Nigeria’s impending economic recession has in recent times become a hot topic with varying opinions. Just for the record, economic recession is a period of general economic decline and is typically accompanied by a drop in the stock market, an increase in unemployment, and a decline in the housing market. Generally, a recession is less severe than a depression.
Recent report from the International Monetary Fund’s (IMF) forecast that Nigeria’s economy would probably contract by 1.8 per cent in 2016. The IMF forecast says Nigerian economy will now grow at a much slower pace than South Africa’s, which is expected to grow at 0.1 per cent in 2016.
Following the above prediction by IMF, some economists has weighed in on the subject matter with differing opinions, an economist, Prof. Ben Aigbokhan, has predicted that Nigeria’s economy would recover from depression as soon as possible with the measures being put in place by President Muhammadu Buhari.
Is recession all that scary? that is the question on my mind ever since this topic started trending. The word economic recession strikes fear in the mind of every Nigerian, so it is of high priority to spin the coin, maybe explaining this from the other side of the coin will bring a better understanding.
The Institute of Strategic Management, ISMN, of Nigeria has said recession is good for the development and the expansion of the country’s economy. The institute described recession as a natural consequence, the 1st Vice-President, ISMN, Mr. Gbenga Oluniyi, said recession was good and necessary to make the country to exploit other capacities inherent in the economy.
Let me digress further by comparing recession to a total collapse of a building, we all know that whenever a building collapse happens, the next thing that happens is “rebuilding” which often comes with a better foundation, plan, professional engineers, and better advisers. So Nigeria’s economy is a building heading towards a total collapse, so let us now take a look at its positive effects on Nigerians and the government:
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- Effects on the economy, Companies and Jobs: Recessions will correct economic imbalances in Nigeria and helps the economy to get back to a healthy, realistic, and sustainable rate of growth. The “job” of a recession is to clean the “fat” out of the system, mop up excess, and pave the way for the next expansion.However, there are always bankrupts, but in a recession the weak companies get put out of business and the strong ones are forced to optimize their business models and come out with better products and opportunities.This brings job losses which are freed up to be efficiently used somewhere else in a flexible market. Recessions also eliminate these sorts of unsustainable bubbles like the technology bubble in the late 90s or the actual housing crisis. Of course, it hurts to lose a good paid job and suffer from financial loss, but it is necessary for Nigeria’s economy to become healthy once again.
- Effect on Personal finance: Nigerians are known for their love for luxury goods, foreign products, showing off and taking loan to keep up with the lifestyle. If people will ever recognize this misbehavior, it maybe will happen during a recession. Although, I don’t believe people are easy to change, I think if suffering from financial loss, unemployment and hard times, maybe they start to think about their personal finances and learn something from it.As we know from the past, a recession lasts for about 10 months, so good times will be back. Nevertheless, they are necessary and you will experience a few recessions in your life, so better be prepared. The important thing is not to panic and learn from crises. In fact, recessions can make you better and more skilled after all, just like they do with our economy on a regular basis.
- The Stock market drops, More opportunities shows up: There is an Ibo adage that says “when the land is bad, some people benefits”, some wise ones takes advantage of economic recession because the stock markets go down in recessions, this ultimately leads to Search for opportunities in crises, there are great opportunities in stock market declines. During periods of mass panic on the market all stocks go down for a while, because people like to panic somehow, I don’t know why. The important thing is, both good and bad companies go down. This means, that you can get high quality companies at a low price and with good long-term perspectives. That’s the time to position yourself to profit from these companies and catch the opportunity while it is there.In fact, I even know a few investment guys, who are really cheered up and looked forward to the upcoming recession because of new investment chances.
- Adjustments in Nigeria’s Economic team: Just like a building in collapse, the rebuilding process will no doubt seek more more great minds in economics and monetary management. It will lead to a significant change in the management of core revenue generating agencies like the NNPC, CBN, FIRS, etc. This will ultimately lead to a better economic team poised with rebuilding Nigeria’s economy for the better.
- Blocking leakages in government: I here alot of people say the federal government should lessen the fight against corruption and focus more on rebuilding the economy and it is laughable, the truth here is that reducing curruption in the country will block financial leakages which led to this recession in the first place.Not just blocking leakages, government tend to cut expenses that it sees as unnecessary. A recent report advised the president to merge some ministries and agencies like the ministry of transport and aviation ministry, such move will lead to cost cut and better fiscal policies.
- After the rain comes the sunshine: Economic recession does not last for more than a year, sometimes it takes 10 months to heal, think about it as a phone you misconfigured and you are lost in bringing it back to normalcy, what do you do? it’s simple: “use the restore factory button”. Although within the period of recession; it is always difficult, but as soon as it is fixed a better and a brand new economy emerges.