News Analysis: Nigeria seeks way out of "possibly worst" economic recession

With its economy officially entering recession, Nigeria is left with little choice but to urgently deal with a bevy of recalcitrant problems head on, which range from surging inflation to depleted foreign reserves and weaker Naira.

The West African country entered a recession on Wednesday, when figures released by the National Bureau of Statistics (NBS) showed the second quarter Gross Domestic Product (GDP) fell 2.06 percent year on year, after slipping 0.4 percent in Q1.

Recession, which is a major decline in sector-by-sector economic activities lasting more than a few months, is technically indicated by two consecutive quarters of negative economic growth as measured by the country's GDP.

For the oil sector, which is Nigeria's mainstay, the NBS report indicated that the vagaries of global oil price, the drop in local production of crude oil and the violent activities of militants in the southern region of the country had made a dent in the money-spinning industry.

Most businesses in Nigeria are connected to government and 80 percent of government resources or cash flow comes from the oil sector.

Positing that the oil and gas sector accounts for about 25 percent of the GDP and the doom and gloom in the industry can have an inordinate effect on the rest of the economy, local financial experts have called on the Nigerian government to declare a "state of emergency" on the economy.

Nigeria's present economic situation has already been described, both by government and financial experts, as "the worst possible time ever", with many predicting that this recession may take up to three years before the country can come out of it.

Financial expert Tony Ejinkeonye said without a stimulus of adequate scale and proper management, the economic situation would be more precarious than its current state.

To come out of the present situation, the Nigerian government must create valuable economic motivation plan to stimulate growth, he said, noting "sadly, the nation's GDP has been on the decrease since the last quarter of 2015."

"This is not really a good time for the country," said Ejikeonye, the current president of the Abuja Chamber of Commerce and Industry.

He pointed out that the recession has already led to unemployment, lower wages and incomes, as well as lost opportunities.

He said with time, more economic opportunities, private capital investments and education are likely to suffer in the current economic blues if nothing urgent was done.

"The effects will be long-lived if not properly managed. Economic recession can lead to long-lasting damage to individuals' economic situations and the economy more broadly," the expert said.

The recession might take a heavy toll on citizens in the aspect of income losses or unemployment, thereby threatening educational achievements by way of reducing families' abilities to provide a supportive learning environment and forcing delay or abandonment of school plans, he noted.

Besides, it will cause poverty and the increase in poverty, for instance, will have lasting consequences on children who might be largely threatened by early childhood nutrition, the expert added.

According to the latest data, over four million Nigerians have lost their jobs since 2015. Many citizens have now taken to subsistence or small-scale farming and others opting for additional jobs in the informal sector to augment their means of livelihoods.

Many continue to hold on to the opinion that the drop in crude oil prices specifically caused the damage, together with other factors including a forced devaluation of the local currency and surging inflation.

Commenting on the way forward, President of the Chartered Institute of Bankers of Nigeria, Segun Ajibola said the country needs to draw solutions from what mainly caused the recession.

"We must go back to the root of the crisis and that is oil economy and pattern of consumption. We are exposed to external shock and it can be tamed as well," he said.

A seasoned economic analyst, Bismark Rewane said all hands must be on deck for a solution to the problem.

"Although the challenge of this recession is deeper than what was earlier envisaged, what the country needs now is basically the confidence of investors more than anytime else. We must woo the investors now, but it's not a magic wand. We must first do our work," he said.

Another economic analyst, Victor Ndukauba, said the way out was for government to think outside the box, improve governance and fiscal policies.

Ndakauba said lack of spending from the public sector and no-dollar inflow policy on the part of government, with little investment, all contributed to the economic downfall.

"There are no silver bullets. The only solution is for the government to spend its way out on infrastructure investments -- education, healthcare, power, transportation, etc.," he said.

Despite the divergent views on the future of the Nigerian economy, there is a school of thought that the country may experience growth during its recovery period, but putting into consideration the long-term damage that the recession might cause, this may prevent the recovery from reaching its full potential.

The Nigerian government said it is not losing sleep and is fully aware of the challenges and effects of the present economic situation.

Speaking to reporters in Abuja Wednesday, the Minister of Finance, Kemi Adeosun admitted that Nigeria was in its possible worst time with the latest GDP figures, saying the country had a long way to go.

"It's the worst possible time for us. Are we confused? Absolutely not!" she said, adding "we are not deceiving ourselves that everything is rosy, it's not".

Adeosun said, however, Nigeria is in the right hands as government will stick to its strategy and seek more ways out of the current situation.

Apart from the economy diversification plan of the government, she added one of the ways forward is to adjust the current monetary policy.

In addition to its solution-seeking plans, Adeosun disclosed the Nigerian government had approved an external three-year rolling plan to seek loans from the African Development Bank (AfDB) and the World Bank to meet the country's current development needs.

The concessional loans sought by Nigeria, she added, will go to the strategic sectors that will help to revive the economy, and would be at only 1.25 percent interest rate from the creditors. Endit