Could Nigeria have a recession similar to that of the UK and Japan? 1
year, 2023, the world was gripped by the fear of looming recession clouds over much of the global economy.
Given the biting effects of regional conflicts, high energy costs, mass layoffs, constraining discretionary spending, the question on the lips of many at the time, was not ‘how’, but ‘when would the recession hit…’
It thus came as a relief when economic data from, particularly, the USA, and China showed better than expected commercial activities.
The USA, arguably the world’s largest debtor nation, saw better-than-expected GDP growth for FY 2023, and January 2024 of ~2.5%, and 1% (expected) respectively.
China’s GDP for 2023 also, unexpectedly, registered a 5.2% year on year growth, despite its debilitating real estate and banking sector troubles.
With such news, one had hoped, the chances of a recession were, at least, now in our rearview, and we could begin embracing the prospects of greater regional and global economic growths.
That was, of course, until news broke that the Japanese, and UK economies, both listed as the 3rd and 6th largest economies in the world respectively, had both slipped into two quarters of negative growth, and consequently, a recession.
For the UK, which registered growth, -0.1%, for Q3 2023 and then -0.3% in Q4, high energy prices constraining industrial output, rising real estate prices, alongside soaring groceries costs were fingered as the harbingers of its economic woes.
These elements, combined with stagnating wages, had severe effects on discretionary spending. Japan, which has also been victim to much the same adversities, saw contracti
on, well below market forecasts of +1.4%, to print at -0.4% in Q4 2023 after another unexpected annualized contraction of -3.3% for the previous quarter. This has led to it yielding its 3rd largest economy position to an unlikely Germany, which too is suffering stiff economic headwinds of its own. Not only that, the Yen has slipped ~27% to the dollar since June 2023.
Juxtaposed with the supposed projection that Nigeria, Africa’ largest economy, is expected to enjoy a median GDP growth of ~3% for 2024 with the current woes being suffered by Nigerians, and it is difficult to see, with any merit, how the country may not suffer the same fate as its European and Asian counterparts in the days to come.
Our current economic woes are not only numerous, and mounting, but do not seem to show ‘transient’ signs as is being diagnosed for the UK and Japanese economies. For 2023, Nigeria suffered a median rise in consumer price index of ~25%. Recent reports by NBS showed inflation for January 2024 already at ~30%.
The malefactors responsible for this statistic unfortunately bares striking semblance to those currently being suffered by UK and Japan.
Last year, the removal of fuel subsidies by the Tinubu administration led to a +50% jump in energy prices. This fueled a corporate exodus from the country and the local bourse, unprecedented in many years.
Insecurities, particularly in the core breadbasket regions of the country, have forced farmers to abandon the farm and seek preservation of life instead, thus pushing up the cost of everyday staples and further impoverishing an already hungry populace.
An attempt to merge our multiple forex markets has sent the Naira tumbling to unprecedented lows, not only registering amongst the worst performing currencies against the dollar in 2023, but arguably the worst, globally, thus far in 2024.
This has left import dependent companies and individuals contemplating the question, “to leave or not to leave the country…” this comes even as our youthful job seekers continue to consider ‘japa’ a viable option against current economic hardships, or continue, unsuccessfully, to traverse a shrinking job pool within the country.
Despite promises by the NNPCL of its non–intentions to further increases in fuel prices, reports have begun percolating that certain States have already started registering mysterious price hikes above the N650.
Cement prices in recent days have jumped +100% to N9,000, leading to many abandoned construction projects and possibly double-digit spikes in rental living in the coming days.
All these, whilst Nigerians still nervously bite their nails against looming threats of further subsidy removals in the utilities sector, a move certain to further add to the woes of a country struggling for greater productivity, especially in the non–oil sector.
Add the foreboding threats of nationwide strikes particularly by the country’s organized labor sector, and one could plausibly argue that whatever economic growth predictions have been made on behalf of Nigeria for 2024 might well be made a mess of by Q2.
A stagflation, I wager, may well be our best–case scenario by mid–year, if not a recession.
The CBN on its own part has enacted a flurry of policies aimed at arresting the precipitously widening gulf in the Purchasing Power Parity of Nigerians. Applaudable as these might seem, it may inadvertently be akin to aiming at a distant target whilst blindfolded, if the Nigerian political administration does not act quickly to arrest the country’s ongoing deteriorating economy.
An adage says, ‘the more things change, the more they stay the same…’ Before the discovery of crude oil, Nigeria was majorly an agrarian led economy, and amongst the world’s largest net exporters of agricultural produce.
With the country now battling constrained crude oil outputs due to theft and illegal bunkering on industrial scales, the writing on the wall is becoming clearer; not only may crude oil, regardless its soaring international prices, be woefully unable to save us from a receding economy, but if the Tinubu led administration does not urgently find a way to get hard working Nigerians back to the farms, then not only may a ~3% GDP growth projection become a fleeting illusion, but a recession, much like what has shockingly gripped the UK and Japanese economies, may be the least of our impending worries.
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