at the stock market? Don’t you see what is going on at the forex market? For us to leave recession, we will be talking of massive spending of money in various sectors. Don’t you see the deficit budget they prepared for 2021? World Bank just approved about $1.5 billion for Nigeria to finance certain things. We borrow money for everything.
“For us to come out of recession, government must be ready to cut down unnecessary spending drastically. They need to pump more money to reinvigorate the economy. We don’t have statistical figure to show that we are coming out of recession. My fear is that if the recession is consistent, we might go into depression.”
Regardless of the fresh challenges posed by the second wave of COVID-19, Ajibola maintained a cautious optimism that Nigeria’s economy would pick up next year especially with the current global price of crude oil.
“At the level of individual, everybody should try and see how to remain economically active. Even at the heat of pandemic, those who decided to be active were able to make a good living. At individuals’ micro level, people diverted to making of face masks, sanitizers, soaps and other safety gadgets.
“Small scale entrepreneurs should take advantage of the various incentives that are being rolled out and see how they can key into the economic empowerment. By so doing, I think we will all be able to overcome the problems posed by the current challenges.
“The benchmark for 2021 budget is $40 per barrel. If the current price of the crude oil in the international market is sustained, then it is something positive for the country. The impact will be positive because we would earn more than it is already projected. But again, we have to pray that the resurgence of the pandemic will not hit the global oil market so that we won’t see the kind of impact we saw during the first wave of the virus,” he said.
Senator Ayo Arise, also speaking in the same vein, said that the economy would expand in 2021 once the world is back on its feet with discovery of vaccine for the dreaded virus.
“In America and Europe, the global economy will begin to improve again, factories will start to operate, vehicles will begin to move on the road, and other activities will pick up. Once that happens, our mono-product, petroleum, will also sell more. When you look at all these indices, it is certain that the economy will begin to grow. This is more so with a number of measures introduced by the CBN. If those who benefitted actually invested those funds in the economy, the only thing to expect is an improvement in the economy, in productivity, especially in agricultural sector,” he said.
All the same, Senator Rufai Hanga, could just simply not see how the positive forecast would come to pass.
“There is no indication whatsoever to show that Nigeria can come out of recession any time soon. People in government continue to talk like this because we don’t care to know what brings about recession and how to get out of it. When they said Nigeria would get out of recession in the first quarter of next year, what and what did they say would happen? Are we going to start manufacturing and exporting? Are we going to stop importing? Are we going to stop exporting raw materials and importing finished products? What magic will they do? How are we going to boost agricultural production when farmers cannot farm? In Borno, they killed the farmers and burnt their rice farm. So, what do you expect to happen? Nobody should mind the Central Bank governor,” he declared.
As the world anxiously awaits the arrival of the New Year to usher in a fresh era of abundance and life security, the debate is still raging as to what the coming fiscal year has in stock for the already traumatized Nigerians.