Analysis: How Nigeria pulled out of recession

Analysis: How Nigeria pulled out of recession

By Mariam Sanni, Abuja

Nigeria officially exited economic recession, even though Nigerians are yet to feel the impact in the price of foods and other essential commodities, AljazirahNigeria gathered

According to the National Bureau of Statistics (NBS), the nation’s economy grew at 0.55 per cent in the second quarter (Q2) of 2017 after contracting for five consecutive quarters.

The Q2 2017 growth rate of 0.55 per cent (year-on-year) was 2.04 per cent higher than the rate recorded in the corresponding quarter of 2016 (-1.49%) and higher by 1.46 per cent points from the rate recorded in the preceding quarter, which was revised to –0.91% from –0.52% due to revisions to crude output for March 2017.

The results revealed that Oil GDP recovered significantly from -11.63 per cent in Q2 2016 and -15.40 per cent in Q1 2017 to 1.64 per cent in Q2 2017.

But while Oil GDP expanded considerably in the second quarter of 2017, Non-oil GDP only grew at 0.45 per cent, down from 0.72 per cent in the preceding quarter and -0.38 in the corresponding period in 2016.

According to the National Bureau of Statistics (NBS) Nigeria’s economy slid into recession after negative growth in the first two quarters of 2016.

However, unrest in the Niger- Delta region affected the price of oil, and lack of savings contributed in no small measure to recession.

How Nigerian economy slide into recession

Poor economic planning and no concrete implementation of her economic planning is one the major cause of Nigeria economic recession – budget delay, exchange rate policy.

Nigerian currency was devalued when crude oil price in the international market was very low and crude oil experts were largely affected by the activities of Niger Delta militants.

Also, government banning the importation of certain essential agricultural produce without considering gestation period contributed to the bad economy, AljazirahNigeria reliably gathered.

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Furthermore, the poor saving culture and inability of the previous administrations to save during oil boom with Nigeria’s over-dependence on foreign products; economic policies of the present administration; the delay, and controversies over the 2016 budget; the activities of militants and pipeline vandals; the existence of wasteful and abuse-prone subsidies are factors that slid the Nigerian economy into recession.

Effects of economic recession on Nigerians

Some of the consequences of the recessed economy on Nigerians includes:

Unemployment, which tends to increase, especially among the low-skilled workers, due to companies and even government agencies laying off staff as a way of curtailing expenses.

Individual income drastically reduced due to loss of employment which led to discretionary spending and disposable income severely restricted. This reduction in income, in turn, led to non-payment or delayed payment of debt obligations – especially credit cards.

Another result of recession is drops in output and/or productivity and business closures. Falls in output tend to last until weaker companies are driven out of the market, then output picks up again among the surviving firms.

During the recessions, stronger companies bought off weaker and smaller ones through mergers and outright takeovers, and this negatively affected the competitive environment; some level of scarcity, artificial or real – begins to emerge, and prices of goods creep up in response.

With more people out of work, and families increasingly unable to make ends meet, the pressure on demands for government-funded social services increased. Since governments also experience drops in revenue collection during recession. it became difficult to meet the increased demands on social services.

How non-oil export helped Nigeria exit recession

Nigeria’s economic recovery was driven principally by the performance of four main economic activities comprising oil, agriculture, manufacturing, and trade.

It also showed that agriculture continued to grow, which it had maintained throughout the recession, growing by 3.01 per cent in Q2 2017, from 3.39 per cent in Q1 2017 and 4.53 per cent in Q2 2016.

Manufacturing retained its growth for the second consecutive quarter in Q2 2017, growing at 0.64 per cent compared to 1.36 per cent in Q1 2017 and -3.36 per cent in Q2 2016, while trade which has a dominant share of GDP remained negative at -1.62 per cent, but the contraction in the sector decelerated from the -3.08 per cent recorded in Q1 2017.

Furthermore, electricity and gas and financial institutions sectors also recorded strong growths, with electricity and gas growing by 35.5 per cent, compared to -5.04 per cent in Q1 2017 and -10.46 per cent in Q2 2016 and financial institutions growing by 11.78 per cent in Q2 2017, compared to 0.60 per cent in Q1 2017 and -13.24 per cent in Q2 2016.

The results also showed that the industry sector grew positively by 1.45 per cent in Q2 2017, after nine consecutive quarters of negative growth since Q4 2014.

Expert seeks reflection in price of food

An economic expert, Dr Charles Nwaekeaku advised the Federal Government to ensure that the country’s exit from economic recession translates into lowering of prices of goods in the market.

Nwaekeaku, an Associate Professor of the Nasarawa State University, Keffi, expressed delight that the country was officially out of recession and called on the government to ensure the exit impacted on the prices of goods in the market.

“As a Nigerian citizen, I am happy to hear that we have exited; it is a welcome development and shows that there is hope; it also signifies a major link out of the level of recession.

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“But my prayer is that it should be translated into concrete terms which will be reflected on the quantity of food on the table of an average Nigerian which is still a far cry.

“The prices of everything in the market are still very high, so I do not know how we got the figures by the NBS, or could this be a conspiracy between some agencies of government to give us hope?’’

Preventing future occurrence

Given the high level of economic pains, government, stakeholders, and policy makers need to pursue policies that works to prevent future occurrence of economic recession in the country.

There is need for diversification, allowing free flow of naira, and stabilizing the oil sector, modernizing agricultural sector. For agricultural development, a better mechanism should be put in place to grow the sector, the government should empower the youth to go into the sector.

Government must bumper harvest store to store agricultural product excess. Government should also encourage Nigerians to venture into farming to reduce importation of agricultural produce.

Government should reduce tax on rates on individuals, small business and corporation by lowering the tax rate.

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