It is all but official: Nigeria is in a recession. The economy is expected to return a negative GDP growth rate for the second quarter of 2016 to make it two successive quarters of economic contraction. Data released by the National Bureau of Statistics shows the Consumer Price Index, used to measure inflation, rose by 0.9 per cent to 16.5 per cent in June, the highest in more than a decade. All the essential ingredients for a recession are in place, and the country must now chart what is sure to be a tortuous path to recovery.
The impacts of an economic recession will be most felt by Nigeria’s middle and lower class citizens, the masses for whom the effects are both apparent and ominous. The naira in the hand of the common man is now worth less than before, and there is not enough of it in circulation. The prices of essential commodities have skyrocketed in recent months. Jobs are harder to come by, and in some cases being lost.
Too much time has already been spent on the meaningless arguments about how Nigeria arrived at the point of economic mess it now is. Not because a debate is not in itself entirely irrelevant, but because positions are often taken and opinions held based on political leanings. Anyone who needs an extra lecture on how Nigeria arrived here in the first place can find a copious number of balanced articles and reports on that. There is no time to prevaricate on the true state of Nigeria’s economy. A cure is what President Muhammadu Buhari and his team must now find to the economic cancer that has already started eating deep into the tissue of Nigeria’s growth and development.
The latest IMF forecast on Nigeria in its latest World Economic Outlook shows the economy is adjusting to foreign currency shortages as a result of lower oil receipts, low power generation, and weak investor confidence. These are the issues President Buhari, through his economic team, must attend to as a matter of urgency to stem the tide of recession. This recession offers Nigeria the opportunity to, once and for all, break the mould and usher in an era of market-controlled economy. An opportunity the President must take to ensure the pains borne by the masses through this journey to recovery is not in vain.
The potential of Nigeria’s economy are not invalidated by a recession, a fact that investors are well aware of. Buhari’s dedication to the fight against corruption and commitment to the diversification of the economy must now be coupled with an unflinching conviction in and support for a market economy devoid of undue government interference.
The Buhari administration has taken commendable steps in recent months to open up the economy and remove deterrents to foreign investments. For example, the decision in June to float the naira and subject the exchange rate to market forces of demand and supply led to investors pouring N279bn into the Nigerian economy in just one day. This came after $2.7bn had been spent in 2016 alone to hold the peg at the previous rate of N199 per dollar.
Likewise, the decision to remove subsidy on fuel has started to yield fruits – at least the savings from the end of fuel subsidy now mean we no longer subsidise consumption, in a country begging for production.
The three tiers of government shared N559 billion in June, the highest amount so far in year 2016. This is despite the fact activities of Niger Delta militants have crippled oil production in recent months. In actual fact, output in May went as low as 1.4 million barrels per day. Non-oil revenue sources therefore contributed 70 per cent of the shared funds for June, authorities of the Federal Inland Revenue Service claimed. This shows the economy is being weaned, gradually, from decades of overdependence on oil.
The delayed passage of the 2016 budget meant monetary injections into the economy were also delayed. The impacts of ongoing efforts to remedy the situation through release of funds for capital projects will not be felt until later in the year. A repeat of this will prove fatal in 2017.The release therefore this week of the basic parameters and fundamental assumptions for the 2017 budget 2017-2019 as contained in the Medium Term Expenditure Framework is a welcome development.
To safeguard the future, we cannot afford a repeat of the mistakes of the past in the present. A wrong strategy deployed a thousand times will not once produce the right result. The task ahead of President Buhari as recession begins to take a toll on economic activities is the restoration of investors’ confidence in the nation’s economy. Recent steps taken to reduce government interference in market operations should be consolidated.
Governors have cut spending seeing as there is an acute shortage in allocations to the states but a lot of them have yet to cut spending on their personal conveniences. They still spend state resources on pilgrimages to holy lands, maintaining the most expensive hotels. They retain their security votes, a relic of the military era a democracy is meant to help clean out of our stable of wasteful spending. Other public service holders must take a cue too while civil servants need to understand that if they are not productive at work, it is almost impossible for Nigeria to be productive, seeing as a chunk of Nigeria’s budget still goes into their salaries.
Other Nigerians on their part need to wriggle themselves out of the political divisiveness of 2015. Those who lost the 2015 elections have lost that for good, wait till 2019 for fresh elections. A million years of cursing and wailing will not change that result. Criticisms of the government must rise above pangs of an election loss that the world has moved on from. If you still feel the pang of that loss, the issue is not the loss, you are the issue. Those who won the 2015 elections need to wake up from their reverie, you have power now, it is time to get to work. The purpose of winning elections is not to have power; the purpose is an opportunity to do something with the power thrust upon you by the people’s mandate. The hailing and “Sai Babaing” can wait and must now give way to governance. Well-intentioned criticisms help the government get better, criticisms backed by ulterior motives are seen for what they are and are at best heard as the sound from the hollows of hypocrisy.
The global economy, thanks to the plunge in commodity prices and Brexit could be experiencing its slowest growth since the 2008 recession. Banks in Dubai have cut some 1,500 jobs, rents are dropping, the Emirates Airline announced a first sales decline in a decade due to the weakening Dirham. The National Oil Company in Doha continued its mass sackings, while the likes of Kuwait and other oil producers elsewhere have had to take decisions many would have thought unthinkable just five years ago. Please, do not mention Venezuela, that is a disaster due to years of irrational socialist policies that met another disaster in plunging oil prices; a disastrous mess.
Nigeria is not in this alone but those whom Nigerians trusted with their mandate should have seen this coming and prepared themselves for realities such as this. Crying about where we have found ourselves will not move us forward, committing to policies that extricate us from the grip of oil and its swinging moods and “wahalas” will. That and a clear commitment towards the ease of doing business. Recession or not, capital will only go where policies and political will let it enter with as much ease as possible. We may not have control over the global economy but we have control over enough things to change our fortunes for good. Enough of crying over the past, we are already losing ground on the future!
This piece was syndicated in the Punch Newspapers of 27th July, 2016