Experts Issue Warning Against Economic Depression in Nigeria
Economists and analysts have warned that the Nigerian economy is heading towards a major depression and not a recession. This is in reaction to a claim by finance minister Zainab Ahmed that the country may be heading towards another recession if the current global crisis is prolonged.
The global economy has been devastated by the coronavirus outbreak, with the International Monetary Fund (IMF) saying economic activities dropped by an unprecedented 80 percent in two months. Speaking on the matter, Ahmed warned that the Nigerian economy risks sliding into another recession if the current coronavirus pandemic continues raging beyond the next six months.
“We are hopeful that this pandemic will be limited in time. If it is an average of three months, we should be able to close the year with positive growth. But, if it goes longer than six months, to one year, we will most likely go into recession,” she said.
But the economic fallout from the COVID-19 pandemic might go beyond a recession as projected by the minister, said Tope Fasua, CEO Global Analytics Consulting Limited, and Paul Aladje, Lead Economist/Enterprise Partner at SM Professionals told Premium Times in Abuja.
Although both experts agreed with the minister’s projection on the impact of the current crisis on the Nigerian economy, they differed on the severity. “The Minister is trying to be nice, maybe so as not to cause panic. She is talking about the economy going into recession in the next six months. She is relying on the theory of recession being two consecutive quarters of negative growth in the economy. Otherwise, the truth is that we are already in recession,“ Fasua said.
Speaking further, the expert noted that people have not been productive because they have not been working. Businesses have shut in for some time, therefore, there is likely going to be a drop in Gross Domestic Product. With the global GDP predicted by the IMF to fall by 12 percent this year, Fasua said Nigeria’s economy cannot come out of the current crisis with less than a 10 percent decline.
“Nigeria’s GDP is about $450 billion. Imagine that the country is losing about $1.5 billion every day. If one is conservative to say half of that is shut-in because people are doing nothing, sitting at home, that means we are losing about $400 million every day. Multiply that with 30 days of the month, that translates to a loss of about $12 billion, to be deducted from the country’s GDP every month. So, it is clear, we cannot escape recession,” Fasua explained.
Aladje meanwhile is of the opinion that if the current lockdown in the country lingers beyond three months into the third quarter of the year, many people and families would be completely devastated. Thus, the economist was more convinced Nigeria’s economy was in depression.
He further said long before the IMF said that the world economy was in recession, the Nigerian economy was already in recession, with mass unemployment, mass joblessness, high inflation, and millions of Nigerian in extreme poverty. The majority of the population with no basic necessities of life, such as food, water, and toilets, with no hope in view that development will come and greet in terms of income per head, is not guaranteed, then there is more than a recession.
“Economic depression is a complete state of devastation of an economy but is a situation where the economy suffers from attacks from an invisible vampire that sucks out its vitality. It is a situation where there is rising stagflation and there is no hope for development,” said the SM economist.