Nigeria path to second recession in less than four years
By Oludare Mayowa
Nigerian economy declined by 6.1 percent in the second quarter of 2020, compared with 1.87 percent growth achieved in the first quarter of the year, according to the National Bureau of Statistics (NBS) report.
The decline in the economy was much expected considering the impact of the outbreak of the coronavirus pandemic, which disrupted productivities for the better part of the second quarter across the country.
However, beyond the impact of the disruption on economic activities due to the lockdown imposed by government to contain the spread of the disease, the effect of the disease on the global economy also spilled over to Nigeria.
For instance, the disruption in the global supply chain impacted negatively on demand for crude oil, which is Nigerian mainstay, cutting revenues by more than 60 percent and forcing the country to resort to borrowing heavily from both external and domestic sources to bridge its budget gap.
Equally devastating was the impact of the lockdown on the private sector as most companies resorted to remote operations, while the bulk of businesses were shut down, cutting jobs and revenues projections for the period.
In spite of the wide publicity given to the distributions of palliatives by the various levels of governments, the majority of Nigerians did not benefit from the so-called support from the government, which further worsen the conditions of average Nigerians.
Also, the economic stimulus package introduced by the government to alleviate the impact of the disruption hardly get to the desired target as government officials at various levels and highly placed individuals hijacked the entire process while the majority of those who such support was meant for could not access it.
In nearby Ghana, the economy also shrunk in the second quarter by 3.2 percent, which was better than what was achieved in Nigeria.
Ghana is outperforming Nigeria in many fields because its government seems to be more responsive to the need of the people and systematically working the economy to benefit more people and bringing more people out of poverty.
Already many analysts are projecting that Ghana economy would rebound in the next quarter and achieve growth at the end of the year, while Nigeria’s Gross Domestic Product (GDP) is seen shrinking further in the third and fourth quarters of the year.
Even at 6.1 percent decline in the second quarter, the Nigerian economy is technically in recession, though recession is defined as a country’s economy declining in two quarters in a row.
The hope of Nigeria rebounding in the third quarter is deemed in spite of the opening up of the economy after about three months lockdown imposed by the government and the return to economic activities due to the flip flop of government policy and the imposition of more hardship on the populace through increase pricing on food and other essentials.
The Central Bank of Nigeria (CBN) has devalued the nation’s currency twice this year by around 20 percent in its bid to conserve dwindling foreign exchange reserves and curb speculations on the local currency.
Despite the various restriction also imposed on allocations of foreign exchange to certain importations of some items to boost local production, the CBN continued to ration dollar sales to even the few economic agents that needed the resources to procure raw materials and machinery to revive production.
Many foreign investors who had earlier dumped Nigerian debt and equity in the face of poor economic outlook have not been able to buy dollars to exit the country, piling up backlog of demand for hard currencies and exacerbating the currency crisis in the country.
The CBN had in a bid to stimulate productivities in the country introduced various intervention funds at a single-digit interest rate, however, access to such facilities had become like a camel passing through the eye of the needle.
Nigeria’s main challenges today are huge corruption, which has become a way of life despite the mouthing by the federal government of fighting corruption. There is no sector of the economy that has been spared as the ease of doing business has continued to get complicated daily with bureaucratic bottleneck, huge corruption by public officials and rent-seeking by influence peddlers in the corridor of power.
In a position paper by the think-tank group, Nigerian Economic Summit Group (NESG), they accused the CBN of lack of transparency in the allocations of the foreign exchange resources and even its intervention fund was seen as also fall short of the required best practice.
Though, the regulatory bank has debunked the claims by the NESG and accused the group of having sinister motive in pushing out such position paper, from investigations the CBN has not put in place proper checks and balances to ensure that its intervention fund gets to the real target.
Investigations showed that many of those who access its anchor borrower funds are not genuine farmers but middlemen, who hijacked the process as a result of their connections in high places. Also, the default rate on the fund being given out by the CBN has reached over 65 percent since inception and many of the funds may not be recoverable, according to multiple sources.
The bank has not been able to publish its statement of account and financial reports for two consecutive years, 2018 and 2019, and not in the least worried about transparency and accountability.
Besides this, government imposition of additional burden on the populace irrespective of the recent hike in the pump prices of fuel and the introduction of the so-called reflective tariff on electricity consumption will sure worsen the plight of many Nigerian struggling from the impact of the lockdown imposed to contain the spread of covid-19.
From the data of the NBS, the consumer inflation rate has continued to surge month-on-month and is expected to rise further in the coming months, which could further worsen the living standard of the majority of the people.
What should the government do to alleviate the suffering of Nigeria and bring back the economy on the path of progress?
The government should be sensitive to the cry of the masses for a reprieve rather than its officials beating its chest over innocuous achievement by the five years old government of President Mohammadu Buhari.
It’s not the time to beat their chest; they were not elected to sing praised themselves when the majority of Nigerians are suffering under a debilitating economic hardship while its officials live in opulent.
The president and his team should roll up their sleeve and go back to the drawing board to review their modus operand and ensure that whatever efforts they are putting in salvaging the economy measure up to the desired outcome.
Right now, the outcome of their efforts remains abysmal as the majority of Nigerians are not feeling the government while those who can jump the ship are fast moving out of the country daily to greener pasture.
The government should look into the mirror and reflect on the true meaning of their so-called achievement visa verse the impact on the people.
If Nigeria again enters another recession for the second time in four years, getting out might be very tough and the impact on ordinarily Nigerians would be excruciating, paving way for a possible social upheaval. So it’s time for the government at all levels to wake up from their illusion and focus on doing the right thing for the good of the majority.