Nigeria is Drifting Towards Economic Depression – By Elder (Dr.) Chukwuma O. Nwaonicha

Economic Depression is a long and severe recession. If the current hash economic situation in the nation is not seriously addressed and sustained, Nigeria could end up in economic depression, which will exacerbate the suffering of the general public. As stated recently, in one of my publications that was published in Pointer Newspaper, in my opinion, the economic recession including, the current hardship in the Nation is an accumulated effect and is triggered by many factors, such as the national financial crisis, an external trade imbalance and Nigerian Leaders Kleptocracy over the years, among others. In other words, the recession had more to do with governance and fiscal policies, no dollar inflow, therefore little investment. In addition, the country is facing an economic crisis largely due to its reliance on the oil sector, which accounts for about 80 percent of Nigeria’s GDP and over 90 percent of the value of its exports. Although, oil production has plummeted as militants in the Niger Delta have blown up pipelines, while the cost of oil has more than halved since 2014 and remains at below $50 per barrel at present. The crisis has seen Nigeria lose its title of Africa’s biggest economy to South Africa, according to data from the International Monetary Fund, (IMF), released earlier in August this year.
Analysts predicts that the stagnation (high inflation rate, slow rate of economic growth and high unemployment rate) may be worse given the crises in the socio-political economy, and the challenge is that the recession is deeper than we thought. The Federal Government (FG) should respond to the current economic recession by adopting expansionary macroeconomic policies, such as increasing government spending (experts believe the Federal Government should pump money into infrastructure development, which will create more jobs and boost liquidity), decreasing taxation and increasing money supply, among others. For instant, increasing money supply, monetary authority in the country should target interest rate or inflation rate to ensure price stability and general trust in the Naira. In addition, the monetary authority should contribute to the economic growth and stability, to lower unemployment and maintain predictable exchange rates with other currencies.
Nigeria has recorded a negative Gross Domestic Product (GDP) growth rate for two consecutive quarters this year, thus, officially indicating a recessed economy. As noted, the presidency attributed the recession to the drop in government revenue on account of the fall in international oil prices, compounded by incessant attacks on pipelines and sabotage. Specifically, the decline in government revenue, the devaluation of the Naira, the severe drop in crude oil prices, and surging inflation rates, in addition to the country’s high poverty rate and high unemployment rate, which have detrimental effect on the economic security of the masses.
Many experts disagreed with the presidency notion that drop in oil revenues plunged Nigeria into recession, saying it had more to do with indiscipline fiscal policy – the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation’s economy, poor governance and lack of economic productivity. Furthermore, there is lack of spending from the public sector, no dollar inflow, therefore little investment. The recession also has to do with financial recklessness at the Federal, State and Local Government levels.
Majority of Nigerians attribute the economic predicament in the country to inadequate investments in capital projects over the years, which is caused by poor leadership. In my opinion, the Naira is also part of the problem as the currency was traded at a record low of 418 Naira to the U.S. Dollar. According to The Financial Times, the on-going Dollar shortage keeps foreign investors away. In addition, the Central Bank of Nigeria, in June this year abandoned the fixed rate for the Naira against the Dollar, which critics said should have been done months earlier. Therefore, there is no magic bullet to make the Naira stronger but economic and social developments, including, good governance, high GDP, economic productivity, job creation and low inflation.
I believe that we need investor’s confidence now more than anytime else and all hands must be on deck. We must woo the investors now, but it is not a magic wand. That is, we must first do our homework, by providing the enabling environment for economic development: safety and security, healthcare, education, good road network, stable power supply and revitalized agricultural sector, among others.
The Nation needs to diversify its economies but this process is a gradual one, as you don’t diversify an economy overnight. However, diversification must be intensified. These National problems are not easy task but we must start somewhere. After all, Rome was not built in a day.
Therefore, I advise that before the national economy goes into depression, if funds are available, one of the ways forward to actualize social and economic developments is for the Federal Government to initiate National Public Works Program (NPWP), an infrastructural development program; to create employment for millions of Nigerians that are without work. Proper execution or implementation of the program will promote and provide favorable environment for investors and create sustainable technology and industrial developments in Nigeria. NPWP should be urgently created by the Federal Government in response to the economic recession in order to avoid economic depression. NPWP is a public utilities maintenance program of the existing infrastructure while simultaneously building new infrastructure. This program is capital intensive because infrastructural development in the Nation has been neglected over the years; hence, the National financial state poses a red flag and a serious challenge. Advantageously, the program is labor intensive, which is good for the job market.
As of today, functional infrastructure is poor in the Nation. The Nation needs infrastructural development in all sectors, which will create productivity, promote safety and security, social and economic developments and create jobs, especially for the youths. Public Works Program worked in many Nations including, the USA during the Great Depression and created many jobs, and the program laid the foundation for development in these Nations. I believed it will work (promote job creation, social and economic developments) in Nigeria if properly managed and handled. As there is no end in sight for the current hardship in the Nation for now, good governance should be a top priority not only for the NPWP to succeed but to reduce the suffering of the masses. Even when the Federal Government borrows, let it make good use of the money because there are no silver bullets, the only solution is for the government to spend its way out on infrastructural development – education, healthcare, power and roads, among others.
I’m not trying to be pessimistic but in my honest opinion, it may take many years before Nigeria can come out of this economic recession because we don’t know the depth of the recession, as the GDP had contracted by 2.06 percent in the second quarter of this year more than the expected growth for the entire year at 1.8 per cent, as projected by the International Monetary Fund (IMF).
In conclusion, for the nation to overcome these economic woes there must be a stable energy supply, as stable energy supply is the key to development, especially in manufacturing industries and other related industries, healthcare systems and educational systems, large scale commercial agriculture, food processing and food preservation, among others. Stable energy supply is a motivation for investment and promotes job creation, at the same time reduces crime rate. It promotes economic diversification. Therefore, one of the ways to go forward for the Nation in energy sector is the use of hydro-power, solar and wind energy to provide quick response to power supply shortages, which are currently related to pipeline vandalism and poor management of the power sector.
Finally, if Mr. President is not academically positioned enough to provide the leadership required to perform his job in this critical time of the national economic woes, he should employ those who know about the economy and those with ideas, and not employment based on nepotism. After all, ideas rule the world and nepotism is worst than crime. The economic problem is not a PDP issue or an APC issue but a national problem and the approach to tackling the problem should be national bipartisan approach in order to alleviate the suffering of the masses. We pray for brighter tomorrow and that there should be light at the end of the tunnel.