When recession will end: Experts’ predictions

Economists and experts have expressed divergent views on when Nigeria is likely to get out of recession. The economy sank into recession as the nation’s Gross Domestic Product (GDP) dropped to a record low of 2.06 per cent in the second quarter of 2016. Vice President Yemi Osinbajo attributed the recession to the persistently low oil price and disruptions in crude production as a result of attacks on oil facilities in the Niger Delta region. He pointed out that the nation now loses over one million barrels of crude oil on a daily basis.
Recently, the Central Bank of Nigeria predicted that Nigeria will come out of recession by December as the worst was over. But a professor of Economics at Ahmadu Bello University, Zaria, Muhammed Muttaka Usman said recession will end between six to eight months only if the government takes certain practical steps. “The only economic solution to recession is to spend more, give more money to the people so they can spend and invest. Then production will pick up and the recession will go,” he said, adding that unfortunately, what pushed the recession faster is because the real economy and real sector, made up of manufacturers and small scale industries are shrinking, while banks are booming.
Usman added that the federal governments present economic stance will not favour the economy or help end recession because they are not lending money, but squeeze people out of it through Treasury Single Account (TSA) and other policies, which pushes states to pay only as they earn, thereby squeezing workers financially.
The professor also pointed out that the move to sell Nigerian assets will only backfire instead of help the country, because it will belong to the private sector, which is made up of people that don’t invest, but who are waiting for the resources of government to be handed over. “Take for example the case of NEPA and NITEL and any other,” he said. “We have done a study which shows that 70 per cent of the companies that were privatised were closed down in the second year. It means it is not economical to privatise. There is no regulatory mechanism to say, these are the things that should be done after privatisation.”
But how did Nigeria find itself in such a precarious situation? The professor of economics explained that it started with debt repayment to Paris Club which compromised about 70 per cent of the total recurrent and capital budget for education and 110 per cent of both capital and recurrent budget for Health. “So, in any economy that has to develop, these two sectors are key,” he said.
The second issue was when Asset Management Company of Nigeria (AMCON) was established to buy the bad debt of the private sector. “So the private sector messed themselves up in the banking sector. AMCON was established to buy the bad debt of the banking sector so it will not collapse. The banking sector is wholly owned by the private sector. And the debt is bought after they have messed themselves up by taking a lot of cash from the Central Bank,” he said and sighted an example.“For instance, today there is about N6 trillion bad debt being housed by AMCON and therefore they paid the banks that amount of money. So the banks have over N6 trillion at their disposal.”  As a result of that action alone, because that N6 trillion given to the banks is now taken as liability to the Central Bank, it loses its authority over monetary policy.
A professor of Financial Economics at the University of Uyo, Professor Leo Ukpong, narrowed the end to recession to a minimum of six months for Nigeria if all the necessary expansionary monetary policies are put in place and implemented by the federal government.
“It took us a long time to get there and it’s going to take a little bit longer time to get out,” he said. “I don’t think we’ll be out before December.”
Ukpong said the worst case scenario means that the recession would linger for as long as the middle of next year, translating into more job cuts and lack of liquidity in the economy.
The Head of the Economics Department of the University of Abuja, Professor Sarah Olanrewaju Anyanwu, said Nigeria is unlikely to get out of recession before the end of the year. “The time is too short,” she noted, adding that very soon, before December, there will be a mopping up of unspent fund and that there have not been advertisements to carry out some of the projects that will boost the economy. Also, the due process involved in contract awards and procurements take time and this may cause delay.
Anyanwu advised government to initiate reforms that can pump in money into the economy to increase the purchasing power of Nigerians. One of such ways is to diversify the economy, expand the revenue base of the government and continue to fight corruption so that the limited resources do not go into the pockets of few individuals.She also urged the federal government to revisit the TSA policy as the economy is starved of money.
Similarly, president of the Abuja Chamber of Commerce and Industry, Mr. Tony Ejinkeonye, said the Chamber totally disagreed with the federal government’s promise that recession would be over by December this year. He pointed out that it takes a minimum of five years for any country to recover from economic recession and that the federal government has no physical measures in place to determine that the country would be out of the woods in the next three months.
“We have economic recession, economic recovery and economic boom. It takes a period of five years for a country to recover from recession before it can start talking of economic boom,” Ejinkeonye said, adding that Nigerians are yet to know the physical measures the government has put in place to know whether we are on the right track. “Even when the right decisions and policies are set out, we do not agree that recovery will come too soon.”
Ejinkeonye said government is not doing what it should to determine that the country will be out of the recession, and that the government is either economical with the truth or not telling what is really happening. He added that unless the federal government has a short term programme that will check the current economic hardship being faced by Nigerians, ending the crisis by December might be a mirage.
Dr. Aminu Usman, a lecturer at the Department of Economics of the Kaduna State University also does not see the end of recession in sight. This is because the policies needed to take Nigerians out of it are either not in place or are uncoordinated. He gives an example: “While Minister for Finance is calling for rates cuts, CBN Governor came out to say interest regime stays. Are they working together?”
Usman stresses that what this recession means to Nigerians is obvious. It means hunger; it means reduced quality of life, inability to take care of simple life demands, more job cuts, poor sales, reduced purchasing power, and so on.
What are the short term measures? The lecturer said one is for governments at all levels to spend with intent to reflate the economy. This means, food import must be allowed to cut on food inflation and the states must stop arbitrary increase in taxes and other unnecessary levies. In this way, citizens will also have to be patient with the government for the time it will take for the measures to be effective and sanity restored to the economy.