As the clouds of a global recession thicken over the world economy, the question to ask now is no longer if, but when, it will happen. Many countries are already preparing for the blizzard, as all leading indicators suggest it may be hard to avoid the doldrums. Since the outbreak of the war in Ukraine and its attendant disruptive impact on international trade and the broader business and macroeconomic environment, economists have warned of an inevitable downturn in output of goods and services.
And only two weeks ago, the World Bank warned that countries around the world were in the danger of plunging into recession. This did not come as a surprise as already, the effect of the war is biting hard: prices of staple commodities and energy are at historic-high levels, straining standards of living across the world and exacerbating already stressed fiscal resources, as governments seek palliatives to mitigate potential social response from the populace.
- Spike in COVID-19 cases: Why you should get vaccinated
- ASUU strike: Electricity, bank, aviation workers join NLC nationwide protest
Incidentally, while people are finding it difficult to cut their consumption to new realities, production isn’t going to recover so fast to bridge the gaps between demand and supply.
Monetary policy authorities across the world are aware of the crisis and they are proactively responding, with streams of interest-rate hikes. From the United States to the United Kingdom, Canada, Australia and indeed the monetary policy committee in Nigeria, the pre-emptive measures have never been as hawkish as we have seen in recent times. The new stance of Nigeria’s MPC is very clear in the sharp U-turn made at the May 2022 meeting of the committee, when the benchmark interest rate was raised to 13.0%, in an aggressive mode not seen in recent times. Yet, not satisfied with the impact, the committee on July 19 2022 announced another hike in the policy rate to 14.0%, as it reinforces its target to rein in the rising headline inflation rate, which rose to 18.6% in June, the highest since February 2017.
Sadly, these economic uncertainties are happening against the backdrop of the COVID-19-induced recession, from which many countries, including Nigeria, are yet to recover fully. Here we are, faced with the reality of another possible recession episode, but the main issue is how prepared are we?
Nigeria needs coordinated fiscal and monetary policy measures to mitigate the potential impact of this looming recession. Such a response package must be firm and primed to produce the best possible result. It’s a supply shock crisis, so policies should be aimed at addressing production efficiency and expansion, as against often-misplaced priorities of fuelling consumption. The managers of the economy must be proactive to avoid inflating the poverty crisis. As many economists have argued, a boom-bust cycle is an integral part of a capitalist economic model, but what Nigeria lacks is the ability to develop and execute reforms to create or harness the boom. Rather, we always suffer the global burst due to the country’s vulnerabilities. It is more so that Nigeria depends mainly on primary commodities, with little or no value addition.
In this regard, Daily Trust hereby calls on all institutions charged with the responsibility of managing the economy to rise to the challenge, collaborate towards developing appropriate policy responses and more importantly execute effectively on initiatives capable of repositioning the Nigerian economy for resilience, with a focus on reforms in the real sector.
This is no time for another grandiose design lacking reality or political capacity. It’s time for real action. It’s not a time to throw money around, but rather a time for actual reforms that can create sustainable progress across different sectors of the economy. The National Economic Council should have its work cut out early, with effective support from institutions such as the Central Bank of Nigeria, Ministry of Finance, Budget and National Planning, Debt Management Office, among others, and of course partnership with the organised private sector.
It is important to once again call on the government at all levels to check their ostentatious lifestyle and wasteful spending of public resources. Generally, recession all over the world calls for sacrifices. This often comes in the form of a change of lifestyle to accommodate the reduced incomes and availability of resources. Also, whatever preparation Nigeria makes for the foreseen turn of events in the economy must tackle the pervading insecurity in the country, as it now poses a potent threat to the nation’s food security by making farming a risky venture. If farmers cannot go to the farm and we cannot feed ourselves, we may be heading toward a major crisis than we can anticipate.
With less than a year to the end of the administration, it is not too late to get our refineries to work as promised and the NNPC should step up whatever it is doing to get them running, be it through concession, rehabilitation, or privatisation. At this point in the discourse of the refineries, the end is probably more important than the means. All efforts must be made to avoid another recession.
Join Daily Trust WhatsApp Community For Quick Access To News and Happenings Around You.