Fatai A. AKOREDE
I wish to commend the initiatives of the the personalities behind the group, the brilliance and academic prowess of the previous lecturers is also commendable. Today, I would wish to discuss on ECONOMIC RECESSION, CAUSES, EFFECTS AND COPING STRATEGIES.
Definition :- Economic recession is a significant decline in activity across the economy, lasting longer than a few months. It is visible in industrial production, employment, real economy, and wholesale-retail trade (macro economic) indexes. The technical indicator of a recession is two consecutive quarters of negative economic growth as measured by a country’s GDP. Further to recession is what we call economic depression. This simply means a deep long lasting recession.
CAUSES OF ECONOMIC RECESSION
To neo-classical economists, recession is caused by the following, though I would at the end of the discussion on the neo-classical economists discuss briefly the causes of the present economic recession/crisis.
(i) High interest rates -: This limits liquidity or the amount of money available for investment
(ii) Inflation :- This portrays a general situation where there is a general rise in the prices of goods and services over a period of time. As inflation increases, the percentage of goods and services that can be purchased with same amount of money decreases. Inflation can be cost push or demand pull.
(iii) Reduction in consumer confidence -: If consumers believe the economy is bad, they are less likely to spend money. Consumer confidence is psychological but can have a real impact on any economy.
(iv) Fall in real wages -: Workers wages aren’t keeping up with inflation. The worker might be making the same amount of money, but his purchasing power is reduced.
(i) Falling in stocks markets
(ii) Weakened currency as being experienced now with Nigerian Naira.
(iii) Banks faced huge shortage of funds and soon collapsed as a result of high percentage of non performing loans.
(i) Creation of emergency funds :- If you don’t already have an adequate emergency fund set aside, specify a goal for how much money you want to add to it every month.
(ii) Endeavour to be debt free
(iii) Create additional income streams ;- in recession, there is higher probability of job losses. So additional income generating activities will keep you going in case of any eventuality.
(iv) Diversify your investments :- This reduces risks and uncertainties associated with economic recession.
(v) Reduce your experiences
(vi) Always try to save no matter how. Little drops of water could fill a 1,000,000 cubic metre capacity tank if it does not stop.
Economic recession, using present Nigeria’s experience as a case study.
The Nigerian economy by all means is now experiencing recession. In my previous submission I tried to look at the economic concept of recession vis-a-vis the general causes. However, the Nigeria’s version of recession could be attributed to have been caused by a number or combination of the following factors.
1. Mal-administration :- Nigerians do not see governance as a major determinant of our development. Opportunities are given every 4 years to re-decide or destiny via the window provided by elections. This we squander with just a pot of porridge. Imagine election periods could be liken to a situation there you are given a blank cheque to re-decide your financial security.
2. Corruption :- Present economic recession in Nigeria could also be traced to a level of corruption in our land. Our treasury is looted dry.
3. Inconsistent public policies :- Policies in Nigeria go with administration that formulate them. A change of government in Nigeria means a change of policy no matter how beneficial to the masses. Example of this was the Growth Enhancement Scheme of the Agricultural Transformation Agenda of Goodluck Jonathan’s administration under the watch of Dr Akinwunmi Adesina as Agriculture Minister. The programme significantly reduced food importation to Nigeria, particularly those we have comparative advantage for its production like rice by almost 25%. Imagine if this policy is sustained. Nigeria probably in the next 10 years could join the league of rice exporting nations in the world.
3. Inability to make sound economic decisions :- Governments world over subsidise production and not consumption. The reverse is the case in Nigeria. We do not subsidise the cost of land for Agricultural purposes, and neither do we subsidise genuinely for the importation of capital goods like tractors, industrial machines which will help create jobs and improve GDP. What we subsidise is importation of petroleum products, foods, and medical bills of privilege Nigerians. Subsidies weren’t given to those importing modern equipment to perform advance surgeries, without necessarily going on medical tourism to Europe, America and lately to India.
4. Nepotism/favourism/political colouration in appointing people to public office :- Public offices in Nigeria, particularly the political office such as ministers, commissioners, chairmen of statutory boards and commissions are used to compensate political patronage and loyalty. Imagine this situation when Fatai Akorede is made the Minister of Health, when Fatai Akorede all his life had been an Agriculturist with serious biased in Agricultural Economics. What will Fatai Akorede do to add value to the heath care delivery system in Nigeria. Definitely nothing.
Monolithic nature of the economy. Nigeria’s economy is driven by proceeds from sales of crude oil. Even at this, receipts from oil sales during the boom were massively looted. Investments on supposed to be other drivers of the economy like Agriculture, solid mineral, tourism, real estate, road infrastructure, rail, ICT/digital technology, manufacturing were not made. We never made our hays while the sun shines and neither did we save for the raining days. Nigeria begins to gasp for breath when the prices of oil in the international market is low, and perhaps can not finance our national budget.
Before I conclude, the present Nigeria’s economic recession is man made and is as a result of our mis-deeds in the past as a nation. Economic recovery takes a lot of proactive and practicable policies peculiar to our situation. Bringing recovery policies used by Great Britain economic recession in 1937 might not work. We should stop our cut and paste policy’s formulation. We need to tighten our belts and buckle up our sandals. Nigeria can still come out of this recession stronger but we must prepare for hard times and make once and for all sacrifice. Else we continue to postpone the evil date, God forbid this. Winning military war is much easier than wars posed by economic doldrums and recession. No nation in Africa today has the capacity to accommodate Nigerian refugees. We must all return to farm to help produce more foods for the nation’s population growing geometrically and possibly export excess to generate most most sort foreign exchange for the country and help stabilise the value of our Naira.
Thank you for this opportunity to address Imeko-Afon Youths on economic recession its causes, effects and coping strategies.
AKOREDE (B. Agric. Econs, M.Sc Agribusiness and Finance), writes from Imeko Ogun State