▪︎ offers way out
When it rains, it surely pours for Nigeria, economically. Now, for the second time in four years, Nigeria has slipped into recession – the worst in 33 years.
Like someone announcing an obituary, former Vice President, Atiku Abubakar, announced: “It is with a very heavy heart that I received the confirmation that for the second time in five years, Nigeria has entered into another recession. Heaviness of heart, because this could have been avoided had this administration taken heed to patriotic counsel given by myself and other well meaning Nigerians on cutting the cost of governance, saving for a rainy day, and avoiding profligate borrowing.”
According to the National Bureau of Statistics (NBS), the economy slipped into recession at the end of the third quarter (Q3) of this year.
Following what many said was the new administration’s delay in hitting the ground running within a year, the country slipped into its recession in 2016.
According to the NBS, the Gross Domestic Product in real terms declined by -3.62% (year-on-year) in the third quarter of 2020 and is driven by the long closure of the Nigerian borders which stopped economic movements across the borders.
“Nigeria’s gross domestic product (GDP) recorded a growth rate of –3.62% (year-on-year) in real terms in the third quarter of 2020,” NBS disclosed on Saturday.
“Cumulatively, the economy has contracted by -2.48% While this represents an improvement of 2.48% points over the –6.10% growth rate recorded in the preceding quarter (Q2 2020), it also indicates that two consecutive quarters of negative growth have been recorded in 2020.
“Furthermore, growth in Q3 2020 was slower by 5.90% points when compared to the third quarter of 2019 which recorded a real growth rate of 2.28% year on year.
“The performance of the economy in Q3 2020 reflected residual effects of the restrictions to movement and economic activity implemented across the country in early Q2 in response to the COVID-19 pandemic.
“As these restrictions were lifted, businesses re-opened and international travel and trading activities resumed, some economic activities have returned to positive growth. A total of 18 economic activities recorded positive growth in Q3 2020, compared to 13 activities in Q2 2020.”
It added that aggregate GDP was at N39,089,460.61 million in nominal terms, saying that the performance was 3.39% higher when compared to the third quarter of 2019 which had an aggregate of N37,806,924.41 million.
“This rate was, however, lower relative to growth recorded in the third quarter of 2019 by –9.91% points but higher than the proceeding quarter by 6.19% points.
“For clarity, the Nigerian economy has been broadly classified into the oil and non-oil sectors: The contract mark the beginning of a full-blown recession and second consecutive contraction from -6.10 per cent recorded in the previous quarter of this year.”
“Nigeria’s gross domestic product (GDP) recorded a growth rate of –3.62% (year-on-year) in real terms in the third quarter of 2020,” NBS disclosed on Saturday.
“Cumulatively, the economy has contracted by -2.48% While this represents an improvement of 2.48% points over the –6.10% growth rate recorded in the preceding quarter (Q2 2020), it also indicates that two consecutive quarters of negative growth have been recorded in 2020.
“Furthermore, growth in Q3 2020 was slower by 5.90% points when compared to the third quarter of 2019 which recorded a real growth rate of 2.28% year on year.
“The performance of the economy in Q3 2020 reflected residual effects of the restrictions to movement and economic activity implemented across the country in early Q2 in response to the COVID-19 pandemic.
“As these restrictions were lifted, businesses re-opened and international travel and trading activities resumed, some economic activities have returned to positive growth. A total of 18 economic activities recorded positive growth in Q3 2020, compared to 13 activities in Q2 2020.”
The report also disclosed that during the quarter under review, aggregate GDP was at N39,089,460.61 million in nominal terms, saying that the performance was 3.39% higher when compared to the third quarter of 2019 which had an aggregate of N37,806,924.41 million.
“This rate was, however, lower relative to growth recorded in the third quarter of 2019 by –9.91% points but higher than the proceeding quarter by 6.19% points.
“For clarity, the Nigerian economy has been broadly classified into the oil and non-oil sectors: The contract mark the beginning of a full-blown recession and second consecutive contraction from -6.10 per cent recorded in the previous quarter of this year.”
Atiku laments further, but advises: “Yes, the COVID19 pandemic has exacerbated an already bad situation, however, we could have avoided this fate by a disciplined and prudent management of our economy.
“Be that as it may, it serves no one’s purposes to quarrel after the fact. We must focus on solutions. Nigeria needs critical leadership to guide her back to the path of economic sustainability.
“We cannot afford hand wringing and navel-gazing. We must act now, by taking necessary, and perhaps painful actions.
“For a start, the proposed 2021 budget presented to the National Assembly on Tuesday, October 8, 2020, is no longer tenable. Nigeria neither has the resources, or the need to implement such a luxury heavy budget. The nation is broke, but not broken. However, if we continue to spend lavishly, even when we do not earn commensurately, we would go from being a broke nation, to being a broken nation.
“As a matter of importance and urgency, every non essential line item in the proposed 2021 budget must be expunged. For the avoidance of doubt, this ought to include estacodes, non emergency travel, feeding, welfare packages, overseas training, new vehicle purchases, office upgrades, non salary allowances, etc.
“Until our economic prospects improve, Nigeria ought to exclusively focus on making budgetary proposals for essential items, which include reasonable wages and salaries, infrastructural projects, and social services (citizenry’s health, and other human development investments).
“Additionally, we have to stimulate the economy, by investing in human development, and increasing the purchasing power of the most vulnerable of our population. Only a well developed populace can generate enough economic activity for the nation to exit this recession.
“We must invest in those most likely to be impacted by the effects of the recession, the poorest of the poor. As well as stimulating the economy, this also ensures that they do not slip further into extreme poverty.
“For example, a stimulus package, in the form of monthly cash transfers of ₦5000 to be made to every bank account holder, verified by a Bank Verification Number, whose combined total deposit in the year 2019 was lower than the annual minimum wage.
“Now, how will this be funded? By more profligate borrowing? No. I propose a luxury tax on goods and services that are exclusively accessible only to the super-wealthy. A tax on the ultra wealthy to protect the extremely poor.
“A practical approach to this is to place a 15% tax on all Business and First Class tickets sold to and from Nigeria, on all luxury car imports and sales, on all private jets imports and service charges, on all jewellery imports and sales, on all designer products imported, produced or sold in Nigeria, and on all other luxury goods either manufactured, or imported into Nigeria, with the exception of goods made for export. The proceeds of this tax should be exclusively dedicated to a Poverty Eradication Fund, which must be managed in the same manner as the Tertiary Education Trust Fund, or the Ecological Fund.
“I further pr
opose that a 1% poverty alleviation tax should be legislated by the National Assembly on the profits of every International Oil
Company operating in Nigeria, and international airlines doing business in Nigeria, which should also go towards the proposed Poverty Eradication Fund.
“It is inhumane for us as a nation to increase the cost of goods and services that affect the poor, while keeping the cost of luxuries fairly stable. We must flip this, and flip it immediately.
“And above all, Nigeria must stop borrowing for anything other than essential needs. Again, for the avoidance of doubt, borrowing to pay salaries, or to engage in White Elephant projects, is not an essential need. This is particularly important as we need cash at hand, because the world and our economic and development partners are also focused on helping their home economies overcome the effects of COVID19. We must be our own saviours.
“The more we borrow, the more we will need cash to make interest and principal payments, and the less cash we will have to make necessary investments in our economy and our people. If we keep borrowing, we stand the risk of defaulting, and that will make recession a child’s play, because we will lose some of our sovereignty.
“I urge the administration of President Muhammadu Buhari to swallow its pride, and accept its limitations, so that they can open their minds to ideas, without caring who the messenger is. For as Deng Xiaoping said “It doesn’t matter whether the cat is black or white, so long as it catches mice.”