Since President Muhammadu Buhari assumed office in 2015, the elements of the economy have not fully smiled at him. From the lofty heights of over $114 per barrel of oil in 2014, oil prices dropped to below $40 soon after he took office. It has oscillated within that range since then with government managing the economy with borrowings and deficit budgets since then. Thus, in 2016, owing to the dwindling oil prices, Nigeria entered its first recession in about 40 years, under Buhari.
It exited the recession in 2018. Exactly two years after, last Saturday, Nigeria entered another recession, second in five years. The blame, this year, goes to the coronavirus outbreak and the #EndSARS protests, which crippled economic activities across the country.
The protests lasted about three weeks, while the country has battled with the scourge since February 27, when the index case was recorded. For Buhari, an apostle of accountability, probity and anti-corruption, it must be a tough luck. According to the National Bureau of Statistics (NBS), the Gross Domestic Product (GDP) contracted for the second consecutive quarter, recording a negative growth of 3.62 per cent in the third quarter of 2020.
In the second quarter, the country had recorded a 6.10 per cent contraction. Analysts believed that this is the worst recession in the country’s history. We are not only worried by the recession that is occurring for the second time in five years, but we are disturbed that the country experiences shocks over issues that affect its economy easily.
While we admit that the coronavirus crisis has dealt blows to economies of the world, there is no doubting the fact that Nigeria is easily impacted so fast because of its sole dependence on crude oil sales as its major foreign exchange earner.
Currently, crude oil earns nearly 90 per cent of the country’s foreign exchange, but contributes less than 10 per cent to the GDP. According to NBS’s latest report, it contributed about 8.73 per cent to the economy.
For decades, successive governments have talked about diversifying the economy away from oil. Thus, different administrations have talked about agriculture, manufacturing, taxation and similar issues, towards building a more resilient economy.
But there is no doubt that the dependence on oil as a major source of foreign exchange has been at the root of the country’s repeated economic woes, which is reflected in the latest recession. For one, the continuous decline in oil prices in the international market, the cut in production output by OPEC and its allies, coupled with internal issues have been impacting negatively on Nigeria and Nigerians.
In the third quarter, according to reports, oil production fell to 1.67 million barrels a day from 1.81 million barrels in the previous quarter. That is the lowest production output since 2016 when the country had its last recession.
Do we still need to look further on why the Nigerian economy is so easily impacted? We recall that under this administration, there were talks of making agriculture the mainstay of the country’s economy. There were talks of exporting agricultural produce.
The administration even celebrated the exportation of yam to other parts of the world. This, we note, was achieved with aplomb. But once the value of oil rose a bit, the initiative went into oblivion. That is not far from the issue of food sufficiency, which the administration and others before it wore like apparel without any concrete actions to follow it up.
Much as such actions would still be considered as minute, without actual manufacturing as a buffer, there is no doubt that little is better than nothing. We believe that Nigeria would continue to be embarrassed with recession as long as the country treats oil as its major foreign exchange earner.
The situation is, however, being further made grim. Just last week, the United Kingdom announced its decision to phase out petrol cars by 2030, 10 clear years from the original plan of doing same in 2040. We are certain that the UK is not the only country that is thinking in that direction. Already, Nigeria’s oil export to the United States of America, one of its major buyers, has dropped over time, as the U.S. devotes its energy to its shale oil production. What this means in effect is that in the next few years, Nigeria might not have anywhere to sell its oil in bulk.
What happens then? We must point out that the president and his team of economic managers need to look more inwardly towards finding a solution to the economy. It takes sound financial management to navigate the tough times the economy has found itself.
When the country exited the 2016 recession in 2018, the then Minister of Budget and National Planning, Udoma Udoma, who announced the full exit, had stated that Nigeria’s growth was broad, “with agriculture growing at 4.23 per cent up from 3.06 per cent in the 3rd quarter.”
The latest contraction surpassed the 3.2 per cent forecast by the World Bank, but lower than the 4.3 per cent the International Monetary Fund (IMF) predicted. That does not raise much hope, if the country did not take serious actions at changing the trajectory of the economy.
We believe that only when serious thought is given to such issues as manufacturing would the country begin to hope for something positive. Otherwise, it is a mere movement in circles for the nation. Once oil prices rise again, the country would come out of recession and move on as usual, as if nothing happened. But sadly, when oil is impacted, as is wont to happen, Nigeria would again be impacted. We only wish, the country can learn its lessons this time, think and faster.