It is no more news that the Nigerian economy is on the brink of another recession in four years. The economic growth of Africa’s most populous nation contracted by 6.10 percent (year-on-year) in real terms in the second quarter of 2020, ending a three-year trend of slow but positive real growth since the 2016/17 recession, according to the National Bureau of Statistics (NBS). The raison d’etre for the crash is COVID-19, which, like wildfire, has spread across the world, carrying with it baggage laden with economic and health deactivatives.
Negative economic growth has hit many developed economies since COVID-19. The UK economy shrank by 20 percent in April due to lockdown measures, according to the UK Office of Statistics. The United States gross domestic product (GDP) dipped by 9.5 percent in the second quarter from the first. Jobless claims for the week ended August 18 surpassed 1 million in the US. Similarly, the eurozone economy slumped by 12.1 percent in the second quarter of 2020 compared to the previous one, said Eurostat, with hundreds of thousands out of work.
Indubitably, the virus has destroyed lives, disrupted global supply chains, eroded wealth and done incalculable damage to consumers and the poorest of the poor.
However, many of the countries mentioned have taken considerably significant measures to mitigate the impact of the virus.
From late March to April, the Federal Reserve of the US pumped $2.3 trillion into the economy. President Donald Trump in late April signed a $484 billion package to help small businesses, hospitals and first responders. The UK, also, paid employers a £1,000 bonus for bringing back any employee furloughed, and provided a “Eat Out to Help Out” discount of 50 percent for meals eaten by citizens between Monday and Wednesday. This was meant to help the citizens, but more so to boost the recovery of restaurants hit by extended lockdowns.
The government removed stamp duty tax on transactions of less than £125,000 and created £2 billion pound Green Homes Grant. In July, the U.K. government announced $38 billion in fresh stimulus to boost the country’s economy as it gradually exited lockdown. The eurozone, on its part, began a bond-buying programme valued at €1.35tn. Countries within the bloc likewise came up with tens of other measures to boost their economies.
Nigeria cannot afford the humongous amounts voted by advanced countries in a bid to steer recovery. However, there are low-hanging fruit the country can pluck to steer recovery or exit the impending recession early enough.
First, the FG must open the Nigeria-Benin Republic border. Border closure has done incalculable damage to the economy—even though a few rice farmers may be smiling to the bank. In the first quarter of the year when COVID-19 had no impact on economic outcomes, for example, trade’s contribution to GDP was 16.87 percent, lower than the 17.07 percent it accounted for in the previous year. For manufacturing, real GDP growth in Q1 was 0.81 percent.
In terms of its contribution, the sector accounted for 9.80 percent of real GDP, lower than the 9.91 percent recorded in the first quarter of 2018. This was inevitable because a number of manufacturers could not import inputs from West and Central Africa after the border closure in August 2019, and many have not been able to export to the region. Many exporters who spoke with BusinessDay said they have shut down their export operations. This is bad for an FX-starved economy. Nigeria earned $823.06 million (N296.3 billion) from export to ECOWAS countries and $2.72 billion (N978.21 billion) from shipping out products to Africa in the first quarter of 2020, according to the NBS. This is no longer possible as long as the busiest border remains closed.
More so, the Federal Government must provide support for MSMEs which make up over 95 percent of businesses in the country. MSMEs contribute 50 percent to Nigeria’s GDP and accounts for 86.3 percent of jobs (59.6 million jobs in 2017), according to a report by the NBS and the Small and Medium Enterprises Development Agency of Nigeria (SMEDAN).
This sector needs easy financial access, better infrastructure and good policies to thrive and create jobs amid the coming adversity. Financial incentives and packages, as other nations have done, will help to prevent closures and further job losses. Again, there is a need for state governments to reduce multiple taxes and levies, while also making investment-friendly laws and policies. Furthermore, the Federal Government must also take steps to remove bottlenecks that cause delays at Lagos ports, while also addressing traffic gridlocks along the access roads.
