In layman’s English, what is a Recession? How does it impact on the citizens? Who caused it and who can remedy a Recession – The Nigerian Global Affairs Council has taken the LIBERTY to break it down for Nigerians in an easy to understand and exciting to read manner.
In simple English, a RECESSION occurs when total goods produced for SALE in major Industries such as those in Fast Moving Consumer Goods, Oil&Gas, Real Estate, Finance, Agriculture etc. experience in a reduction in TOTAL Goods produced, of course, the major reason there is a DECLINE in sales is a result of the LOW number of Individuals purchasing goods or procuring services from the Market. It becomes a RECESSION when it happens for 6 months STRAIGHT (2 Quarters).
It is a KNOWN fact this RECESSION was caused by the Pandemic that made a lot of people lose their jobs whilst contractual jobs for those in the Informal Sector has largely dried up or drastically reduce due to the low levels of economic activities – when people are out of jobs, find themselves collecting lower pay or generally unable to find stable jobs that give them consistent income, it impacts on the purchasing powers of the citizens.
Whilst Government, in this case, isn’t the cause of the present RECESSION, the Government is partially to blame due to the weak nature of our economic infrastructure that cannot withstand short shocks to its foundation.
As at today, Government can use a number of Fiscal (Something that puts cash in people;’s hands and the economy) and Monetary Policies (Only Central Bank of Nigeria can use this TOOL) to correct a RECESSION and enable our ECONOMY to increase its production to rebound the economy.
For Fiscal Measures, Government can decide to provide TAX rebates to a certain category of Earners within the Public and Private Sector, this will put more money in the hands of Nigeria who will likely spend it in buying stuff from the Market.
The government can decide to directly give out GRANTS or Development Loans to a certain segment of SOCIETY that produces what we use every day, this will spur indirect growth as people are able to employ more hands to produce – those who produce are able to pay salaries to their staff and their staff can purchase goods in the market.
Government can also decide to launch out new PROJECTS with economic value across the 36 states of the Federation, this will ensure that money flows into the society through paid workers who earn and spend.
For Monetary Policies, the Central Bank of Nigeria is empowered to use Monetary Tools to rebound our ECONOMY – The CBN can try to defend the Naira so that imported components or goods that largely makeup what we use or consume isn’t so expensive, this is difficult to achieve at this time due to dwindling OIL revenue as a result of the GLOBAL pandemic. If they can, they can also readjust our local exchange rate.
The Central Bank of Nigeria can also reduce INTEREST rate through its Monetary Policy Committee, with reduced interest rates, Banks are more WILLING to provide cheaper interest LOANS to Businesses.
The Central Bank of Nigeria can also PROVIDE CREDIT Guarantees and COVERS to SECTORS with high-volume production particularly cross-sectors with symbiotic relationships that feeds on mutually each other. This will spur growth and flow of money.
Whilst Nigeria is not the ONLY country in the World in a RECESSION, Nigeria’s PATH to RECOVERY might take a little while, things will pick up around January 2021 but we will be fully out of a RECESSION by end of 2nd Quarter 2021, that’s June 2021, all things being EQUAL.
So Nigerians, whilst Government can do the following explained above, we also need to pray and hope that a VACCINE gets to Nigerians as early as February 2021, we don’t have a mass pandemic problem so we can be very fine by March 2021 in terms of covering our HEALTH BASE.
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This piece is written by EldaDavid Kehinde Samuel, Elda is a Public Policy Practitioner and Resident Policy Fellow of the Nigerian Global Affairs Council (NIGAC) – A Technology-based and Digital Media-driven Public Policy and Evidence-based Research Think-Tank.