Nigeria's Recession May Last 6 Years - Experts

CRIME RATE HIGH BY 50 PER CENT

Recently, the governor of the central bank of Nigeria (CBN), Godwin Emefiele, ignored calls by Finance Minister, Kemi Adeosun to cut borrowing cost and kept the interest rate unchanged at 14 per cent, believing that was necessary to stimulate the economy, however, some experts have observed that no economic policy can take this country out of its mess in less than six years.

By AYUBA JACOB

Nigeria's Finance Minister, Kemi Adeosun

It started as rumour, but when Kemi Adeosun, the Minister of Finance finally announced that Nigeria’s economy was in recession, there were palpable fears by the public on how Nigerians could sail through the tight spot. Since then, prominent Nigerians, experts and economic think-tank, have offered suggestions on how we can get out of this quagmire. It is on record that since the advent of the Muhammadu Buhari administration, Nigerians have been facing different economic challenges and headwinds beyond the ordinary call for pity and lamentation.

Since the pronouncement of the finance minister, major economic indicators pointed to severe erosion of purchasing power of ordinary Nigerians with fast depreciating currency, now at almost N500 to the dollar in the parallel market; rising interest rates, galloping inflation and unemployment. As a matter of fact, it has become extremely hard on the people.

Central Bank of Nigeria

According to The Guardian newspaper, “economic growth has decelerated from 6.5% in 2014 through 2.7% in 2015 to 2.06% in the second quarter of 2016”. It has also been projected that Nigeria’s projected average growth rate of 40% between2007 and 2020 would still be below the rate recorded in 2014.

The difficult economic situation has been attributed to many factors including falling oil prices and cut in oil production. Delays in government’s response, especially with the presentation and approval of the 2016 national budget and spending plans have also contributed. The lack of fiscal buffers, structural constraints and fuel, electricity and foreign exchange scarcities have further compounded economic difficulties being experienced by Nigerians in the last one year, six months.

Nigeria'e Central Bank Governor,
Godwin Emefiele

In all these, there appears to be no early shortcuts for policy makers to deal with the economic challenges. It is, however, clear that the President Buhari-led administration appears rudderless with a lack of overreaching economic policy vision and philosophy which explains its knee-jerk reactions to ideas from the left and those from the right and in disjointed and uncoordinated approaches between the fiscal and monetary sides.

According to the experts, the dispute between Nigeria’s monetary and fiscal policymakers over how to lift the economy out of its worst slump in more than two decades may delay its coming out of recession soon. Recently, the Central Bank Governor, Godwin Emefiele rejected a call by the Minister of Finance to cut borrowing costs and kept the key interest rate unchanged at 14 per cent as a way of stimulating the economy.

In his submission, the CBN governor said monetary policy alone can’t get the economy out of stagflation, adding that complementary fiscal policies are needed to resuscitate output and consumption.

Nigeria’s galloping inflation rate stood at some 16.5 per cent as at the second quarter of this year and the CBN had partly attributed the rising inflationary trend to the increment in fuel and electricity tariff which led to the increase in the cost of goods and services across the country. The CBN, just as the Federal Government had earlier pronounced, restated its commitment to ensuring that the country comes out of the ongoing recession as soon as possible.

However, most of the experts that spoke with this magazine don’t seem to agree with the CBN and the FG. Dr. Reuben Oke is an economist and lectures at the prestigious Ahmadu Bello University (ABU), Zaria. According to him, “Considering the pace at which government is addressing the real issues, the recession in the economy may linger, and the impact will be worse than the crisis erupting in the aviation, banking, education and manufacturing sectors. Once the government had failed to save when it had excess, recession cannot be avoided.”

When asked whether the Buhari-led administration possesses what it takes to bring the country out of recession, he said that depends on a lot of factors, stressing that many of our leaders are selfish and never consider the development of the economy in decision-making, adding that all our leaders care about is their comfort which, according to him, is what is destroying Nigeria.

He said that for government to tackle this issue in earnest, some cabinet members must be shown the way out of government, else we may continue in this predicament for many years.

Speaking in the same vein, Remy Adegoke, a financial expert in Abuja, observed that the Buhari government ought to have emulated what the United States of America did in2007/2008 economic meltdown when it injected stimulus funds into the financial system in order to boost liquidity. He added that the administration also needed to address inflation and exchange rate issues in order to cushion the affect of stimulus fund.

He added that it was obvious that the recession would lat not less than six years considering the performance of the Gross Domestic Product (GDP) which dropped from 2.35 per cent as at the end of the first quarter of 2016 to 1.70 per cent by the end of the second quarter of 2016.

“Things will not change until government gets competent hands from the private sector to help transform the economy. It is not true to say that we would get out of the recession soon, but funds should be injected into the economy to attract more investors to the economy and that can be done when lending rate is reduced drastically.”

According to him, no genuine investor can be encouraged to invest in the economy now at such a high rate because the business environment does not aid quick refund of such credit facility.

Other prominent Nigerians have also proffered solutions on how to end the recession. According to the pioneer Chairman of the Economic and Financial Crimes Commission (EFCC), Mallam Nuhu Ribadu, extra-budgetary expenditure should be criminalized in order to minimize corruption and lift the country out of recession.

In his words, former President Olusegun Obasanjo believed that the government needs to spend less, earn more and borrow its way out of recession. According to him, “We are spending more than what we earn, so we must borrow as quickly as possible. Let us meet with those who can lend us under reasonable interest rates.”

Crime Rate Increases
In a similar vein, security experts have also frowned at the inability of the government to address recession saying that this has led to an increase in crime rates across the country. Folorunsho Dami is a security expert in Jos. According to him, economic recession has increased crime rate by 50 per cent between January and July 2016.

He said that the menace has increased the rate of robbery, kidnapping fraud, burglary and other acts of social anomie across the country. “Recession births job losses and inflation and that means disposable income will be limited with the tendency to raise the bar in both crimes and criminality,” he said.

However, the Federal Government has reiterated its determination to ensure that the country gets out of the economic recession. Spokesman of President Muhammadu Buhari spoke with journalists recently. He said that the government was working round the clock to ensure Nigerians heave a sigh of relief very soon.

He further advised Nigerians not to listen to different speculations of “doom” by some experts. “Whatever anyone likes they can say, but things will turn around for the country very soon,” said Adesina.

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