The massive disruption caused by the COVID-19 pandemic and the imposition of lockdown measures to curb the spread has thrown the global economy into a severe recession. As Nigeria struggles with the devastating effect of its most challenging economic recession for over three decades, economic experts and industry leaders have warned that poverty may be aggravated. No sector is excluded. The recession stalls major and expected developments forecasted in all the sectors of the economy. The need for collaborative and detailed implementation of fiscal and monetary incentives and reforms across the sectors has been emphasized by economic experts.
The weekend report by the National Bureau of Statistics (NBS) revealed that Nigeria’s Gross Domestic Product (GDP) declined by 3.62 percent in the third quarter of 2020, making it the second consecutive quarterly decline in GDP since the recession of 2016. The GDP dropped by 6.1 percent in the second quarter of 2020, a rare occurrence which was recorded as far back as 1987when GDP dropped by 10.8 percent.
The Lagos Chamber of Commerce & Industry (LCCI) disclosed that the nation is going through its worst economic times lately. The LCCI fears that Nigeria faces the double risk of a stumbling economy and rising inflation: what it describes as a true definition of ‘stagflation’. It stated that, ‘Sales are slowing, profit margins are being eroded, production costs are escalating, unemployment is rising, poverty situation is worsening, purchasing power is weakening and there is a general social discontent. Regrettably, and as if these were not bad enough, the business community continues to grapple with policy, institutional and regulatory challenges impeding investment.’
Although the reduction in the decline rate, from 6.1 percent to 3.62 percent, may indicate that the worst is yet to come, additional disruptions to economic activities may exasperate the economy which further impairs the recovery period. In light of this, the Federal Government launched the Economic Sustainability Plan (ESP) which is to set in motion the recovery of the economy from the damages of the COVID-19 pandemic. Vice-President Yemi Osinbajo disclosed that the ESP was developed with a stimulus package of N2.3 trillion to boost local production, prevent business collapse, and provide liquidity across various sectors. This includes mainly micro, small, and medium enterprises (MSMEs). The various opportunities entail expansion of activities in manufacturing and local production, as well as involvement in supply chain activities bordering on various industrial and service sectors. Furthermore, there would be direct procurement of pharmaceutical and health products from small businesses and support for small businesses in sectors seriously hit by the pandemic.
Bismarck Rewane, a notable economist and adviser to the Federal Government, pointed out that the Federal Government’s stimulus plan for the economy was insufficient to curtail the shortfall recorded by the NBS. ‘This recession is going to be longer than we thought, even though not as deep as originally feared. The recovery is going to be slow and painful, so policy actions and policy pronouncements have to be consistent,’ Rewane stated.
Dr. MudaYusuf, Director-General of LCCI, disclosed that to facilitate quick recovery, the nation needs to revive regularities in the foreign exchange market by ‘enlarging the scope of market expression in the allocation mechanism.’ Also, the port processes, particularly major institutions in international trade, need to be more investment-friendly since trade is a necessity for recovery. Adeniyi Adebayo, the Minister of Industry, Trade and Investment, disclosed that Nigerians in the diaspora are also key drivers of the road map to the recovery growth plan, as the government would leverage on the Diaspora resources. The minister also listed some of the measures put in place by the Federal Government to curb the effect of the pandemic which include the release of 200-billion-naira loans for micro small and medium enterprises in Nigeria. Policies are also being formulated to attract investments to Nigeria. Experts have also advised that the Federal Government increase support to the agricultural sector, and small businesses, to boost economic recovery and growth.
The reality of all the figures presented by market experts to the common man is grave. Families would have to grapple with more than 1.96% increase in expenditure on food items on a monthly basis, as against 1.88% that they (Nigerians) were struggling to manage in September. It therefore doesn’t come as a surprise that the price of bread has increased by 50%. Other food items affected by the inflation are potato, yam, meat, fish, and other nutritional foods. This is coupled with alcoholic and food beverages. Nigerians will also begin to lament the increase in its service sector which includes air travel, medical and paramedical services, road transportation, the price of essential drugs, maintenance of personal vehicles, high cost of hairdressing salons and personal grooming, amongst others.
QPhoto Credit: awmagazine