Nigeria’s recession, officially acknowledged for the first time by the finance minister, Mrs. Kemi Adeosun, and budget and planning minister, Senator Udo Udoma, on July 22, 2016, may last between 6 months and 43 months depending on how serious the government of President Muhammadu Buhari responds to the symptoms and administers medications that will heal the ravaging plague for good.
So, Nigerians may begin to be hale and hearty and smile in the first quarter of 2017 or continue to be malnourished, wait it out and endure a backbreaking dehumanization till the end of 2019. And if government’s interventions are not seriously and logically implemented, we may be in it for longer than 43 months.
Since the three major characteristics of a recession are still present and escalating in the second week of November 2016, we may have to wait longer for recovery from the economic doldrums spreading uncontrollably. It is clear and indisputable that : (1) More companies are declaring reduction in profits; (2) Unemployment figure is still rising as more businesses are offloading staffers and (3) There is unprecedented decline in investment activities.
This recession (“the shrinking of a country’s gross domestic product, which translates to the reduction in the value of all goods and services produced each year”) was largely ignored by the government for many months as its effects decimated millions of Nigerians.
And coupled with stagflation (“a persistent high inflation combined with high unemployment and stagnant demand”), there are no clear signs that we may walk out of this recession soon.
The business climate is still foggy, a clear signal that recovery from this recession has not even started. One thing that marks the beginning of the end of a recession is when we see a rise in business investments. When more people are investing in businesses, the cycle of recovery twirls and rolls and results in growth.
With increased business investments, huge resources are deployed to acquiring new capital equipment, expanding capacity and multiplying productivity which leads to more profits. And with more profit, more people are engaged and paid higher wages and salaries. Higher wages and salaries means bigger disposable income which leads to expanding production capacity.
This singular sign that will mark the recovery cycle, increased business investments, is not even in view…
Many Nigerians are clamoring for a more conducive business environment so that investments can resurface and multiply. And their expectations include:
- Improved and cheaper power supply
- Massive infrastructure development for easier existence
- Reduced interest rate to encourage borrowing for business investments
- More reasonable, widely available and cheaper forex
- Institutionalize processes that encourage entrepreneurship
- Promote, patronize made in Nigeria goods
With these expectations met, the country’s recession will begin to abate…
Quick facts on recession
- The duration of a normal recession (“a decline in economic activities lasting more than a few months”) is between 6 and 16 months.
- And when it is longer than 16 months, it is described as a depression or Great Depression.
- The Great Depression (“a long and severe recession”) in the United States in 1929 lasted 43 months. And in some Western countries, it lasted 10 years.
- The US witnessed another Great Depression from December 2007 till June 2009 (a total of 19 months).
- There have been 47 recessions in the US since 1790.
- Recession lasts longer if it is balance sheet related (bad debts, falling assets prices and bank losses).
- And shorter when it is caused by tightening of monetary policies (higher interest rate to reduce inflation).