The Federal Government on Thursday said the country’s economy was ‘technically’ in a recession.
The Minister of Finance, Mrs. Kemi Adeosun, who appeared before the Senate, said the current indices in the country had shown that there was an economic downturn.
A recession is defined as a significant decline in activities across the economy, lasting longer than a few months. It is visible in industrial production, employment, real income and wholesale retail trade.
The technical indicator of a recession is two consecutive quarters of negative economic growth as measured by a country’s Gross Domestic Product.
Nigeria’s GDP growth contracted to -0.36 per cent in the first quarter of this year compared to 2.11 per cent in the fourth quarter of 2015. Several economists have already forecast that the economy is likely to contract again in the second quarter of this year.
The National Bureau of Statistics is due to release the GDP figure for the second quarter any time from now.
After addressing the lawmakers, the minister told journalists that Nigeria was not the only country in recession globally, and urged the citizens not to panic over the current state of the economy as the President Muhammadu Buhari administration would soon change the course of the economy for good.
She said, “Technically, in economic terms, if you have two periods of negative growth, you are in a recession. I don’t think we should spend too much time on this. The issue is we are in a tough place, whether we call it recession or not, we are in a tough place. But most importantly, we are going to get out of it. What we are doing is moving us out of it.
“Social intervention programmes have been funded; those of providing relief to the poorest. Every single person in every local government will be touched by those programmes. We have started and we will continue to get us out of it.
“We are not the only country in recession; there are many countries doing far worse than us. For Nigerians, that is not comfortable. What Nigerians want to know is, ‘How is it going to affect them?’ I want to assure everybody that what we are doing is going to work and it is going to turn this economy around.”
Earlier, while addressing the lawmakers, Adeosun had said, “Is Nigeria in recession? Technically, yes. If you go into the two conditions of negative growth, you are in recession. But I don’t think we should dwell on definitions, we should dwell on where we are going.
“If we are in recession, what are we likely to face? When are we likely to come out of it? And it will be a very short one because with the policies that we have, we will ensure that we don’t go beyond where we need to go. With what we are doing, we will begin to turn around the corner.”
Adeosun, while answering one of the 28 questions posed to her by the lawmakers during plenary, stated that Nigeria remained the biggest economy in Africa despite the economic challenges facing it, adding, “We are going through a difficult time but while we are rebuilding, we will go out of this challenge stronger than the way we came in.”
The minister also stated that the Federal Government had not issued bailouts to states as widely believed, explaining that the government had always been standing as a guarantor for loans obtained by the states.
She said, “As far as I am aware, we have not done any bailout. The bailout was done by the Central Bank of Nigeria last year. What we did last month was that we recognised that the states could no longer borrow. Most of them had reached their limits of borrowing and they had no liquidities; they could not pay salaries and it had created crisis in the land.
“What we did for them was credit enhancement. We gave the guarantee that enabled them to borrow. We in the executive have not lent any money to the states; we have no authority to do so and we have not done so.
“What we simply did was to grant partial risk guarantees to the state governments to enable them to borrow. Those instruments were bought and held by the commercial banks and not by the Federal Government. We have not granted any bailout.
“What we also did was to tie it to a fiscal credibility plan, which requires the states and local governments to pursue the same reforms we are pursuing at the federal level – to be disciplined, clean up their payroll, introduce efficiency units and redefine what the IGR means. That will be a fundamental change you will see in the state governments.”
Adeosun also said the Buhari-led administration had made importation of agricultural equipment duty free as part of efforts to speed up the diversification of the country’s economy towards agriculture.
The minister urged Nigerian not to panic over the low ratings of Nigerian economy by the International Monetary Fund, Bloomberg and other global institutions, saying the country was in the right direction economically.
