Thewill Editorial: Government Must Take Practical Steps To Get Nigeria Out Of Recession
BEVERLY HILLS, September 01, (THEWILL) – The Nigerian economy is now officially in recession. This followed a further contraction of the economy in the second quarter of the year. The National Bureau of Statistics, NBS, disclosed on Wednesday that the Gross Domestic Product, GDP, contracted by 2.06 percent after shrinking 0.36 in the first quarter of 2016.
In the last one year, the declining fortunes of the economy has manifested in all facets of the nation's life. While the value of naira has been on a free fall (N425 – $1 today), the global price of crude oil, the country's main export, has also nose-dived to an abysmal level, the lowest in the last two decades.
Unfortunately, the Federal Government's efforts at repositioning the economy have not yielded the expected returns so far. Yet, no crack policy has been put on ground to stimulate the economy beyond the traditional approaches.
The situation is further compounded by the security challenges brought about by the Boko Haram insurgency and the renewed militancy in the Niger Delta region. Incidentally, with the region continually prone to violence, the output of crude oil production has been drastically reduced.
It has therefore become necessary that unless certain emergency steps are taken to stimulate the economy, the continued laying of blame for every trouble with the economy on the immediate past wasteful and corruption-ridden administration of ex-President Goodluck Jonathan would only worsen the situation.
A lot has been said about the diversification of the economy, but the current piecemeal approach to it is not signifying the emergency that it deserves. The Federal Government must cede some powers to the federating units to pursue the much talked about diversification, while the governors and council chairmen must show themselves as being capable of living up to the challenging times by thinking out of the box.
THEWILL acknowledges the importance of the ongoing anti-corruption fight, but government must accord the economy a corresponding attention to steer the country out of the tide of recession. Retrieving stolen funds, which is the highpoint of the fight, should not be done at the detriment of the economy.
That the adverse effect of the economy is having its toll on both individuals and the industrial sector is an understatement. In the last one-year, many industries have closed shop, while the purchasing power of Nigerians has plummeted. Feeding has even become a luxury to most Nigerians. The manufacturing and telecommunications sectors appear to be badly affected. There is fear that if the situation persists, it could lead to mergers and acquisitions among firms, which may further compound the people's woes.
The President of the Manufacturing Association of Nigeria, MAN, Mr. Frank Udemba Jacobs said: “At present, 56 companies have closed down and this occurred in the last one year. It is estimated that over 100,000 workers have been laid off”.
Among the major steps necessary to stimulate the economy is to localize the refining of petroleum products and build more refineries. An economy that spends almost 20 per cent of its huge annual imports on refined petroleum products is unserious about growth.
THEWILL urges the Federal Government to provide financial support and improved seedlings to farmers in organised settings, as well as encourage them to do more of mechanized, rather than subsistence farming. The marketing boards should be revived to create markets for the exportation of farm produce.
The method adopted by other countries which had experienced recession may not exactly work for Nigeria. However, we must immediately reduce the cost of governance. The wieldy expenditure that goes into financing the national and state assemblies and other overbearing government financial burdens must be shed for optimal performance.
The Central Bank of Nigeria, CBN, must guide the financial sector to support the growth of the real sector, to be able to contribute significantly in growing the economy. The apex bank must also revisit the interest rates by banks in order to stimulate a more active participation in the economy by firms and consumers at large.
Also, the tax base must be readjusted with leakages blocked. However tax cuts must be considered to enhance local productive capacity. While efforts must be made to ensure compliance and efficiency in taxation, the proceeds must be committed to creating infrastructure that would boost production and consumer spending.
The current focus on austerity measure as economic option in a falling economy should not be adopted holistically, as the government needs to spend its way out of the doldrums, even if it means borrowing to spend on capital regenerating projects.
The Federal Government must cut capital flights in all sectors where pressure is exerted on the foreign exchange. For instance, the amount of foreign exchange that goes into medical tourism abroad is staggering. Recently, concessionary foreign exchange rate was recently given to Hajj pilgrims to the chagrin of many. It goes for education, where parents annually commit a very huge foreign exchange in training their wards abroad.
If attempts to ban certain imported goods and concentrate on local production must be accomplished, emergency steps must be taken to stimulate local production. THEWILL therefore requests the Federal Government to among other things, identify all areas that aid capital flights and develop homegrown alternatives as a matter of priority. The country must not be allowed to slide from recession to depression.