With the National Bureau of Statistics’ (NBS) report on the contraction of the nation’s Gross Domestic Product (GDP) by 3.6 per cent in the third quarter of the year (Q3 2020), it was official that Nigeria had slipped into recession for the second time in five years.
According to the NBS, cumulatively, the economy contracted by -2.48 per cent, representing an improvement of 2.48 per cent over the –6.10 per cent growth rate recorded in the preceding quarter (Q2 2020).
It also indicated that two consecutive quarters of negative growth had been recorded in 2020.
“Furthermore, growth in Q3 2020 was slower by 5.90 per cent when compared to the third quarter of 2019 which recorded a real growth rate of 2.28 per cent year on year.”
It said the economy in that quarter reflected residual effects of the restrictions to movement and economic activity implemented across the country in early Q2 in response to the COVID-19 pandemic.
President Muhammadu Buhari, while declaring open the 26th Nigerian Economic Summit, said the recession came about because of the global downturn caused by the COVID-19 pandemic.
Buhari, who was represented by Vice-President Yemi Osinbajo, said that the decline in the nation’s GDP came after 12 successive quarters of positive growth.
He said the downturn caused by the pandemic included lockdowns, disruption in global supply chains, business failures and rising unemployment.
“We can all recall that during the lockdown, farming did not take place, businesses were closed; schools were closed as were hotels and restaurants. Also, airlines stopped flying, while inter-state commerce was disrupted.
“The economy only began to recover when these activities resumed and if we are able to sustain the nearly three percentage point increase from the second quarter decline of minus 6.1 per cent, the performance in the fourth quarter could take us into positive territory,’’ he said.
Mr. David Ibidapo, an economic and financial analyst, however said that the recession was expected due to the lockdown and other factors such as border closure.
According to him, it is worse because the pandemic struck at a time when the fundamentals of Nigeria were very weak and there were still some structural issues that the fiscal and monetary authorities have not addressed.
“If we remain at this state without implementing some key reforms in key sectors of the economy, most especially in our foreign exchange market, if a shock as devastating as COVID-19 pandemic strikes again in the nearest future, we may be back to, if not worse off than what we are currently experiencing in 2020.
“One major misfortune of Nigeria is the fact that we are highly exposed to fluctuations in the oil market and our foreign reserves are largely dependent on the performance in the oil market.
“So we must diversify our revenue base and that can be done if only the fiscal authorities can identify some other key sectors of the economy like agriculture and start looking at how to boost economic activities in those sectors.
“If you look at the share of our crude oil export to total export it is over 90 per cent and that means that our major export is crude oil so we need to not necessarily reduce the share of oil export but also increase reasonably and significantly export in commodities that we produce.”
He also advised that the Central Bank of Nigeria (CBN) should take the bold step of unifying the nation’s foreign exchange market.
Dr. Aminu Usman, Dean, Faculty of Social Sciences, Kaduna State University, said oil price war between Russia and Saudi Arabia at the beginning of the year also contributed to the present state of the nation’s economy.
“However above all is the refusal of successive governments to move the country away from over dependence on oil which is the major cause of economic challenges regularly affecting Nigeria.
“If government had focused on real diversification of the revenue sources for the country away from over dependence on oil we could have mitigated the impact of the pandemic and the oil price war.
“Up till now our solid minerals sector and agricultural sector remains largely untapped to their potentials.
“Another cause of the recession is government’s inability to stop the menace of insecurity which prevents farming activities for both subsistence and commercial agriculture.”
According to Usman, Nigeria should begin to take proactive economic management measures and move away from reactive policies because they usually come too late.
He added that the Federal Government should ensure that the current attempt at reintroduction of development planning for both long and medium term was sustained and backed by law.
He said that all levels of government must be compelled by law to fully implement the provisions of the development plan once completed.
“That way a predetermined course can be pursued to a logical conclusion with all hands on deck. Quick fixes may be only short term and temporary.”
The Minister of Finance, Mrs. Zainab Ahmed said that the current recession would be a short one, as government and key stakeholders were proactively working together to put in place sustainable measures to curtail and improve the situation.
According to her, in spite of the recession, Nigeria had out-performed many economies in terms of economic growth.
She said that the Federal Government was fully aware of the current economic situation and was working round the clock to reverse the trend and restore the economy on the path of sustainable inclusive growth.
Ahmed said that to achieve the said growth, the government developed a sustainability plan to cushion the effects of the pandemic and was already implementing policies aimed at stabilising the economy.
Some of the measures are taking action to stimulate the economy by preventing business collapse through ensuring liquidity and retaining and creating jobs through support to labour intensive sectors such as agriculture and direct labour interventions.
She said that the government was also undertaking growth enhancing and job creating infrastructural investments in roads, rails, bridges, solar power and communications technologies
It is also promoting manufacturing and local production at all levels and advocating the use of Made in Nigeria goods and services as a way of creating job opportunities.
The government also aims to achieve self-sufficiency in critical sectors of the economy and curb unnecessary demand for foreign exchange which might put pressure on the exchange rate.
The World Bank Group also said it had approved 1.5 billion dollars for the Nigeria COVID-19 Action Recovery and Economic Stimulus – Programme for Results (Nigeria CARES) and the State Fiscal Transparency, Accountability and Sustainability Programme for Results (SFTAS) Additional Financing projects.
“The Nigeria CARES programme will help increase access to social transfers and basic services and provide grants to poor and vulnerable households.
“It will also strengthen food supply chains for poor households while facilitating recovery and enhancing capabilities of MSMEs,” it stated.
Meanwhile, the International Monetary Fund (IMF) mission to Nigeria said exchange rate and monetary policy reforms, increased revenue mobilisation and structural reforms would unlock Nigeria’s growth potential.
It said that recovery was projected to start in 2021, with subdued growth of 1.2 per cent and output recovering to its pre-pandemic level only in 2022.
In addition to monetary policy reforms, the mission recommended that decisive actions to tackle governance weaknesses and implement regulatory and trade-enabling reforms, including the lifting of trade restrictions to unlock Nigeria’s strong growth potential should be taken. (NAN)