Everyone expected the flurry of bad news on Nigeria’s economy streaming in from the National Bureau of Statistics (NBS). However, few expected the figures to be so deep in negative territory. The World Bank and the International Monetary Fund (IMF) had estimated that Nigeria’s economy would shrink by 4 to 5 per cent in the second quarter of 2020.
The economy defied that projection and went down by a record 6.1 per cent.
It is not how deep an economy contracted but how fast it could recover from the negative growth. The U.S. economy contracted by 33 per cent with unemployment rate sailing perilously close to 30 per cent during the lockdown in the second quarter of 2020. However, between June and July the economy created so many jobs that unemployment dropped to 10 per cent.
Nigeria’s unemployment rate stands defiantly at 27.1 per cent and is still climbing. Graduate unemployment stands menacingly at 2.9 million. That explains why more than 200 graduates including PhD holders have applied for the federal government 774, 000 street sweeping jobs.
Nigeria’s unemployment figure is intimidating. There has been a steep decline in the number of people employed in the economy since 2015. A total of 55 million people were fully employed in Nigeria in 2015. As at the last count two weeks ago, the number of fully employed Nigerians dropped to 34 million.
That again explains the rising level of poverty in the land. About 60 per cent of Nigerians spend all their monthly income on food because they are either under-employed or food inflation has eaten deep into the purchasing power of their lean income. Food inflation stands menacingly at 15.4 per cent.
With agriculture growing at 2.5 per cent during the lockdown, the only way to explain the spike in food inflation is that the proceeds of the bumper harvest rot away in Nigeria’s inaccessible rural communities while prices rise in urban areas due to high cost of haulage.
Nigerians have endured a long stretch of negative news on economic indices in the last two weeks. Even as the economy is contracting precipitously, inflation rate is climbing. It now stands at 12.8 per cent. Everyone expects it to climb higher.
The only positive news was on population growth. Nigeria’s population grows at a frightening 2.6 per cent. The National Population Commission (NPC) announced last week that Nigeria is now the world’s fifth most populous nation. That again is bad news for an economy lumbering along at a growth rate far below population growth.
With an abysmally low life expectancy of 53 years for male and the fact that only 6 per cent of Nigerians live beyond 65 years, the rulers of Nigeria should be worried that Nigeria now has the fifth largest population in the globe.
The decline in Nigeria’s gross domestic products (GDP) in the second quarter of 2020 is largely traced to the lockdown to contain the spread of COVID-19. Statistics from NBS shows transport sector declining by a whopping 49 per cent.
The sharp decline in transport sector is understandable. For almost three months there was no inter-state movement in the entire federation. In some states like Lagos and Ogun, there was intra-city lockdown that halted movements within communities. The aviation segment of the transportation industry suffered colossal losses as the lockdown started with it about a month before land transportation was shut down. Even after the lockdown on land transportation was eased in June, the airlines could still not fly because no one could guarantee safety in the air.
Growth in transportation industry is expected to be sluggish because COVID-19 has opened the eyes of business executives to the comfort of virtual meetings. People now hold strategic meetings from the comfort of their homes through zoom. Even after COVID-19 few would be in a hurry to return to physical meetings.
The losses to the transportation industry were the gains of the telecoms industry. It would remain so for some time.
After transportation, the business of buying and selling suffered the deepest decline. It plunged by 16.2 per cent. Again, the lockdown to contain the spread of COVID-19 drastically reduced trading as markets and malls were shut down.
Agriculture toiled to record a growth of 2.5 per cent during the turbulent period. There are fears that the GDP contraction would have entered double digit if agriculture had declined during the period. Agriculture accounts for 25 per cent of GDP and employs close to 60 per cent of the workforce.
The federal government should think of the way out of the impending recession. Government and the private sector have to spend their way out of the impending recession. Ironically government palliatives budgeted for the GDP decline is infinitesimally low compared to the economic crunch. The palliative is a scant N2.3 trillion when the economy plunged by 6.1 per cent, about N12 trillion.
There are strong indications that the economy would slip into recession in the third quarter of 2020 when it would have recorded declines for three consecutive quarters. The chances of preventing the slip into recession are very slim because schools are still shut.
The hospitality and entertainment industries are still idle. With security crisis worsening and infrastructure deficit raising the cost of doing business and repulsing foreign investors, the fastest way to pull the economy out of the impending recession is to invest massively in agriculture.
Nigeria is the world’s largest producer of cassava with a record 53 million metric tons per annum. However, Nigeria’s cassava yield per hectare of land stands incredulously low at 7.2 metric tons. Indonesia produces 22.2 metric tons of cassava per hectare. If Nigeria raises its cassava yield per hectare to 15 metric tons, the national annual output would rise to 110 million tons.
That would free more cassava for processing into derivatives that Nigeria imports annually with $600 million. About 94 per cent of Nigeria’s cassava is processed into garri and fufu for domestic consumption. That leaves only four per cent of the annual output for export and processing into industrial starch and other derivatives.
The Central Bank of Nigeria (CBN) should focus its intervention in cassava production on equipping farmers with high yield seedlings and inputs while at the same time encouraging investors to process cassava into derivatives currently being imported.
A similar intervention in maize and rice production would create jobs, raise GDP and forex.
