Nigerians lament as they face the reality of economic recession

Nigeria, Africa's most populous nation has officially slipped into economic recession with GDP growth contracting in last two consecutive quarters. According to a report from the National Bureau of Statistics (NBS), GDP growth shrank by 2.06 percent in the second quarter of 2016 and shrank 0.36 percent in the first quarter of 2016. The last time Nigeria entered economic recession was in 1991. There has been widespread lamentations across the country.

President Buhari

The President of Nigeria, President Buhari noted in his Eid-El-kabir's message to Nigerians that

the present recession is as a result of cumulative effects of worldwide economic downturn and failure in the past to plan and save for difficult times

Nigeria is a mono-culture economy, depends largely on crude oil export. The price of oil has fallen significantly since 2014 from $120 to $48 per barrel today. Oil revenues are at the lowest in the last two decades which has greatly affected the economy of Nigeria. Disruptions of oil by the militants in the Niger Delta areas has also affected the economy of the nation.

In July, inflation increased by 17.1 percent  (year-on-year) from 16.5 percent in June and unemployment rate rose 13.3 percent in second quarter of 2016.

The Naira has been devalued since the Central Bank of Nigeria introduced the Foreign Exchange rate policy. There has been a shortage of dollars in Nigeria in recent times. The exchange rate is at 315 naira to the dollar in the official market and 424  naira to the dollar in the parallel market.

A weak currency in short term can be painful, hence many are now lamenting about the economy. Nigeria's manufacturers lamented the decline in industrial activities due to shortage of dollars, poor infrastructure (power and transport) leading to escalating costs. Some Airlines  have been grounded because they can't access foreign exchange to maintain its aircrafts.

In long term, a weak currency encourages import substitution and attracts foreign investors. Despite the devaluation of the Naira, many investors have not yet been attracted to Nigeria due to the shortage of dollars in the official and parallel markets.

Many analysts are of the view that Nigeria needs to diversify her economy, encourage small and medium businesses, create jobs, tackle corruption holistically, address the problems of security and infrastructure as a way of getting out of this economic recession. President Buhari says his administration is "working round the clock to remove the hardships the country is going through.".