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Monday, 17 October 2016

Why Recession May Not End in 2017


Economic recessions occur when aggregate spending by governments, consumers and investors drop below the levels required to sustain the previous tempo of economic activity. Recovery starts when increased spending occurs significantly. Furthermore, a recession such as Nigeria is experiencing does not come suddenly.

 There usually are signs to indicate that the economy is slowing down. The signs were there for quite some time but we failed to act. Unfortunately, when such signs occur in a fledgling democracy, especially within an election year or a period of high transitional activities, the tendency is always for the ruling party to ignore them.

Economists and other experts pointing to the imminent drop in economic activity are dismissed as alarmists. Back in 1981, when the leader of the defunct Unity Party of Nigeria (UPN) and main opposition group, the late Chief Obafemi Awolowo, warned the National Party of Nigeria (NPN) Federal Government led by President Shehu Shagari about the inevitable sharp drop in the price of crude oil by the end of the year, and a recession to follow, he was dismissed as a “prophet of doom” by the NPN Federal Government.

The recession came as predicted. It not only swept away the Shagari government and ushered in the military; it lasted for all of thirteen years! In 2013 when the price of crude oil was above $100 per barrel, some patriotic Nigerians, including Professor Soludo, former Governor of the Central Bank of Nigeria (CBN) raised the alarm that the price of crude was heading downwards and  a recession was inevitable.

 Even, then Minister of Finance and Coordinating Minister for the Economy, Dr. Ngozi Okonjo-Iweala, in June 2014, advised government to “buckle up and prepare for a possible recession”. These calls were ignored by both the Federal and state governments, as all eyes were on the impending elections of 2015. Again, the President Goodluck Jonathan-led government lost the election and the country was plunged into a recession which we are now experiencing.

As in late 1983, the factors which drove the price of crude oil down will not disappear any time soon – certainly not in 2017. It is important for Nigerians to brace up for a much longer recession ordeal. Anybody telling Nigerians to expect a sharp recovery in 2017 does not appreciate the gravity of our situation. Three months to the end of 2016, nothing much has been done to start reversing the recession. The so-called strategy of “spending our way out of the recession” is just mere talk. It is more patriotic to tell Nigerians the truth to enable them make reasonable decisions regarding how to manage their affairs instead of creating false hopes.

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