The popular lingo on the business street of Lagos now is ‘recession’. Yes! We all agree Nigeria’s economy is in recession. Technically because we have posted at least two straight quarters of negative gross domestic product (GDP) growth rates.
While the ministry of finance forecast the end of the fourth quarter before a sign of recovery can be expected, we have already started seeing signs that a recovery is nearer than we think.
Last week, Stanbic IBTC’s Nigerian purchasing manager’s index, (PMI) data showed a marginal improvement from June’s reading which was a the survey’s record low of 47.3 to 48.8 in July.
While it pointed to a fifth month of deterioration in business conditions in the past six months, Stanbic IBTC noted in the report that the latest reading is ‘signalling that the overall rate of contraction had eased’.
It is expected that Nigerians would panic should we enter a recession, however, the reaction from many quarters, particularly, companies has been reactionary and in some cases ‘kneel-jack’.
First, it is agreed that recession is a negative economic cycle, however, it is inevitable in most cases. Major economies that are post quarter-on-quarter growth figures have and would still have their fair share of recession.
In the fall-out of the 2008 sub-prime mortgage crisis in America which ended up infesting the high-flying European economies, America and its cohorts of top seven economies were plunged into one of the most devastating recession worst than post World War 11 crisis and the year 2000 dotcom bubble put together.
Another fact is that ours is peculiar, self-inflicted and systemic. Decades of oil windfalls were frittered away by successive political leadership with little or nothing to show for it. Import dependency is a dangerous position for any economy and the ‘oil-centric’ and mono-product title can only postpone the troubling days as oil itself is open to geopolitical sentiments, boom and burst cycles of major actors who use it to fuel their factories.
While it is a no-brainer that power and enabling environment must be put in place by government for businesses to survive, what is expedient for us as an economy is to take learnings and not wait for oil price recovery. Many businesses have to do some re-engineering.
Some ventures were built with only boom cycles in mind. Such business models only need a few turbulence such as now to halt. More production-focused ventures in agriculture, consumer products and services should be encouraged. As the market is already down, it is the best time to invest across board.
With an unstable currency, appetite for foreign and exotic products have to be tapered if we must get outof recession. The more we all run after dollars for consumption, the more we all sink into a depression that can collapse the economy into finality.
Another lesson that we all might also have learnt is that we should also be long-term in our planning. There will always at least be a rainy day. What we do with what we have now matters.