In more comprehensive definition, a nation is said to be in recession when the economy declines significantly for at least six months; beyond the GDP, when there is economic recession, there is a significant decline in the following five economic indicators i.e. real GDP, income, employment, manufacturing and retail sales.
Following the five economic indicators stated above, Nigeria has been faced with tough economic issues for decades, but recession was officially declared in 2016. Nigeria’s GDP dwindles, for many years; unemployment has kept increasing while local manufacturing has dropped significantly. Nigeria made a long walk to recession which is caused by a combination of components. Some of these components include:
Shrinking oil revenue: Nigeria’s economy is largely dependent on crude oil revenue, crude oil sales account for 70 percent of government revenue in Nigeria; thus the fall in oil revenue implies fall in government income. A major feature of Nigeria’s economy since the 1980s was its dependence on petroleum, which accounted for about 87 percent of export receipts.
Expensive governance style: Nigeria is running a very expensive political system, 58 percent of the nation’s allocation is spent at the federal level while 32 percent goes to the 36 states and 10 percent for the 774 local government areas. Also, bogus salaries, allowances and luxury that accompany political offices make governance expensive in Nigeria. Since independence, government expenditures have been increasing, as a percentage of gross domestic products, national government expenditures rose from 9 percent in 1962 to 44 percent in 1979, the pattern is still on-going.
Corruption and weak institution: Nigeria is ranked as one of the most corrupt nations in the world. Corruption among ranking government officials have become a norm. Nigerians are persuaded that corruption is the biggest challenge been faced by the nation and it has remained a persistent issue.
Political instability, sharp ethic and religious sentiments: Nigeria is a victim of consistent political instability; uncertainties, tension and unhealthy rivalries among the political elites which are predominant features of Nigeria’s political climate. More also, sharp ethnic and religious identities have further divided the nation, even economically.
Forex crisis, low local manufacturing and dependence on importation: Nigeria depends largely on importation; almost everything in Nigeria is imported aside Nigerians. Even though the nation is endowed with enormous resources and raw material, local production is low. Reliance on importation has placed an incessantly high demand on foreign currencies (dollars, euro and pounds) which led to the prolonged forex crisis faced by Nigeria.
These factors contributed largely to Nigeria’s current economic woes. And until they are resolved, the economic woes will be prolonged. However, solution is only required and celebrated when there are problems; Nigeria’s economy is in a problematic state, no doubt. Many industries, start-ups and local businesses have found it difficult to survive in the economic climate.
Unfortunately, due to shrinking oil revenue and chronic mismanagement of public resources, the government is unable to embark on many capital projects that will create enabling environment for businesses to grow and the economy to flourish. While about 27 states are struggling with payment of salaries, the Nigerian Bureau of Statistics (NBS) reported that 1.7 million Nigerians lost their jobs in 2016 only due to harsh economic environment.
As this period pose as major obstacle to growth in Nigeria, importantly it comes with rare opportunity for economic revolution that will set Nigeria ahead economically across the globe. Despite dwindling oil revenue, it is interesting to note that, non-oil sector GDP grew in 2016 for the first time in decades. According to presidential economic adviser, Adeyemi Dipeolu, he said “There was growth in the agricultural and solid minerals sectors…” This undoubtedly true!
However, reliant on oil and failure to diversify weakened Nigeria’s economy with ease. Kevin Daly from Aberdeen Asset Management said “a lot of Nigeria’s current predicament could have been avoided…the country is so reliant on oil precisely because its leaders haven’t diversified the economy. More recently, they have tried, and failed, to prop up the naira, which has had a ruinous effect on the country’s foreign exchange reserves and any reputation it might have had of being fiscally responsible.”
A quick look into the past, after independence, Nigerian seemed very promising as many classified her economy as emerging economy; a potential is yet to materialize. Non-oil sector, particularly the agric sector served as the major source of revenue for the nation. In the 1970s, agriculture accounted for 70% of Nigeria’s labour force as the most important, stable and resilient sector of Nigeria’s economy.
The sector provided food crops such as yams and manioc (cassava) in the south and sorghum (Guinea corn) and millet in the north. In 1999, production of yams was 25.1 million tons (67% of world production); manioc, 33.1 million tons (highest in the world and 20% of global production); cocoyams (taro), 3.3 million tons; and sweet potatoes, 1,560,000 tons. Other sectors such as mining also played key role in Nigeria’s economy in the 1960s and 1970s.
Though the current economic recession looks like an obstacle to many Nigerians, majorly it comes with tremendous opportunity to spur economic growth and wealth creation for the citizens. There are numerous opportunities in the non-oil sectors such as agric, mining, education e.t.c. which are not capital intensive but are transformative. Such opportunities are been promoted by committed Nigerian groups such as Nigeria Investment Cloud which has been committedly bridging investment gaps between Nigerians in diaspora and investment opportunities in Nigeria, particularly in the non-oil sector.
Apparently, Nigerians can no longer depend on the government to spur economic growth, and the government can no longer depend on oil as a source of revenue. Thus, it is not too late for Nigeria and Nigerians to rethink and translate this recession into economic lifting for the nation.
The falling oil revenue is an eye-opener to non-oil sectors. Engaging numerous opportunities in non-oil sector such as the agric sector will not only spur growth, it will also create wealth, create jobs and ensure food security in Nigeria. As forex crisis continue, importation becomes more difficult; this opens opportunities for local production of items. Nigeria has all she needs to survive, including human capital; we must see the opportunities in this period and take advantage of it for Nigeria’s advancement.
Olawale Rotimi Opeyemi is a developmental journalist, news article consultant for Making Finance Work for Africa and global convener of Nigeria Investment Cloud. He can be reached through olawalerotty@gmail.com or +2348105508224
