‘Nigeria can shorten her worst recession in 33 yrs’

By Tunde Shorunke & Tunde Opalana

Following the announcement by the National Bureau of Statistics (NBS) that Nigeria has slipped into its worst recession since 1987, industry experts have outlined how the country can easily cut short the latest economic downturn.

The NBS latest figure has shown that the nation’s Gross Domestic Product (GDP) in real terms contracted by 3.62 per cent (year-on-year) in the third quarter of 2020.

Analysts who spoke with The Daily Times believed that if the federal government can come up with the best of economic policies and programmes to navigate the economy, Nigeria may be out of recession in no time.

The recession which was seen as negative impacts of the pandemic is expected to abate soon as news of vaccines is becoming true, also, economic activities are picking up and oil prices are improving in the global market.

It is, however, worthy of note that the last time Nigeria recorded such cumulative GDP was 33 years ago when GDP declined by 10.8 per cent.

According to the World Bank and NBS figures analysed by The Daily Times, this is the second recession under President Muhamadu Buhari’s democratic reign and his fourth as head of state.

Although, 1983 recession not directly attributed to him, since he took power on the last day of the year, while the 2016 economic recession was as a result of a massive decline in oil prices, and poor management of the currency crisis.

Responding to an inquiry posted by our correspondent, a Financial Engineer and Chief Executive Officer (CEO) of Wyoming Capital & Partners, Tajudeen Olayinka explained that government cannot avert a recession that is already here with us. But can work hard, by coming up with best of economic policies and programs, to navigate the economy out of recession.

According to him, when something is expected, it shouldn’t be a shock to you anymore or throw you off-balance when it finally arrives.

Because the recession was expected, the recession has come, and it came from an unusual source, which is known to have largely affected the global economy unevenly.

So, there’s no need for noise-making or condemnation of the government.

“The only problem I have with the Nigerian government is their nonchalant attitude in implementing some of the economic recovery programs they are currently running, which could have averted recession if they had commenced implementation early enough in July 2020.

“Nigeria had the latitude to avert a looming recession in July. Regrettably, they commenced implementation in mid-September when it was already too late.

All the same, the magnitude might reduce in the 4th quarter of 2020; that is if it becomes a U-shaped recession.”

Speaking further, he noted, “Globally, stock markets are seen to be the barometers of the economy, and so, the Nigerian stock market had factored impact of the recession on stock prices and market indices, even before the arrival of recession; the same way it is happening all over the world.

The fact that the Nigerian stock market is still largely undervalued, attests to the fact that we should be out of recession soon.

“You can also, see what to expect from the results announced by public companies in their third-quarter accounts.

Those were comparatively excellent results, because of the unusual operating environment they had to navigate in the course of the global pandemic and total lockdown. We should be out of recession soon,” he added.

Also, in an exclusive interaction with the Head, Investment Research & Business Development, PAC Holdings, Moses Ojo, pointed out that the recession is not expected to last long with the news of the availability of vaccines are becoming true, adding that the federal government should ensure incentives to Small Medium Enterprises and reopening of the land border.

“Firstly, we need to understand that the current recession was due to the pandemic. Therefore, it is not expected to last long; with the news of the availability of vaccines are becoming true.

The negative impacts of the pandemic including economic recession are expected to abate.

As economic activities are picking up and oil prices are improving in the global market, the recession will also abate.

“The policymakers are expected to embark on expansionary fiscal policies through infrastructural spending in other to pull the economy out of recession on time.

“Moreover, there’s a need to provide incentives to SMEs to reduce the impacts of the recession on the small businesses which may include the opening of the land border,” he added.

Meanwhile, in an open letter to President Muhammadu Buhari, the Socio-Economic Rights and Accountability Project (SERAP) has asked the President to put the country’s resources at the service of human rights and to support the less well-off to enjoy an adequate standing of living through cutting the cost of governance and implementing bold transparency and accountability measures in your government’s response to Nigeria’s second recession in five years.

In the letter dated 21 November 2020 and signed by SERAP deputy director Kolawole Oluwadare, the organization said: “This economic crisis provides an opportunity to prioritise access of poor and vulnerable Nigerians to basic socio-economic rights, and to genuinely recommit to the fight against corruption.

The country cannot afford to get back to business as usual.” “As the National Bureau of Statistics stated, the country’s GDP recorded negative growth of 3.62 per cent in the third quarter of 2020.

The country had earlier recorded a 6.10 per cent contraction in the second quarter.” “SERAP, therefore, urges you to prioritise citizens’ socio-economic rights and undertake comprehensive reform to stem grand corruption including in MDAs, hold corrupt electricity contractors to hold, fully recover all stolen public funds, and life pensions collected by former governors and their deputies, and ensure transparent and accountable spending of any recovered public funds on projects that will directly benefit poor and vulnerable Nigerians.”

Meanwhile, the Peoples Democratic Party (PDP) has asked President Muhammadu Buhari and the All Progressives Congress (APC) to accept their failure and allow competent, transparent and honest hands to effectively manage the economy, as that is the only way to save the nation from an imminent economic collapse.

The PDP asserted that the report by the National Bureau of Statistics (NBS) that the economy has plunged into another recession under the APC confirms its stand that the Buhari Presidency and the APC lack the competence and integrity to run a national economy.

The party said the report shows that the Buhari administration and the APC “have been lying to Nigerians with false performance claims when they know that they have, in a space of five years, wrecked and plundered our economy which was rated as one of the fastest growing economies of the world, when they took over from the PDP.

“Indeed, President Buhari will be the first President, in our history, to score a hat-trick, in plunging his nation into economic recession, both as military and civilian leader.

“The economic recession we face today is a fallout of President Buhari and APC’s restrictive, vindictive and anti-trade policies, bizarre foreign exchange controls and monetary policies that impede growth, an over-bloated public sector that encourages waste and incurable corruption, reckless treasury looting and failure to decisively deal with the escalated insecurity, which has destroyed economic activities in most parts of our country.

“While the Buhari Presidency pretends to be running a free market economy, it is in reality, running a corrupt exclusionist market economy tailored to service the interest of a selfish few while frustrating millions of hard working Nigerians with restrictive policies, lack of access to incentives and support as well as high taxes and levies.

“This has crippled domestic production and competiveness, eroded investors’ confidence and occasioned a dearth in foreign direct investment, leading to the economic contraction we have continued to witness under Buhari’s watch.”

The PDP asked President Buhari to end the corruption and divisive tendencies of his administration and allow a free market economy so that more Nigerians will actively participate in the economic space to boost our productive sectors and bring our economy back to its feet.

Party’s National Publicity Secretary, Kola Ologbondiyan in a statement Sunday said “presently, over 60 million hard working Nigerians have been rendered redundant by the harsh economic policies, including cumbersome protocols and high taxes foisted by the APC administration.

“The failure by the Buhari administration to heed to demands by Nigerians to rejig our security architecture has also worsened the level of insecurity in many parts of our country leading to the closure of millions of businesses, with over 30 million of our farmers abandoning their farmlands, while commercial activities on our trade corridors have been destroyed.

“Besides, our party had cautioned against the increase in fuel price, which has impacted negatively on the disposable incomes of Nigerians.

We however insist that poor management and not the high cost of crude oil in the international market is responsible for high costs of domestic price of fuel.

“This is because, in its laziness, the Buhari administration failed to put structures in place to boost domestic competiveness for favourable market forces-induced pricing before the so called deregulation of the oil sector.

“Also, we note the negative impact of the closure of our borders by the Buhari administration, without encouraging local production, just to create an impression of food sufficiency, when it knows that it has not achieved any improvement in food production.

“If the Buhari Presidency had listened to wise counsel by well-meaning Nigerians, including our party, to end its corruption, lift its restrictive polices, reduce taxes and state imposed prices, and get more competent hands to tackle insecurity, our nation would not be in this dire strait.

“Moreover, if the over N14 trillion oil money as well as the billions of naira stolen in the Federal Inland Revenue Service (FIRS) and other MDAs by APC leaders are recovered and injected into our economy, our nation would not be in such bad shape”.

The party asked Nigerians to hold the Buhari Presidency and the APC responsible for the hardship they suffer today.

Also, former vice president, Atiku Abubakar has raised the alarm that the Federal Government may be unable to implement the 2021 budget which he described as untenable.

He emphatically said the country is broke and needs critical leadership to guide her back to the path of economic sustainability.

The presidential candidate of the Peoples Democratic Party (PDP) in the 2019 general election regretted that Nigeria slide into a second recession in five years but insisted that the situation could have been averted should the government acceded to economic advises.

Atiku in a personal statement on Sunday blamed the Nigerian government for failing to cut the cost of governance, saving for a rainy day, and avoiding profligate borrowing.

He also said “the COVID19 pandemic has exacerbated an already bad situation, however, we could have avoided this fate by a disciplined and prudent management of our economy”.

To revamp the economy, he charge government to act now, by taking necessary, and perhaps painful actions. Proffering solutions, he said “for a start, the proposed 2021 budget presented to the National Assembly on Tuesday, October 8, 2020, is no longer tenable. Nigeria neither has the resources, or the need to implement such a luxury heavy budget.

“The nation is broke, but not broken. However, if we continue to spend lavishly, even when we do not earn commensurately, we would go from being a broke nation, to being a broken nation.

“As a matter of importance and urgency, every non essential line item in the proposed 2021 budget must be expunged.

For the avoidance of doubt, this ought to include estacodes, non emergency travel, feeding, welfare packages, overseas training, new vehicle purchases, office upgrades, non salary allowances, etc.

“Until our economic prospects improve, Nigeria ought to exclusively focus on making budgetary proposals for essential items, which include reasonable wages and salaries, infrastructural projects, and social services (citizenry’s health, and other human development investments).

“Additionally, we have to stimulate the economy, by investing in human development, and increasing the purchasing power of the most vulnerable of our population. Only a well developed populace can generate enough economic activity for the nation to exit this recession.

“We must invest in those most likely to be impacted by the effects of the recession, the poorest of the poor.

As well as stimulating the economy, this also ensures that they do not slip further into extreme poverty.

“For example, a stimulus package, in the form of monthly cash transfers of ₦5000 to be made to every bank account holder, verified by a Bank Verification Number, whose combined total deposit in the year 2019 was lower than the annual minimum wage.

“Now, how will this be funded? By more profligate borrowing? No. I propose a luxury tax on goods and services that are exclusively accessible only to the super-wealthy.

A tax on the ultra wealthy to protect the extremely poor.

“A practical approach to this is to place a 15% tax on all Business and First Class tickets sold to and from Nigeria, on all luxury car imports and sales, on all private jets imports and service charges, on all jewellery imports and sales, on all designer products imported, produced or sold in Nigeria, and on all other luxury goods either manufactured, or imported into Nigeria, with the exception of goods made for export.

The proceeds of this tax should be exclusively dedicated to a Poverty Eradication Fund, which must be managed in the same manner as the Tertiary Education Trust Fund, or the Ecological Fund”.

Atiku further proposed that a one percent poverty alleviation tax to be legislated by the National Assembly on the profits of every International Oil Company operating in Nigeria, and international airlines doing business in Nigeria, which should also go towards the proposed Poverty Eradication Fund.

He argued that it is inhumane for us as a nation to increase the cost of goods and services that affect the poor, while keeping the cost of luxuries fairly stable. We must flip this, and flip it immediately.

The politician cautioned government to stop borrowing for anything other than essential needs, stressing that borrowing to pay salaries, or to engage in White Elephant projects, is not an essential need.

He said “this is particularly important as we need cash at hand, because the world and our economic and development partners are also focused on helping their home economies overcome the effects of COVID19. We must be our own saviours.

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“The more we borrow, the more we will need cash to make interest and principal payments, and the less cash we will have to make necessary investments in our economy and our people.

If we keep borrowing, we stand the risk of defaulting, and that will make recession a child’s play, because we will lose some of our sovereignty.

Atiku urged the administration of President Muhammadu Buhari “to swallow its pride, and accept its limitations, so that they can open their minds to ideas, without caring who the messenger is”.