Recession: Understanding the present predicament (1)

There is no doubt that Nigeria is in dire economic straits right now. It does not matter what name we give the ailment that is ravaging the nation today. It is characterised by consistent negative growth rate of the Gross Domestic Product (GDP); a contracting industrial sector; high and rising unemployment with massive job losses in all sectors of the economy, rising levels of non-performing loans among the banks, massive and continuing loss of value by the local currency and inflation.

Some people say that Nigeria has gone into a recession while others are beginning to look at it as a depression. I know that neither of these two terms – recession and depression – is a dog. Dogs are known to be the friendliest animals and man’s best friends. In other words, none of the terms reflects anything good for a country. In trying to characterise the situation now afflicting the country, either of the terms recession and depression will do, depending on when one began to notice the declining economic growth figures in the country. The fact is that the Nigerian economy is facing one of the hardest times of its modern history and something must be done and unlike many activities of government, be seen to be done.

The genealogy of this crisis may be traced to two core factors: high level misconduct of government officials and the unforeseen developments in the oil sector. The tragedy began when the government of Nigeria was unable to give the country a budget to guide and drive economic activity until midyear 2016. The reason given for delaying a national budget for nearly six months into the year was that some people, who parade themselves as elected representatives of the Nigerian people, were alleged to have engaged in unwholesome acts of manipulation and alteration of figures in the budget. This act led to the refusal of the president to accent to the budget until such allegations were cleared.

This act singular act, which was termed budget padding, and the first of several padding allegations that would follow, set the stage for the current economic debacle unfolding today. By the time the budget was eventually approved, many negative consequences had gained traction and irreversibly. From a positive growth rate of about 2.11 per cent in the fourth quarter of 2015, the Nigerian economy contracted by about 13 per cent in the first quarter of 2016 – a trend that has continued.

This was the natural consequence of widespread apathy among economic agents. Companies were reluctant to enter into any serious contractual relationships as the economic direction of the new government refused to unfold. At the same time, crude oil prices continued to go on a southward spiral. Then, as if to show that every component of the Nigerian economy is running on a parallel trajectory and coordination was a happenstance, those in charge of the electricity sector decided that it was time to recover the costs they incurred in buying up our national patrimony – they increased the tariffs abnormally. This was one of many other “bad things” that happened in quick succession. The huge increase in electricity tariffs introduced more challenges to both firms and households all over the country, depleting the already diminished disposable income of the citizens. As we write, Nigerians are yet to accept the evidently weak justification (essentially “cost reflective tariff”) for the increase, as power supply continues to falter. The other bad thing was the act of God? – the collapse of oil prices.

As if the above challenges were too mild, the Central Bank, against the initial position of the President, and may be in connivance with our economic pundits and pseudo professors of economics, floated the naira, at a time when it lacked the capacity to intervene occasionally as is the tradition in floating exchange rate regimes. Today, the naira is lonely in a free market, probably the only free market left in the world, struggling with massive pent up demand that has been capped for too long by the same administrative incompetence now in play.

And the rest has become history beginning with the immediate and violent depreciation of the naira, which has now lost over 35 per cent of its value, standing at about N330/$ in the interbank market and over N375 in the parallel market; and getting worse. And to demonstrate the ignominy in which education is held historically in Nigeria, no transition arrangement was made, even if only for one semester to accommodate Nigerian children in schools all over the world. Today, as the dollar hits the roof, contrary to the postulation of the pundit who said that the higher exchange rate would increase supply, the market remains in disequilibrium. These children and their parents are now at sea on what to do to complete the current session before seeking transfer back to Nigeria.

Nigeria does not appear to have a history of a deep understanding of the fact that the future of any nation is determined by the kind of children it raises. The instances of this disregard for the future and the children are too many and too well-known to deserve a rehash in this piece. Suffice it to say that the present generation, like the ones before it but in a progressively increasing order, continues to focus on itself to the detriment of the future generations. This is why as the economy heads to a major depression, governments at all levels continue to speak glibly about economic diversification without a single bold step to reflect their resolve to achieve it.

The height of wickedness was recently brought to the open when those purporting to represent the people in the National Assembly displayed their insensitivity by attempting to give themselves immunity from prosecution for the looting of the treasury everywhere. Not even an honest attempt to reduce the unwarranted and excessive privileges of office, to encourage other Nigerians to take the obvious pains diversification would entail, has been made. On the contrary more allegations about budget padding are being revealed. To think that these are happening under the feared Buhari breaks my heart. It looks like the fear of Buhari is no longer the beginning of wisdom as they use the courts to frustrate the man.

Today, as the chicken comes to roost and the multidimensional consequences of a contracting economy unfold – massive death and attrition of SMEs, massive job losses, mounting bad loans occasioned by exchange rate differentials in facilities, highly weakened banking system calling for help, without which a disaster is imminent, inflation and erosion of purchasing power and the potential for social unrest, what should occupy us is how to stem the tide and reposition the economy. Unfortunately, it seems we are not yet ready to survive to say nothing about leading Africa. As South African leaders roll out homemade military hardware, ours are busy either shopping for safe haven for stolen public funds or secretly returning their loot.

Emeka Osuji