Return of optimism is key to recovery
The growing division among Nigerians received a boost last week when the National Bureau of Statistics (NBS) released its report for the second quarter of 2017. But the division was not of the hate type. It was intellectual, centripetal, constructive and even enabling. Economic pundits sparred intensely on either side of a divide as to whether the recession has ended or somebody was juggling numbers; whether the numbers were statistical lies or empirical truths. Unlike the division caused by hate speeches (which some say have their origins in hate governance, hate leadership and hate policies at all levels of governance), this particular debate rallied Nigerians against a common enemy – the now “dying” recession. Some think it’s already dead while others think it is hibernating – the crux of the division and heated debate.
The report of the NBS has enjoyed a lot of media attention because, apart from the recovery of the President, the fact that the economy has grown, by whatever number, is probably the only good news Nigerians have heard lately. So the debate was healthy and fun, just as it was a source of contention among groups. The numbers show that the economy, which has been in decline since the first quarter of 2016, has turned around growing at 0.5 per cent, marking the beginning of her escape from the clutches of the lingering economic disaster fancifully named recession.
There are very few occasions when the town crier is confronted directly by the people to whom he announces the decisions of the elders. One of such occasions is when people no longer believe the elders. When leaders lose the confidence of the led through lies told professional (which, with due respect, is in the DNA of politicians), the town crier runs a risk of mob attack. If we liken the NBS to a town crier, it got a bit of that reaction last week when many Nigerians refused to accept the news of their good fortune that the economy has resumed positive growth and the recession was over. Indeed, the NBS looked like a town crier working for a group of discredited elders. This was evident in the Channels TV discussion with the Statistician General (SG), when he grappled with the words “my employers” thrust into his mouth innocently but uncannily by the brilliant Omofaye, the presenter of Business Morning. The SG almost disputed the fact that he has employers. And who wouldn’t, at such a cross road. Even as we speak, many are still going through the numbers with the proverbial tooth-pick to see if truly they were not statistical engineering.
There are certain facts we must bear in mind when looking at the behaviour of an economy in recession. First, there are key elements that must exist before a recession occurs. One is the decline of consumer spending. This decline, itself is not autonomous. It draws strength from other forces of economic contraction, including budgetary failures and policy misapplication. Once activated, the contraction in consumer demand acquires a life of its own and translates to an autonomous and self-reinforcing prime mover of economic decline. Before long, the entire economy will be engulfed in decline powered by negative expectation. As unintended inventory mounts, producers cut back on output and disengage idle factors of production, including labour. The loss of jobs reinforces the momentum of decline in consumer spending and the vicious circle proceeds like a hurricane.
Another factor of importance in a recession is the phenomenon of economic optimism or pessimism. When the economy enters this reverse gear, the people get apprehensive. They fear for their wellbeing and the security of their young ones – their education and all. As producers cut back on production they also cut back on all forms of investment. People expand their factories only when they expect that the market exists to absorb the output of such factories. But there is no such optimism in a recession. Instead, every economic agent becomes bearish and pessimism rules.
The questions to ask is: what has happened that led to the reversal of the decline? There is no way a recession can end without increase in consumer demand and a return to positivism, optimism and bullishness. These are some facts that should form part of the information emanating from relevant research authorities and institutions. In Nigeria, we treat symptoms and leave the disease. When children in secondary schools form cults, we form a Peace Corps to prevent them from leaving class and staying in the nearby bush. Meanwhile, they have no teachers and the school environment is fit only for rats and rodents, and other animals (and the cows know it so they now rest in the so-called class rooms). We must adopt modern, systematic and proven solutions to problems. There is nothing new under the sun; even terrorism. Only the strategies change and so should our solutions be dynamic.
We should be tackling the elements of recession, including negative expectations (economic pessimism and falling optimism) and looking at the reaction of productive sector investments, to be better able to pronounce on what the numbers say. For the avoidance of doubt, recessions do not reverse through a V-shaped curve. A trough in this regard, always implies a U-shape and this should be understood as we form expectations of the return to prosperity. In other words, mathematically speaking, the differential coefficient of the curve at the trough is not greater than zero because the trough is not V-shaped.
Nigerians, especially members of the Small Business Community, deserve a respite. We are not the only oil producing economy that experienced the decline in oil prices. The problem is that we are among the very few (assuming we have company) whose top leaders save public funds in the wardrobes of private bedrooms, and escape jail. Such economies labour in vain as the abyss remains the starting point of their fall. For any recovery to be sustainable it must begin with the turnaround of known recession pull factors, including negative expectation and pessimism. These are the core forces behind consumer demand.
Emeka Osuji