Major Factors That Influenced The Economic Recession
The reports released by the National Bureau of statistics on Saturday, November 21, stated that Nigeria has plunged into economic recession for the second time in 5 years. Considering that Covid-19 gave the citizens a fair share of ‘personal economic recession’ in the wake of 2020 during the total lockdown, All economic activities were on a standstill, and many citizens lost their sources of income. Data from the World Bank stated that about 42 percent of Nigerian workers lost their jobs between March and June during the total lockdown; this was more evident within those working in the hospitality and service industry.
According to NBC, the country’s economy contracted by 6.1% in the second quarter of the year; this was the steepest decline that the Nigerian economy has gone in the last ten years. Although there was an improvement of 2.48% in the third quarter of 2020 when the GDP was -3.62, the recession was inevitable as a negative growth rate in two consecutive quarters in a year means recession.
Sequel to the effect of coronavirus on the economy was the steep drop in oil prices amid a decline in global demand; this left the country short of earnings as the oil sector is the principal and most extensive revenue source. In the first five months in 2020, the United States reduced its Nigerian crude oil imports by 11.67 million barrels, and in the second quarter of 2020, local oil production dropped to its lowest since 2016 – the country had a negative growth all year round.
But as usual, the second thought that crosses our mind is that ‘This too shall pass,’ as it is the common saying of a typical Nigerian. Unfortunately, the look of things does not support this consolation, and even though the minister for finance has declared that Nigeria will exit this recession in 2021, it is not something tangible to hold on to as a grain of sand. It is not a hope that can be banked on. For all we know, ‘They are working on it.’
The bottom line is that if the Nigerian government had done its very best to solidify her economy, even Covid-19 would not have to take the blame for her failure. The Nigerian government’s non-viable fiscal policies is a “Band-Aid” and has not prepared the economy for future contingencies. If economic diversification had been put in place in the past years, the massive hit taken by the oil sector would not have mattered. Diversifying to agriculture on a public-private partnership would help ensure subsistence farming graduated to modern commercial agriculture even for grassroots farmers. It would aid the production of food and cash crops, and food items would not be so expensive for the populace, thereby clearing a pathway for the proper standard of living for people.
The overdependence on the oil sector is not the only cause; too much cloud has been pulled over this sector’s management. Nigeria is the leading crude-oil producer in Africa, yet, our oil prices are literally the highest. Its foreign exchange value is not what it used to be.
Without adopting viable fiscal policies, proper management of the oil sector, and public-private partnerships, conventional financial strategies cannot deliver Nigeria from continuous economic recession.