Tale of a Bitter Global Recession, By Grace Ameh
…Charles Darwin’s very nightmare going on in Nigeria with those who don’t have much to sell or to gain extra income bearing the full brunt! This recession has caused Nigerians to ask “to be or not to be for the present government?” The delay in passing the budget has been a drawback for the economy but we can still say that it is better delayed than exploited.
Ronald Reagan, it was, who stated that “Recession is when your neighbour loses his job. Depression is when you lose yours.” Generally, a recession is a fall in the level of economic activity. An economic recession is the debility of gross domestic product (GDP), capacity utilisation and employment rate for two or more consecutive quarters. A decline after a short period of time cannot be classified as a recession. The National Bureau of Economic Research’s (NBER) Business Cycle Dating Committee defines a recession as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators. A recession begins when the economy reaches a peak of activity and ends when the economy reaches its trough.”
Several reports show that many economies are presently facing or are on the path to recession. Countries such as Ireland, Zimbabwe, Angola, and Venezuela are in recession. According to Bloomberg, some countries most likely to hit recession over the next one year for various reasons include Russia, Argentina and Ukraine, with a 60 percent chance; Brazil with 75 percent; and Taiwan 55 percent. Greece and the United States have also been viewed as likely economies to experience recession. The National Bureau of Statistics (NBS) maintained that Nigeria hit recession in the second quarter of the year, and had a decline by -2.06 percent year on year in real terms; from the oil sector real growth was -17.48 percent year on year and the non-oil sector dropped by 0.38 percent in real terms all in the second quarter of 2016. The non-oil sector was affected due to the fact that some industries in that sector are dependent on the oil sector, regardless of the positive growth in a few of the industries in the non-oil sector.
Causes of an Economic Recession
Politics revolves around economics and vice versa. In terms of employment, comparing the fourth quarter of 2015 and the 1st quarter of 2016, we see that in quarter four (Q4) of 2015, there was an increase of 5.1 percent and in the first quarter of 2016, there was a rapid decrease of 84.1 percent. In the case of GDP, the fact that oil revenue is the highest source of government foreign exchange revenue has greatly caused a sharp decline in the total revenue generated as a result of low oil prices and the consistent vandalism of oil pipelines by the “Niger Delta Avengers” and other illegal activities. Oil price decline has been one of the greatest causes of the recession and this has greatly affected other sectors of the economy.
Source: National Bureau of Statistics
Analysing GDP from the Two Main Sectors – Oil and Non-Oil
All sectors in the economy from mining and quarrying, construction, trade, arts, entertainment and recreation, health, finance and insurance fell and had negative impact on the GDP. Accommodation and food services had no significant change, while information and communication experienced a fall, even if still a positive contribution to GDP. Transport and storage grew, but less than in preceding quarters. On the other hand, public administration had positive growth. Manufacturing, real estate services, electricity, gas and steam supply, education, as well as agriculture and other sectors experienced positive growths.
The appropriate thing to do is to look at what consumptions habits to curb and how to improve on investment, government expenditure and net exports.
Some of the causes of recession in the case of Nigeria can be seen from our reality of being a mono-producing economy and the issue of us being mainly consumers. People exaggerate the idea of recession like it’s the final stage of failure. Recession is not the end. Many countries have been in recession and have bounced back stronger. The only control is to take measures that would not settle on the tables of government officials but are stringent and implemented unambiguously by the government, as well as individuals. People now realise that they cannot continue with their usual tastes, spend as they used to, as the prices in the market keep shooting high; that’s fine, but if money is not pumped into the economy and individuals do not spend, how can we come out of a recession? The appropriate thing to do is to look at what consumptions habits to curb and how to improve on investment, government expenditure and net exports.
Nigerians realise that the fall in the value of naira exacerbated this recession. The naira has greatly depreciated and even those who have no business transacting in dollars still complain of the naira devaluation because of the complex value chains that exists among goods and services and the need for people to recover costs and hedge themselves against galloping stagflation by every means. It is a case of ‘survival of the fittest’; Charles Darwin’s very nightmare going on in Nigeria with those who don’t have much to sell or to gain extra income bearing the full brunt! This recession has caused Nigerians to ask “to be or not to be for the present government?” The delay in passing the budget has been a drawback for the economy but we can still say that it is better delayed than exploited.
We will surely bounce back but a lot of hard work is in front of us!
Grace Ameh, an Economist, writes from Abuja.