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Nigerian economy: Recession, depression and recovery

On 1st September 1980 during his Labour Day address speech at Liberty State Park, Jersey City, New Jersey on his presidential campaign trail, President Ronald…

On 1st September 1980 during his Labour Day address speech at Liberty State Park, Jersey City, New Jersey on his presidential campaign trail, President Ronald Reagan lectured his audience with what became a sure-fire applause line of his campaign that: “A recession is when your neighbour loses his job. A depression is when you lose yours. And recovery is when Jimmy Carter loses his.” Hardly a day pass over since the beginning of the year without hearing a comment, a remark, a report, or coming across an article analyzing the economy quagmire been faced by Nigeria. The recent open confession by the Honourable Minister for Finance, Mrs. Kemi Adesoun that we have gradually slide into the recession has open debates from financial and economic experts which in matters of days will make the topic as a rigorous academic and public discourse on how to bring our economy out of the dilemma. But, how can we keep a positive attitude during these tough economic times? It has now become an unavoidable topic that will come up in offices, business meetings, motor parks, lunches, market, place of worships and even social gatherings.
Every honest Nigerian either from the public or private sector, a shoe cobbler, a wheelbarrow pusher, a Beans cake baker, a vegetable seller or a kiosk owner will eagerly lament on how hard-hitting things have been in last few months. We don’t need a Noble Prize winner in Economics, IMF or World Bank Economists to tell us if truly our economy is going through a trying time. The last time we witnessed this kind of financial quagmire was during the 2007-2009 global financial crisis which our country was not immune from “crony capitalism” in which banks lent too freely to profligate corporate customers, while the financial troubles were rooted in excessive borrowing by individuals. Our economy almost collapsed under the weight of profligate corporate borrowing and stock manipulation.
The striking economic performance of Germany as the most viable, stable and superstar economy in Europe today has remained a reference point to many analysts. The outstanding performance of Germany which was often referred as “the sick man of Europe” between the late 1990s and in early 2000s shows that with good policies and institutional reforms, a sleeping or stagnating nation can rise to be a progressing one. The case of Germany was very spectacular as no forceful outside guidance was exercised for structural reform. Today, the success story of the German super economy has been a result of sacrifices, good governance, institutional reforms and strengthening of the economy sectors. Among the success made by the Germany in 10 years is that the country has gone from a landmark ruling that allowed tuition fees phased out completely to both domestic and foreign student to the fourth largest economy in the world.
The current financial crisis been faced in Nigeria did not only stop at the continuous fall in the global price of crude oil which currently is below $46.83 per barrel, but the rise in the exchange rates of major global currencies of Dollars, Euro and Pound Sterling. At the time am writing this piece, $1 sells for N422, €1 sells for N460 and £1 sells for N538 at Bureau De Change Rates. The alarming rise in the prices of foodstuff and other essential commodities is so worrisome and has become so unbearable to many categories of Nigerians that live in urban and rural areas. Now that the economic motor is driving along wrongly, most analysts and commentators need not put this down to President Buhari’s administration, but the failure of managing, planning, and savings from the era of boom witnessed by the past administrations. Unemployment has remained an unsolved problem before the emergence of the current administration.
The current economic challenges facing the country has necessitated that Nigeria must make some cruel choices, making them sooner is the best way to restore confidence. The government needs to do a better job of moving quickly to clean up its banking system and forex market once and for all, where officials’ reluctance to close “zombie” corporate borrowers, high-interest rate, forex cartels, and looters who contributed to the country’s economic stagnation. But Nigeria’s ability to endure such hardships and bounce back points to another lesson: the need for a sense of shared national purpose and willingness to sacrifice. Nigerians must rally to help their nation, spending less, saving more and learning to be more competitive. Nigeria needs a national consensus to reduce borrowing and to invest more in technical education, agriculture, mining sector and supports small-scale industries. We must also improve the business climate by upgrading corporate governance, promoting venture capital investment, redesigning policies for small and medium-sized enterprises, known as SMEs that will raise productivity, which is the only way to regain a sustainable growth rate.
In creating an encouraging atmosphere for our domestic industry competitiveness and establishing protection for our industries, we should properly align our companies with the national interest by changing the incentive system within which they operate. The tax structure should encourage industrial revival, particularly in industries which have been hit worst by unfair foreign competition. One simple but highly effective measure would be to shorten the depreciation schedules on capital investment and research spending. Meanwhile, capital gains taxes should be increased to discourage short-term thinking and reduce the incentive for entrepreneurs to cash out. We must halt the sale of key assets to foreign entities, we must also close opportunities for foreign corporations to compete unfairly against our home industries, we should move immediately curb our out-of-control spending on unnecessary programs and initiatives that are being financed by foreign debt, we should look to the way how other first world nations have established industrial superiority over us and try to copy their best policies.
In strengthening trade policies, our trade treaties should protect our country from predatory foreign countries and companies seeking to weaken or destroy Nigerian industry. To that end, tariffs should be erected where needed and where practical. Experience has shown that it is futile to expect other countries to adopt others policies on, for instance, fair and free competition. What we can do is control the impact of their policies on our economy. The most obvious tool we have is tariffs on imports. No doubt our tariffs would set off retaliation abroad. This can be achieved with the vows of “restoring fiscal sanity” starting from all arms of government, cutting the cost of governance, blocking of leakages, adopting standard procurement policies, reduce the cost of credit resources for domestic industry and support our export.
One such lesson is to accelerate all reforms, social security programs, ranging from anti-corruption actions, transformations of judicial and law enforcement systems to the construction of institutions to stimulate economic growth, restructuring the economy, make honest painful structural changes and establish a development Bank which will support priority sector of the economy so that Nigerian economy can find its natural bottom and resume its growth. The administration should also be wary of “Voodoo Economists” that will prescribe pills that will add more pains to our ailing economy. For Nigeria to get out of recession, depression and attain recovery, the current administration should embark on policies that will add value to all sector of the economy.
Yahaya wrote this piece from Abuja.

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