At first it sounded like tales by moonlight; not until the release of the official Gross Domestic Product (GDP) figures for the second quarter of 2016 by the National Bureau of Statistics (NBS) of Nigeria officially confirmed that the Nigerian economy was indeed in a recession.
According to the NBS statistics, Nigeria’s Gross Domestic Product contracted by 2.06 percent in the second quarter of 2016, following a contraction of 0.36 percent in the first quarter. This officially places Nigeria in a recession, which is defined by two or more consecutive quarters of negative economic growth or a period of general economic slowdown.
Experts have argued that failure by past governments to have proper plans in place to tackle issues, such as the crude oil price drop, fall of the Naira and struggles in other sectors have gradually grinded the economy into a recession. Other factors responsible include global economic slowdown, inflation, NSE capitalization and FBN manufacturing index.
An Economist, Professor Akpan Hogan Ekpo, delivering a keynote address at a lecture in Lagos recently said, “The high rates of unemployment, combined with reduced output since the third quarter of 2015, suggested an economy in the sphere of “stagflation”, a prelude to the recession experienced today”.
Prof Ekpo, who also is the Director General of West African Institute for Financial and Economic Management “considered the decline in the contribution to the nations GDP by the industrial sector as an unhealthy situation given the importance of manufacturing in driving growth and development as well as job creation.”
Acknowledging that although recessions are to be expected in any capitalist economy, he advised that the President Muhammadu Buhari-led government must put in place effective policies to combat the misery the recession brings upon the common man.
Prof Ekpo consequently advised the government to design and implement policies that would prioritize massive investment in hard infrastructure, employment generation, investment in housing construction, rebuilding the public school system, building strong institutions, and an aggressive monetary and fiscal policy.
In the marketing ecosystem, the economic downturn is presenting new and difficult challenges for marketers, particularly those wishing to provide goods that retain consumer loyalty, while the current situation persists and even beyond this period.
This is so because practitioners expect the slump to result in changing consumer behavioral pattern.
There are speculations that with the simultaneous rise in prices of commodities and some consumers faced with job losses, their shopping habits will not only change, consumer purchasing power will shrink significantly.
Economic experts have summarized the effects and ways to cope with the present economic recession on the part of the common Nigerian citizens as follows:
- Decrease in sales of goods and services, due to decreased finances available to individuals and families, the purchase of goods and services decline.
- Increase in unemployment, due to decreased sales of goods and services by business owners and Companies , a reduction in the workforce takes place, leading to loss of jobs.
- High inflation rate, Nigeria have been experiencing high inflation rate due to scarcity of foreign exchange, a weak Naira, high interest rates, poor electricity supply, dependence on importation and the high cost of doing business in Nigeria. As Nigeria goes into a recession the inflation rate will go higher as the above mentioned factors still persist.
- Budget deficit in government spending, the National and States budgets will experience spending deficit due to shortfalls in government revenues. The government may decide on borrowing to cover for the fall in revenues, and this will increase the debt burden of the Federal and State Governments.
- Decline in the stock market, investors would avoid investing in companies that might suffer loses, while some investors would pull their funds from the stock market.
- Increase in crime rate, as life gets hard for many and living conditions get worse, crime rate will escalate. There will be increase in robberies, kidnapping, petty stealing, fraudulent schemes and other financial crimes.
- Strained family relationships, as a result of unemployment, loss of income and high cost of living, inter-family relationships would come under strain which may lead to marital and family conflicts.
Meanwhile, an economist, Prof. Ben Aigbokhan, President, Nigeria Economic Society, in a recent interview with the News Agency of Nigeria (NAN) in Abuja has assured Nigerians that the economy would recover from recession as soon as possible with the measures being put in place by President Muhammadu Buhari. He praised the Federal Government for not folding its hands, but doing everything possible to improve the living conditions of Nigerians.
“The government wants to be seen to achieve something and will not allow the economy to be nose-diving all the time, that is why I’m optimistic that the country will come out of this present recession,’’ Aigbokhan said.
Other economic experts have argued that families and individuals may not be able to avoid the effects of the present economic recession, but that they can make informed changes that can improve their situations and help them prepare for the future, while waiting for the economy to recover.
Tips and Strategies to Cope With a Recession:
- Unemployed people should accept a low paying job as a short term solution pending when a better job offer is available.
- Part time job, business or small scale farming: an option available for dependent members of the family is to take a part time job, operate a small scale business that requires little capital, and engaging in farming of crops that are of short harvest period, as well as rearing farm animals on a small scale.
- Change of plans: individuals and families would need to make changes in their plans, such changes may include relocating to affordable accommodation and switching of children’s school to affordable ones.
- Making changes in financial spending: people should understand the difference between needs and wants during a recession. Areas of priority spending should be housing, food, affordable health care, transportation, clothing and education.
- Life style changes: people involved in a lifestyle that leads to wastage of money need to make changes, examples are excessive smoking and alcohol consumption, excessive clubbing, womanizing, unnecessary and irrelevant travels, buying new household gadgets and appliances when old ones are still in good condition, as well as buying new phones several times in a year. Another lifestyle to be changed is the buying of new clothes for every social functions and events.
- Business opportunities: in an economic recession, as people’s spending power depreciate, spending of money is focused on areas of essential needs. For those planning to go into business, they should consider the following areas (a) sales of food items (b) operating a low cost canteen (c) low cost transportation business (d) health care business (e) small scale crops and animals farm.
- Keeping a positive attitude: as the economic recession lingers people should have a positive attitude both at work and home, and while in company of friends and strangers. Having a positive attitude generally makes it easy to deal with tough times. On the other hand; anger, bitterness, hopelessness, frustration and persistent complaining makes it difficult for people to deal with tough times.
Adeyemi Dipeolu, the Special Adviser to the President on Economic Matters, confirmed that though the economy is in a decline, but believes that there are indicators that the economy will improve very soon. Dipeolu added that despite the recession, the Nigerian economy is performing better than the International Monetary Fund had earlier predicted, therefore there is light at the end of the tunnel-things will certainly get better.