Economic Downturn in Nigeria: Examining Its Causes and Effects on the Nation -By Ogbevire Victor Oghenevwegba

Just as David Cameron posited, the economy is the start and end of everything. This is to say that a country cannot have any societal reforms without its economy. Without the economy, there cannot be any educational, political, or health reforms, etcetera; because it is the economy that determines what is done. However, before discussing this topic in detail, it will be suitable to first explain what economic downturn, or recession, is all about.

According to the Oxford Dictionary, recession is the state of economic decline; a widespread decline in the GDP, employment and trade of a country; lasting from six months to a year. The adjectival term, “economic”, simply means “related to an economy or economics”. Economy, is seen as the system of production and management of material wealth, as related to a particular country. Economics on the other hand, according to Prof. Lionel Robbins, is the science that studies human behaviour as a relationship between ends and scarce means that have alternative uses. Lastly, “downturn” simply denotes a period or process whereby a business or an economic activity is aggravated. Having established the possible connotations and denotations of the basic terms of this subject, we can now move further to substantiate it with the basics.

According to Robert Foster Bennett, “As sure as the spring will follow the winter, prosperity and economic growth will follow recession.” This is to say that first, economic recession will always come and go like a visitor; and secondly, that even when it happens to exist, it will later be conquered by prosperity and economic growth. Nigeria, Africa’s largest and the most populous black nation in the world, has faced various economic challenges in these recent years, culminating in great economic downturn. Although it is not easy to pinpoint what exactly causes recession in an economy, some probable factors are responsible.

First, excessive inflation and deflation can cause economic recession. Inflation is a general and progressive increase in the price of commodities; while deflation on the other hand, as the name implies, is a contraction of economic activity, resulting in a decline of prices. When prices suddenly go high, it causes economic downturn because it reduces economic activities. Similarly, deflation also causes economic recession because when the price of commodities become too low, it reduces the amount of money to be generated from the economy.

Secondly, unemployment and stagnancy of wages/salaries can be a major scourge of economic recession in Nigeria. When more people are unemployed, the rate of taxes to be paid is reduced, leading to low generation of federal government revenue. Similarly, economic downturn is unavoidable when the payment of the few employed people in the country are constantly fixed without any increase; because if the people cannot increase their income, how can they contribute financially to the growth of the economy?

More so, deregulation can cause economic recession because when government’s regulations are removed from any domain of the economy, it gives the workers in that area the negative opportunity to exploit the masses as they so wish; and this can further lead to financial crisis.

Again, currency level is not out of place in discussing the causes of economic downturn in Nigeria. The low currency of Nigeria, compared to other more developed countries like the States, U.K, Britain, and so on; still go a long way in bringing about economic downturn.

Economic downturn has some negative effects on the country; which we are now going to peep into. First, during economic downturns, Nigeria typically experiences challenges such as reduced government revenues, currency depreciation, inflation, high unemployment rates, reduced foreign direct investment, and decreased consumer spending. These factors can lead to lower economic growth, increased poverty levels, and social unrest.

Moreover, petrol subsidy has been removed. The petrol subsidies strained Nigeria’s public accounts, contributing to a situation where higher global oil prices hurt rather than help the economy. Removing them should free up public resources for allocation to growth and recovery. But it has raised the petrol price by 200 percent.The Nigerian economy heavily relies on oil exports, which exposes it to instabilities in global oil prices. When oil prices decline, it often lead to significant economic challenges for the country.

Also, the rise in cost of fuel has affected the prices of commodities around the country. The first hit, being the vehicle users, having to purchase fuel or diesel for a price they can hardly afford, causing them to raise the prices for transport; both intra and inter states.

More so, marketers also have to increase their prices as a result of the transport fee that they pay which has been increased, making almost everything we buy more costly than it was weeks or months ago. Comparing the now and the then is not even healthy. How would those who once bought a sachet of water for 5 naira, feel now when the price has been increased to 20 naira?

Conclusively, we have seen that the negative effects of the economic recession in Nigeria are becoming too alarming; and if allowed to continue, can lead us to a devastating state of the economy. Therefore, it is advisable that the government should do something necessary to remedy the situation for the general growth of the economy.

Ogbevire Victor Oghenevwegba,
Faculty of Law,
Delta State University, Oleh Campus.