Since 2015, Nigeria has tested recession twice, the latter apparently caused by COVID-19. EKONG EKPENYONG writes on how Nigerian residents can cope with recession
One thing is common with every recession; they widen the economic gap by creating more millionaires. According to Forbes, while virtually everyone else has been struggling through the Coronavirus Disease recession, billionaires added more than $400bn to their wealth.
The catastrophic effect of the COVID-19 and #EndSARS in Nigeria rips through family economies, devastates businesses and cripples economic growth in Nigeria.
These are challenging times still. Another trial seems to be on its way. Countries have closed their borders, healthcare services are stretched past their limits, large regions are quarantined, and millions of people are self-isolating at home.
But what exactly is recession and what can one do to stay afloat?
Economic recession
In economics, a recession is a business cycle contraction when there is a general decline in economic activity. Recessions generally occur when there is widespread drop in spending (an adverse demand shock). This may be triggered by various events, such as financial crisis, external trade shock, adverse supply shock, bursting of economic bubble or a large-scale anthropogenic or natural disaster such as a pandemic.
Nigeria’s Minister of Finance, Zainab Ahmed, has said that COVID-19 and falling oil prices are set to force Nigeria’s economy into recession. The minister disclosed this to State House correspondents after attending the National Economic Summit meeting in Abuja.
Coping mechanisms
“You probably got involved in the recession; ideally a period of economic recession could make or mar investments of corporate organisations and individual businesses alike,” said a consultant agriculturist and entrepreneur, Femi Omole, during a chat with the Financial Street. “As Nigeria is currently in recession, businesses that will scale through are those that will fine-tune their mode of operations by minimising investment risks as well as emptying tools that will maximise capital investment.”
Despite, you can cope with recession in Nigeria when you have something to fall back on in case of the unforeseen.
Bars
A financial consultant, Dr Orok Ekpenyong, says that binge drinking increases during tough economic times.
He added, “Overall alcohol consumption decreased during this recession. Binge drinking, particularly among unmarried men under 30 who recently become unemployed, increased. Other winners in this time of recession tend to be retail shops.
“Recovery of debts, living within ones means of income by creating a monthly budget, developing a good savings culture, eliminating discretionary spending, building up employable skill and continuous education, with a regular evaluation of financial flow can be achieved now and in future.”
Grocery stores: Economic instability leads to less splurging, including less eating out. With more people cooking at home, grocery stores benefit.
An engineer and a consultant in a top Nigerian bank, Smith Obugagbe, said in a chat with Financial Street, “Looking for alternative passive income is by having petty business and not depending on salary alone. With this, an individual can survive without depending on friends and well-wishers.
Change of mindset: Nearly all of us will be impacted by a recession in some way, said an accountant, Arit Oluwafemi.
“Causes of the incipient recession include the impact of COVID-19 and the preceding decade of extreme monetary stimulus that left the economy vulnerable to economic shocks,” he tweeted.
Although, there are many tongue in cheek answers about the depression during this present recession in Nigeria. In every merit, there is also demerit. Here are deficiencies and solutions for businesses in Nigeria.
Hysteresis: This is the argument that arises in temporary (cyclical) unemployment. Banker and consultant, Eyo Antiga, told Financial Street, “Income not increasing with expenses will only have a retrogressive effect, of course. However, cost of living generally has not dropped for a day. It is on the increase; hence a comfortable salary earner sees no value in his or her income.”
Antiga added that the only thing that would help Nigeria in this recession was for the government to sincerely place an honest subsidy on food. “With food, the panic will reduce and plan can be set to save the situation.”
Every problem has a solution, and to manage the present recession, Nigeria and Nigerians should reduce foreign expenditure.
Crashing of exchange rate
Currencies tend to devalue in a recession.
The Branch Executive Secretary of Nigerian Institution of Estate Surveyors and Valuers, Samson Echimle, in a chat with Financial Street, said, “The naira has lost so much value and purchasing power.
Unfortunately, people are not earning enough. The citizens’ earning power is going down daily.
“For instance, some workers have been earning 60,000 per month before COVID-19 era. Then a measure of garri (cassava flakes) was N350. Now, after two years, they still earn same amount, but same measure of garri costs as much as N1,500. Ditto beans and rice – some of the country’s stable food.”
Falling output
Less will be produced leading to lower real Gross Domestic Product and lower average incomes. Wages tend to rise much slowly or not at all.
This is clear survival of the fittest. Echimle said, “People have cut down cost. People’s power to buy basic needs has been badly reduced. People will continue to cut down consumption. Only their basic needs should have patronage. They will also have to do more to earn more.
“Salaries are no longer enough; so there should be other means to earn more. In supposition, it is very important that people spend on only things that are very useful. Luxurious goods, for now, should be cut off.”
Last line
Reaching financial goals can sometimes feel a little like a rivalry. Just when you are moving down the field, life intercepts the ball. But with the right game plan, you can stay on track.
