CAUSE AND EFFECTS OF ECONOMIC RECESSION ON MACROECONOMIC STABILITY AND SUSTAINABLE DEVELOPMENT IN NIGERIA: A STUDY OF PRESIDENT MUHAMMADU BUHARI’S ADMINISTRATION

Introduction

Economic recession is a period of general economic decline and is typically accompanied by a drop in the stock market, an increase in unemployment, and a decline in the housing market. Generally, a recession is less severe than a depression. The blame for a recession generally falls on the federal government where economic policy emanates from, often either the president himself, the head of the Federal Reserve, or the entire administration. Hence , this research paper tends to discuss the impact of economic recession on macroeconomic stability and sustainable development in Nigeria; its concepts, causes and implications for the wider economy.

There have been symptoms of recession in the Nigerian economy, just that it became full blown under the President Muhammadu Buhari regime due to certain drastic actions taken to solve perennial domestic economic problems. Economic crisis come in a cycle. A recession is an economic crisis in the business cycle contraction, which results in a general slowdown in economic activities in two or more quarters(6 months and above). Macroeconomic indicators get worse showing that if there is no appropriate policy response, the economy may slip further into a depression. The Gross Domestic Product (GDP), investment and consumption spending, savings rate, imports and exports, capacity utilization, household income, trade, capital flows, business profits and inflation decline, while indebtedness, illiquidity, bankruptcies and the unemployment rates rise.

Economic recession is also a negative economic growth for two consecutive quarters. The National Bureau of Economic Research (NBER), defines recession as “a significant decline in economic activity spread across the macro economy, lasting more than a few months, normally visible in real gross domestic product (RGDP), real income, employment, industrial production and wholesale-retail sales”. Usually, recession may be triggered by financial crisis and or credit crunch, as well as demand and supply side shocks, (Kamar,2012).

There are many causes of the current economic recession in Nigeria. Globally, there is geopolitical tension around the world, causing global crisis and commodity prices dropping, the drop in crude oil prices, Brexit, crucial American election in 2016, South China Sea issues, Russia-Syria crisis, ISIS, illegal migration and refugee crisis which are remote but important causes of the recession as Nigeria is an integral part of the global economy. This loss of confidence makes businesses and/or consumers stop buying and move into defensive mode. Once a critical mass moves toward the exit sign, panic sets in. That creates a destructive downward spiral.

The global economic (financial) crisis of 2007/2008 affected Nigeria as a periphery economy that is dependent on the global trade. Nigeria has unrepentant, unpunished corrupt political class, over relies on the Federal Government revenue, over-depends on crude oil, to a large extent, feeds on imported food, lives on foreign finished household electronics and communication manufactures, military gadgets, transport and electricity, infrastructure inputs, cloth in imported textiles and garments and drives in 100 percent imported cars. These are the root causes of the recession. The country looses $18 billion FDI annually to foreign entrepreneurs in telecommunications, with over-blown financial corruption and recklessness. These are the internal problems that caused the recession. Nigeria should adopt measures that will conserve its foreign reserves by reducing the demand for foreign exchange on imports that could be produced in Nigeria. Structural reforms that would lead to diversifying the economy must be fully implemented. The socio-economic effects of the recession include; unemployment, inflation and loss of livelihood strategies. These have serious negative consequences on the stability of families. The standard of living, education, healthcare, infrastructure and general wellbeing are affected. People are suffering, life is tough and crime rates are on the increase as life expectancy reduces with increases in infant and maternal mortality rates. Consumer confidence is lost; there is psychological bad faith in the economy and the government, especially by the suffering aggregate households, businesses and external sectors.

Following this introduction, chapter two of this work will deal extensively on related literature review where some empirical and theoretical frameworks will be adopted. Chapter three will presents the methodological details the researcher employed in the study. Chapter four will discuss the presentation and analysis of data, whereas chapter five will summarize the findings of the work drawing some conclusion presenting useful and attainable recommendations.