Following the official report of the National Bureau of Statistics (NBS) indicating that Nigeria had plunged into recession, Techeconomy.ng, in this article will be highlighting the meaning and causes of the development.
This medium on Saturday, November 21, reported that Nigeria slipped into recession as the country’s gross domestic product (GDP) decreased by –3.62% (year-on-year) in the third quarter of 2020 while this represents an improvement of 2.48% points over the –6.10% growth rate recorded in the preceding quarter (Q2 2020).
But the question must be asked: what actually constitutes a recession? This is ultimately a matter of definition, which unfortunately is not answered homogeneously in the scholarly literature and also not in the practice of international organisations or statistical offices.
However, business-cycle analysts generally use the concept of a recession to refer to weak economic phases, of which duration, depth, and diffusion exceed the usual bounds; thus one speaks of the “three key dimensions of a recession, known as the ‘three Ds’: duration, depth, and diffusion”
This means that in a recession economic activity decreases substantially, the decline affects wide portions of the economy and it has some permanence.
Therefore, recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales”.
Suffice to say that the undeniable definition of a recession is applicable to the current state of Nigerian economy.
In furtherance, we are considering major reasons for the Nigerian economy slipping into recession.
The number one reason is not farfetched; it is the COVID-19 pandemic. Recall that Nigeria confirmed her first case of the pandemic on Thursday, February 27, making it the third African country to record the deadly disease at that time.
And of course, that was the beginning of the country’s economic meltdown which lasted for about eight months. During this period, the economy was totally shutdown.
And by the time private companies were supposed to be counting their profits, they were merely talking about the survival of their capital.
On Thursday, September 3, the Secretary to the Government of the Federation (SGF), Boss Mustapha said the third phase of the COVID-19 lockdown would last for another period of four weeks. No sooner the lockdown was totally relaxed than the #EndSARS protests began across the country.
The development we might consider as the second reason for Nigerian current economy recession were the #EndSARS protests turned violence.
Nigerian youths recently took to the streets to demand that the country’s leaders disband the Special Anti-Robbery Squad (SARS) and reform the nation’s police force.
Few days after the peaceful protests began Nigerian economists and business managers spoke on the economy effect of the #ENDSARS protests across the country.
The financial experts disclosed that the businesses in the country lost at least N10 billion daily since the commencement of the protests.
However, the loss incurred by the country during the protests that lasted for about two weeks are believed to have been a minute of what was lost during the violence and aftermath.
Asides the above reasons for the development, a global trade tension between the US and China impacted the global economy and FBI inflows into geography.
This led to a huge drop in the price of crude oil and led to a reduction in government revenue and economic recession.
According to the NBS, the average daily oil production recorded in the third quarter of 2020 stood at 1.67 million barrels per day (mbpd), or 0.37mbpd lower than the average production recorded in the same quarter of 2019 and 0.14mbpd lower than production volume recorded in the second quarter of 2020.