The price of oil went down to as low as $27 a barrel last year which affected the growth of many commodity dependent nations like Nigeria, Venezuela and Angola. Nigeria is currently battling to survive a recession after recording slow growth for its Gross Domestic Product (GDP) for two consecutive quarters.
The Nigerian Bureau of Statistics (NBS) last week released a report for first quarter this year which showed the GDP of Nigeria contracted by -0.36 percent and warned of even worse figures at the end of this quarter.
Already, major signs of recession, such as rising unemployment, fall in output and increase in government borrowing are eminent in the country.
In recession, citizens would find it difficult to buy goods and services as their purchasing power would diminish.
This will also affect production and the demand for goods and services. Also, stock prices would naturally slump and investors would be wary of such an economy.
Meanwhile, economists and experts say putting money in the hands of consumers is a faster way to stimulate the economy than putting it in corporates’. The stimulus spending and several other subsidy loans the CBN has embarked upon first puts money in corporates. But a simple way is that all salary arrears and pensions should be fully paid.
The above, though, has a caveat as even the supply side has been dampened seriously from the ongoing power and forex saga. So, so much money with consumers might result in demand pull inflation.
Mr. David Aku, an economists and ex-banker said addressing the demand side is still a better alternative as it will likely reboot investor confidence in the market and cause more spending with the attendant trickle-down effect.
If this approach is adopted, from all indications, inflation will still rise in the short run as investors invest to balance off increased demand, he also noted.
“Liberalisation of the forex market is good but things will only get better if the government supports consumers spending power while doing all it can to ease doing business in the country.”
“But in the near term, all prices will go up. That is for sure,” Aku said, adding that “due to lag time, we will technically enter the recession, first. How soon we will come out depends on government’s focus as against the president’s ego trip; which caused us where we are today.
“Let the president start parleying with the business community,” he suggested.
Dr. Franca Mnguachia Dimah, an analysts based in New Orleans, USA, said perhaps, Nigeria could slide into a recession as early as June ending.
“Now that the budget has been signed into law, I am hoping that disbursement of funds for capital projects will help increase spending and help stimulate the economy. Cutting interest rates too should help.
A Senior Researcher Fellow at the Institute for Development Studies, University of Nigeria, Enugu Campus, Dr. Uzochukwu Amakom, told Daily Trust that a country is said to be in an economic recession “when an economy has two consecutive declines in the country’s Gross Domestic Product (GDP). That is the standard definition.”
By this definition and NBS’ reports that showed Nigeria’s economy had had two consecutive declines in GDP rates, Nigeria is in recession.
The Head of Department of Economics of the University of Abuja, Mrs Sarah Olanrewaju Anyanwu, said the federal government should use economists and not politicians to run the economy to reverse the downturn.
Anyanwu said GDP revolves around production and any deliberate attempt at promoting production would have positive effect on the GDP and spur growth.