It is no longer news that Nigeria has been under recession for the past one year. The first sign that the economy was going into recession manifested at the end of Q1 (March) 2016, when the country’s Gross Domestic Product (GDP) recorded a negative growth of -0.26%. This trend continued in Q2 and Q3 with GDP growth rates of -2.1% and -2.24% respectively. GDP is the aggregate monetary value of all finished goods and services produced within a country’s borders in a specific time period.
A recession is defined as a period of economic downturn. Technically, if a country records a negative GDP growth in two or more consecutive quarters, then such economy is classified as being under recession. The economy can also get into depression if this trend of negative GDP growth is sustained. Depression is a more severe economic downturn where the period of recession becomes long term (i.e remains beyond a normal business cycle). In a nut shell, should Nigeria record yet another negative growth in GDP when the reports for Q4 2016 are released in a couple weeks’ time, then we can say that the Nigerian economy has gone into depression.
The current economic realities are worrisome. GDP has dropped 2.24% as at the end of September 2016. In the same manner, industrial production declined by 12.21%, unemployment rate stood at about 13.3% at the end of June 2016, inflation as at end of December 2016 stood at 18.55% (Jan. 2016 was 9.6%), while naira exchange rate at the parallel and the interbank markets in December 2016 averaged N480/$ and N328/$ respectively.
The consequences of all these include massive job losses, reduction in disposable income, high cost of living, reduction in corporate profits, increased burden on families to fund education, medical expenses and other needs of their members. Naira remains under intense pressure as scarcity of foreign exchange persists.
I do not believe that Nigeria will slide into depression at the end of the day. My optimism is built on two points. Firstly, depression is not a regular occurrence. The world has seen about 33 recessions since 1854, but only one depression has happened since then. The US witnessed what was then known as “the Great Depression” between August 1929 and June 1938 with moderation between April 1933 and May 1937. So, countries do not easily experience this economic dilemma. Secondly, and most importantly, Nigerians are very resilient people. We have a never-say-die attitude to survival. We are a creative and innovative people. We can turn around this economy in a matter of months if we all decide to get out of the woods. Furthermore, government’s expenditure plans (despite some flaws) seem to speak to most of the issues responsible for the strain in our economic milieu.
The major reason for our economic woes is that the non-oil sector of the economy remains weak. Therefore, despite the improvements in the price of crude oil in the international oil markets, as well as the increase in production output following the relaxation in militancy attacks in the Niger-Delta region, government revenue remains under strain. I believe that government’s strategy to diversify its revenue base focusing on taxes and import duties is counterproductive. Let’s discuss this in the next edition of this magazine.
What options do we have?
Nigerian population size and distribution is a unique opportunity waiting to be tapped. Most Nigerians do not see the green pastures within, hence we have left these opportunities to discerning entrepreneurs from other countries like India, South Africa, China, Korea and parts of Europe. Most retail chains in Nigeria are owned by South African businesses and Indians, most of whose goods were imported until the recent ban of certain 41 items from the official foreign exchange market. The forex scarcity is a blessing in disguise. Nigerians have been forced to test the beauty of home made goods and food items such as rice. Today, Nigerian rice, grown in the dry lands of Nassarawa, and the wetlands of Eboyi have thrown the so-called foreign rice from Thailand and Indonesia out of the windows of Nigerian markets. I believe strongly, that by the time, as a nation, we are able to delete rice and other food items from our import list, the nation’s economy will begin to experience a rebound.
Nigeria has one of the best geographies in the world. From Sokoto to Calabar, Maiduguri to Mbaise, there is no crop or animal that we cannot grow or rear in these lands. Some of the best bananas can be found in Mbaise (quoting the current MD of UAC, Mr.ChidiOkoro, while delivering a paper at the 2016 end of the year get together of Mbaise Professionals Congress in Lagos recently). Cows, goats and sheep can be reared in virtually all parts of Nigeria. We can be self-sufficient in food if we all can embrace one aspect of farming or the other. Time for white collar jobs has passed. We need to face the reality.
Growing up in the Eastern part of Nigeria, I saw that almost every family had a small stable for rearing goats and other types of livestock. All that needed to be done every day was that one went into a nearby bush, fetched palm fronts and other forms of grass to make fodder for the livestock. At that time, we had a strong rural economy where families could sell some of such livestock to meet their financial needs (including payment of school fees) from time to time. Unfortunately today, you can hardly see such ventures in most villages. We need to return to this economic model. Import dependence has become a paradigm within the Nigerian society. The East depends so much on the North for meat and dreary products, yam, tomatoes and pepper. Everything we need today must be bought from the market. We need to imbibe a self-sufficient mindset. This is the only option we have.
Agriculture remains the most vital sector capable of generating inclusive economic growth, savings for investment purposes and foster national development. The opportunities in the agricultural sector are many. For instance, over 65% of fruit juice consumed in Nigeria are made from orange and pineapple. This market is supported by a growing youth population. Oil palm adds about N221 billion annually to GDP and employs about 4 million people. Yet, only about 11% of Nigeria’s arable land is cultivated. In many rural communities, family lands have been split into very tiny and useless portions. Such small portions are neither big enough for farming nor building. Such lands can be pulled together by the community and converted to large palm plantations proceed from which can be shared according to defined proportions. The demand for agricultural products outstrips its supply. This is a yawning opportunity.
Poultry, piggery and fishery businesses seem to command the most attention of our young farmers. This is a positive sign and as such, commendable. We, however, advise that before engaging in such ventures on a large scale, proper consultation with experts should be undertaken. Such businesses must comply with public health and safety standards, or they will be penalized by government. Experience that is the best teacher is that of others. Proper financial and operational planning remain critical success factors in every entrepreneurial endeavor.
I wish all our readers a happy and prosperous new year.
By Oguh Mark, FCA
NB: Mark Oguh, a Fellow of Institute of Chartered Accountants of Nigeria and a Financial Management Expert wrote in from St. Anthony’s Parish, Gbaja, Surulere, Lagos. Contact email@example.com
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