A news analysis by Folasade Akpan of the Nigerian News Agency (NAN)
With the National Bureau of Statistics (NBS) report on the nation’s Gross Domestic Product (GDP) contracting by 3.6 percent in the third quarter of the year (Q3 2020), it was official that Nigeria had slipped into recession during the second time in five years.
According to the NBS, as a whole, the economy contracted by -2.48%, which represents an improvement of 2.48% over the growth rate of -6.10% registered in the previous quarter (second quarter of 2020) .
He also indicated that in 2020 there had been two consecutive quarters of negative growth.
“Additionally, growth in the third quarter of 2020 was slower by 5.90 percent compared to the third quarter of 2019, which recorded a real growth rate of 2.28 percent year on year.”
He said the economy in that quarter reflected the residual effects of restrictions on movement and economic activity implemented across the country early in the second quarter in response to the COVID-19 pandemic.
President Muhammadu Buhari, declaring the 26th Nigerian Economic Summit open, said that the recession came about due to the global recession caused by the COVID-19 pandemic.
Buhari, who was represented by Vice President Yemi Osinbajo, said the country’s GDP drop came after 12 consecutive quarters of positive growth.
He said the recession caused by the pandemic included lockdowns, disruptions in global supply chains, business failures and rising unemployment.
“We all remember that during the confinement agriculture was not carried out, businesses were closed; schools were closed as were hotels and restaurants. Additionally, airlines stopped flying, while interstate commerce was disrupted.
“The economy only started to recover when these activities resumed and if we are able to sustain the almost three percentage point increase from the second quarter slump of minus 6.1 percent, the performance in the fourth quarter could take us into positive territory. ” he said.
However, David Ibidapo, an economic and financial analyst, said the recession was expected due to the closure and other factors such as the closure of the border.
According to him, it is worse because the pandemic hit at a time when Nigerian fundamentals were very weak and there were still some structural problems that the fiscal and monetary authorities have not addressed.
“If we remain in this state without implementing some key reforms in key sectors of the economy, most especially in our foreign exchange market, if such a devastating impact as the COVID-19 pandemic hits again in the near future, we may return to , if not worse than what we are currently experiencing in 2020.
“A great disgrace for Nigeria is the fact that we are highly exposed to fluctuations in the oil market and our foreign exchange reserves are highly dependent on the performance of the oil market.
“Therefore, we must diversify our income base and that can be done if only the tax authorities can identify other key sectors of the economy such as agriculture and start looking at how to boost economic activities in those sectors.
“If we look at the proportion of our crude oil exports with respect to the total export, it is higher than 90% and that means that our main export is crude oil, so we do not necessarily have to reduce the proportion of oil exports. , but also increase the export reasonably and significantly. in the basic products we produce. “
He also recommended that the Central Bank of Nigeria (CBN) should take the bold step of unifying the nation’s foreign exchange market.
Dr. Aminu Usman, Dean of the Faculty of Social Sciences at Kaduna State University, said the oil price war between Russia and Saudi Arabia earlier in the year also contributed to the current state of the nation’s economy.
“However, above all there is the refusal of successive governments to move the country away from excessive dependence on oil, which is the main cause of the economic challenges that regularly affect Nigeria.
“If the government had focused on the real diversification of the country’s sources of income, away from excessive dependence on oil, we could have mitigated the impact of the pandemic and the oil price war.
“So far, our solid minerals sector and agriculture sector remain largely untapped to their potential.
“Another cause of the recession is the government’s inability to stop the threat of insecurity that prevents agricultural activities for commercial and subsistence agriculture.”
According to Usman, Nigeria should start taking proactive economic management measures and move away from reactive policies because they tend to come too late.
He added that the federal government must ensure that the current attempt to reintroduce long- and medium-term development planning is sustained and supported by law.
He said that all levels of government should be required by law to fully implement the provisions of the development plan once it is completed.
“That way you can follow a predetermined course to a logical conclusion with all your hands on deck. Quick fixes can only be short-term and temporary. “
Finance Minister Ms Zainab Ahmed said the current recession would be short-lived, as the government and key stakeholders were proactively working together to implement sustainable measures to reduce and improve the situation.
According to her, despite the recession, Nigeria had outperformed many economies in terms of economic growth.
He said that the Federal Government was fully aware of the current economic situation and was working round the clock to reverse the trend and restore the economy on the path of sustainable inclusive growth.
Ahmed said that to achieve such growth, the government developed a sustainability plan to cushion the effects of the pandemic and was already implementing policies aimed at stabilizing the economy.
Some of the measures are taking steps to stimulate the economy avoiding business collapse by ensuring liquidity and retaining and creating jobs by supporting labor-intensive sectors such as agriculture and direct labor interventions.
He said the government was also undertaking investments in infrastructure to enhance growth and create jobs in roads, rails, bridges, solar energy and communications technologies.
It also promotes local manufacturing and production at all levels and advocates the use of Made in Nigeria goods and services as a way to create employment opportunities.
The government also aims to achieve self-sufficiency in critical sectors of the economy and curb unnecessary demand for foreign exchange that could put pressure on the exchange rate.
The World Bank Group also said it had approved $ 1.5 billion for Nigeria’s Additional Financing projects COVID-19 Action Recovery and Economic Stimulus – Program for Results (Nigeria CARES) and State Fiscal Transparency, Accountability and Sustainability Program for Results ( SFTAS).
“Nigeria’s CARES program will help increase access to social transfers and basic services and provide grants to poor and vulnerable households.
“It will also strengthen food supply chains for poor households while facilitating recovery and enhancing the capacities of MSMEs,” he said.
Meanwhile, the International Monetary Fund (IMF) mission to Nigeria said that exchange rate and monetary policy reforms, increased revenue mobilization and structural reforms would unlock Nigeria’s growth potential.
He said the recovery was projected to begin in 2021, with moderate growth of 1.2% and production recovering to its pre-pandemic level in 2022 alone.
In addition to monetary policy reforms, the mission recommended that decisive action be taken to address weaknesses in governance and implement trade-friendly and regulatory reforms, including lifting trade restrictions to unlock Nigeria’s strong growth potential.