Plummeting Recession And The Unending Common Man Endurance Messages -By Bamidele Williams

Bamidele Williams

The announcement last week by the National Bureau of Statistics (NBS) that the economy had slid into recession consequent upon negative growth in two consecutive quarters did not come as a surprise to many Nigerians. The handwriting like the biblical MENE, MENE, TEKEL, UPHARSIN had been clearly on the wall since last year that the economy was headed in that direction.

Recession, a slowdown in economic activities, comes with its characterized attendant pains— contraction of the economy, closure of businesses, loss of jobs and a plunge in the standard of living of the people, as a result of decline in revenue well defined by two or more consecutive quarters of negative economic growth.

Technically, if you have two periods of negative economic growth, you are technically in a recession. Technically, we are in a recession as a nation.

The Central Bank of Nigeria’s Monetary Policy Committee had warned the nation since last year that unless drastic steps were taken, the economy would go into recession. Apparently, the warning was unheeded by the Buharinomists led administration, so the CBN’s prophecy has found fulfillment.

Every day, Nigerians are struggling with the cost of basic amenities as prices soar and the value of the naira depreciates against the US dollar. This rapid decline in growth marks the worst recession Nigeria has experienced since then Ibrahim Babangida regime, when the country declined by 0.51 and 0.82 in two consecutive quarters in 1981.

Three major culprits are responsible for the rising cost of commodities; they are the exchange rate volatility, the exclusion of the importers of some items from access to the forex market as well as the increase in pump price of petroleum products.

The expectation of the business community would be that the President Buhari government after his 2015 victory would liberalise the foreign exchange (forex) market so allow the true value of the local currency to be determined by market forces given the critical reduction of the country’s reserves and following the crash in the price of crude oil in dented manner.
The dollar scarcity, which scaled down manufacturing activities while forcing up prices of many commodities, played a significant role in the contraction of the economy in the first quarter, January to March.

It was while the economy was trying to resolve the crisis of the crash in the value of naira that the government announced the full deregulation of the downstream sector of the petroleum industry which pushed the price of petrol to N145 from the erstwhile N87 per litre. The resultant effect was instant; prices of many commodities went up just as the cost of transportation also skyrocketed.

The combination of the highlighted three factors has resulted in the further shrinking of the economy in the second quarter and the seemingly unprecedented rise in prices of commodities. Even the NBS admitted that the increase in the price of petrol played a significant role in the spike in prices of commodities.
This explains why a bag of rice which was sold for N10,000 in January this year has gone up to N20,000 by the end of August.

Just last week, Media investigations revealed that Diamond Bank Plc, Heritage Bank Plc, Zenith Bank Plc, First Bank Plc and Wema Bank Plc have reduced their workers’ salaries by as of August 31, 2016. This has also been confirmed by management sources and workers in the affected banks.

While Diamond was said to slashed salaries by 30 per cent, Heritage by 30 per cent, First Bank and Wema Bank workers’ salaries were slashed by 20 per cent each.

IS THIS NOW PECULIAR TO NIGERIA OR FIRST OF ITS KIND?

Cause of recession is inflation and poor handling of the economy, given that the higher the rate of inflation, the more impoverished people become, industrial production and GDP decline, resulting in massive job losses.
World history is full of many examples where genuine leaders take over countries whose economies are stagnated and move them to positive growth. Like Franklin D. Roosevelt, the president who ruled the United States from a wheel chair during the time of unprecedented economic depression(worse than recession) and total war, introduced an ambitious programme for recruit, recovery and reform called ‘the Great Deal,’ which began to yield considerable dividends in weeks and Americans are the better for it today.

At the root of the galloping inflation is the volatile foreign exchange. The inflation being experienced in the country is a cost-push one.
For as long as the naira continues to be worsted by dollar at foreign exchange market, the prices of imported commodities will continue to soar.

The government should bridge the gap between the interbank and parallel market rates. The over N100 gap between the two rates leaves room for a series of underhand dealings with the propensity for leaving the economy prostrate and the people poorer.
However, bridging the gap will also take the sail out of the wind of those who make a kill by engaging in round-tripping while buying the interest of genuine business people in productive activities.

The government also needs to cut down on the cost of governance. If the revenue according to the states has dwindled, it goes beyond saying that government expenditure on non-essentials ought to be scaled down.
Having a convoy of 15 vehicles accompanying a government official is not only a wrong deployment of scarce resources; it is also an unconscionable act capable of pitting the government against the people.

It is lamentably pitiful to know that at a time Nigerians are groaning under the yoke and chain of recession; members of the National Assembly (NASS) alone, comprising of the 109 senators and 360 members of House of Representatives are gulping a total of 6.78billion, 1.85billion and 4.93billion respectively, as their official salaries and allowances in one year with other over 18 numeration packages.
The presidency is not excluded here.
This demands an urgent review by the Revenue Mobilisation Allocation and Fiscal Commission.

The Federal Government needs to brace up with a view to stemming the tide of recession so that it does not degenerate into depression; a long lasting severe recession which will foist more hardship on the people. The government must shake off its lethargy and take decisive steps to bring the economy out of recession.

Nigerians are groaning. Common man is weeping. Salvage the situation. Nigerians are aging out of endurance.

Bamidele Williams
08134810254
profcube10@gmail.com

Bamidele Williams is a journalist, a public affairs Analyst and the convener of Pigeonpost News Agency.