Nigeria’s economy has officially, but as expected, entered its second recession in five years, with no relief in sight despite the optimism expressed by the Finance Ministry. It is arguably the country’s worst economic patch since its independence in 1960. For the first time in more than three years, the economy shrank in the second quarter of this year as the Gross Domestic Product fell by 6.10 per cent, compared with a growth of 1.87 per cent in Q1. It shrank further by 3.62 per cent in Q3.
The National Bureau of Statistics had attributed the decline in Q2 to significantly lower levels of domestic and international economic activity resulting from the nationwide lockdowns aimed at containing the COVID-19 pandemic. Economists consider two consecutive quarters of shrinking GDP as the technical definition of a recession, with the authorities again blaming the pandemic for the downturn. In 2016, Nigeria slipped into its first recession in 25 years, but the current one has been described as worse. True, the COVID-19 crisis has presented the global economy with a huge challenge, including health, employment, education and economic crises. So, it is anyone’s guess what implications these and more would have on an already structurally weak Nigerian economy, which has been relying on loans to fund its budgets.
The Managing Director, International Monetary Fund, Kristalina Georgieva, had noted that Nigeria would face “twin shocks” from the pandemic and the oil price plunge. The World Bank also warned that the global impact of the pandemic would be profound and long-lasting and that developing countries would be confronted with the pressure to develop, test and deliver innovative approaches quickly. But the regime of Major General Muhammadu Buhari (retd.) has glaringly showed a lack of capacity to devise creative and innovative solutions to take the country through the tough period. This is despite his promise during electioneering to focus and improve on three cardinal points — security, the fight against corruption and the economy.
Though it is Africa’s largest economy, Nigeria depends on oil revenue for about 90 per cent of its foreign exchange, a commodity whose price is currently abysmally low and beyond the country’s control. As of May 2020, Nigeria had applied for more than $7 billion in emergency funds from international lenders, including the IMF, World Bank and the African Development Bank. Unemployment and underemployment rates are grim and likely to get worse amid rising inflation rates, low private consumption and dwindling investment.
Data from the National Bureau of Statistics show that unemployment and underemployment rate in the second quarter of 2020 at a combined 55.7 per cent; the worst hit are youths with over 13.9 million of them unemployed. The highest unemployment rate was 40 per cent, recorded for those aged between 15 and 24 years old.
Also, the economy is bleeding in many areas that should augment the country’s income due to corruption, inefficiency, ineptitude and a weak federal structure, among others, but again; the regime has not exhibited the required political will to plug the leakages. For instance, a report by Dynamar, the Netherlands-based maritime research firm, recently revealed that Nigeria was losing about $55 million (N20.8 billion as of then) per day to congestion at its ports. It noted that services were “diverted from Lagos terminals at Tin Can and Apapa to ports as far as 1,500km south of Lagos, in Pointe Noire in the Republic of Congo, with transhipment back to Nigeria.”
In 2018, the research firm revealed that Lomé, Togo had overtaken Lagos as the host of West Africa’s leading container port, following rapid expansion, with the number of containers transiting by the Port of Lomé almost tripled. It explained that Lomé profited from the congestion hampering activities at the Lagos ports.
Similarly, the country spent N148 billion in 13 months on three refineries that processed less than 40,000 metric tons of crude oil despite a combined production capacity of 445,000 barrels per day, according to a June report published by the Nigerian National Petroleum Corporation.
Nigeria needs good policies to get out of the doldrums, which should include attracting foreign capital, encouraging local industries and boosting agriculture. The Nigeria Labour Congress rightly noted that the government’s interventionist programmes –TraderMoni, MarketMoni etc– and misapplied foreign loans had only worsened the recession. It dismissed the meagre cash disbursements to a few as unproductive and advocated the direct labour option to provide jobs for the millions of jobless youth.
Most states are battling with insecurity – banditry, kidnapping and insurgency – that has adversely affected production, particularly agricultural output as many farmers have abandoned their farms. Even food security for citizens is being threatened by insecurity, yet the various governments have not demonstrated the capacity and political will to deal decisively with the problem. Beyond this, there must be deliberate policies to encourage large-scale agriculture, strong partnership between government and the private sector, small and medium-sized enterprises, manufacturing industries to provide employment and keep many people employed. Power and transport, which are integral to development, must receive full attention and must see remarkable improvements to stimulate agricultural and industrial activities capable of making notable impact.
Nigerian leaders must understand that it is no longer business as usual; they must show seriousness and justify their occupation of public offices. Government at all levels should show enough commitment to cut down on size of governance, their retinues of aides, security guards and other hangers-on, in line with the current reality.