The insolvent economy needs better attention
Without a doubt, the situation in the country today has tasked the wits of the federal government. If the cause of the prevailing hardship could be traced to past years of profligacy, the incompetent handling of the economy in the past five years has compounded the woes of many Nigerians. There is perhaps no better evidence of this than the announcement last Saturday by the National Bureau of Statistics (NBS) that the economy has slipped into its second recession in five years as the Gross Domestic Product (GDP) contracted for the second consecutive quarter. Not many Nigerians were surprised by the outcome.
In June this year, Shubham Chaudhuri, World Bank Country Director in Nigeria had warned that “While the long-term economic impact of the global pandemic is uncertain, the effectiveness of the government’s response is important to determine the speed, quality, and sustainability of Nigeria’s economic recovery”. He further admonished that it would “be even more urgent to address bottlenecks that hinder the productivity of the economy and job creation.”
Although many officials are predicting that the country may soon come out of the recession, the challenges nonetheless remain daunting. The implications are that prices of household consumables will rise further; family incomes will shrink even as savings capacity thin out. Meanwhile, the real estate sector will reel under poor demand. More companies may also close down as the operating conditions become harder. With the naira exchanging at about N490 to the dollar, higher prices of both finished goods and raw materials will further fuel inflation and the misery index will certainly deepen in the country.
The consequence of the prevailing situation is that the economic problems could spiral to other areas of national life. Insecurity could worsen as unemployment and job losses lead many idle young hands into crimes of desperation. Labour agitations and strikes will increase as more states get into trouble with payment of salaries. These are some of the challenges that lie ahead.
Although there is no doubt that agriculture is one of the key options in the national efforts to diversify our economy, much more thoughtful policies are required to move the nation in the direction of that noble path. Unfortunately, the response from the federal government to these challenges remains incoherent. Many of the rural communities in the country today do not have access to potable water supply; they lack critical infrastructure for storage and transportation of raw materials from their places of production to markets. Farmers are at the mercy of middlemen who exploit them and make significant profits on resale of the same goods in other geographies.
Besides, incentives for private sector and youth participation are scanty just as a credit regime to drive the sector does not exist. There is also no backup national communication campaign to make agriculture sexy for the digital generation who tend to see farming as synonymous with an ageing colorless rural population. Yet, there is no better time than now to make the much-touted transition from oil to agriculture as the growth catalyst for the Nigerian economy. It’s not as if we are left with much choice anyway. With energy alone accounting for about 30 per cent of the operating cost of businesses and running individual households, we must address these challenges in a strategic manner.
For sure, the reversal of the looming recessional avalanche would require a combination of fiscal and monetary creativity. The federal government will also require businesslike executive capacity that is currently lacking. One thing is certain: the economic challenges we face in the country today cannot be tackled with the ad hoc approach being adopted by the current administration.