Nigeria is now in recession, a period of general decline in economic activity resulting in a business cycle contraction. In other words, since our population rate continues to rise when our economic output has seasonally dropped, it means, on average, everyone is getting poorer. No one can honestly blame the government for this particular recession; it is an asymmetric attack from the coronavirus pandemic, and Nigeria fell just like many other countries.
During recession, a government has some tools which can be classified into monetary and fiscal tools. These tools affect interest rates, foreign currency exchange, and many other factors. By reducing interest rates, borrowing money by companies becomes cheaper, and if other things are largely equal, they can invest more.
And if they do invest, it means they can hire more people, and pay them wages. With more money in the pockets of people, consumption can rise, and with higher consumption, and associated further economic activities, you can create a virtuoso circle that will make it possible for the economy to get out of recession. That is done while making sure that inflation does not become the order of the day.
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Higher liquidity is very critical here. That liquidity is to get people and companies to spend. In the U.S., they even send everyone free money to jumpstart the economy via spending. Of course, Nigeria does not have that liberty.
Government can just print money and start spending it. If that happens, it could kickstart the economy. It could also decide to lower tax so that companies will keep their money and possibly spend it. That spending can lead to more investments, triggering a circle where more economic activities could be kickstarted. Of course lowering tax may have its challenges when you want to remove it. Also, printing money for massive expansion of the budget and running deficits could lead to inflation.
This is my question: what options do you think Nigeria has now?
(Personally, my call is to inject liquidity in productive endeavors, not spending money on the typical non leverageable things like expanding bureaucracy. An example of productive things would be making cheaper funds available to businesses and building critical infrastructures.)
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While growing up, I read a lot of agendas from different levels of our government; 10 point agenda, 3 point agenda, 16 point Agenda etc. Today I have just 5 point Agenda:
1. Nigeria should organise a national Hackathons, business incubation programs, select 50-100 business from it and fund them. Preference should be given to logistics and agric businesses as they have capacity to employ many. This should be done qauterly, it will put us in the sight of foreign investors.
2. Infuse Capacity in existing businesses by retraining the workforce, so many will find groundbreaking solutions by themselves. Preference should be given to the creative and entertainment industry. Many people make a living by hosting podcast, being social media influencers, writing, acting, etc. Our youths are already inclined that way, let’s add structure to it.
3. Privatise government agencies by selling it to citizens in form of shares and franchises. I will buy a NIPOST Franchise. All these will cause repatriation of funds from Nigerians abroad and give them an opportunity to put their money where their mouth is.
4. Put money in the hands of people by structuring financial packages in partnership with telcos instead of banks. Telcos know our money habits more than our banks.
5. Reduce the cost of governance. Merge ministries and send sleeping lawmakers home.
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We have largely played all our cards, before recession arrived, and the best way to get out of a hole is to stop digging; but Nigeria is still digging.
It’s over a year since the boarder closure, but nobody has given us the P/L statement, so that we know how we won and lost; you are not winning simply because you claimed that you are winning, the evidence must be palpable.
If you release money to fund consumption of goods and services you cannot produce, you end up battering the naira that is already suffering convulsion; every move must require diverse computer simulations, to examine its potential impacts.
Printing more money will be irresponsible, because inflation will render it worthless; making sacrifices and being patriotic are never our strong points, it’s dog eat dog here.
After all said and done, who will lead the renaissance, the same people we know? That is where it gets complicated, they are already a spent force.
Maybe we hold a conference with moneymen and big league investors outside here, and humbly ask them, what do you want? Because we seem to be overly interested in what we want, and never about what those who could drop the dollars want. Give them what they want, and in return you get what you want…