THE STATE AND MANAGEMENT OF ECONOMIC RECESSION IN NIGERIA 2014-2017

CHAPTER ONE

INTRODUCTION

1.1     BACKGROUND OF THE STUDY

Nigeria is a nation that is endowed with abundant human and material resources, agriculture was the main stay of the economy at the time of Nigeria’s political independence in 1960, accounting for about 70 percent of the GDP and about 90 percent of foreign exchange earnings manufacturing which contributed 3.9 percent in 1960 to 1961, reached a pack of about 10 percent in 1981 and thereafter stated to decline progressively to the lowest level of 2.57 percent in 2006(Adelakun, 2008). Crude oil became dominant in the Nigeria economy, starting from 1970s and presently accounts for about 40 percent of the GDP, over 95 percent of foreign exchange earnings and over 70 percent of federal government revenue (Adelakun, 2008). However, due to gross mismanagement, profligate spending, kleptomania and adverse policies of various government of Nigeria, these resources have not been optimally utilized, these resources have not been adequately channeled to profitable investment to bring maximum economic benefit (Agbo, 2014). As a result of the foregoing, Nigeria has been bedeviled with poverty and unemployment (Tokunbo, 2005:1).

Nigeria claims to be giant of Africa but remains among the world’s poorest countries in terms of gross national product (GNP) and access to social and political life(Agbo, 2014). This is in spite of the fact that Nigeria is the sixth oil producing nation in the world, yet the poor and unemployed constitute 70% of her population (Dike, 2006:2, Onobum, Obadan, 2002:186, &Onah, 2006:68). This reflects the poor management of the economy, irrespective of huge resource injected towards it eradication (Joseph, 2006:238, & world 1996; 3).

Recession is generally the slowdown in economic activity. The national Bureau of Economic Research (2008) defines an economic recession as a significant decline in economic activity spread across the economy activity spread across the economy, lasting more than a few months normally visible in real GDP, real income, employment, industrial production and whole sale-retail sale. During recession, many macro-economic indicators vary in a similar way production GDP, employment, investment spending capacity utilization, household income, business profit all while bankruptcies and unemployment rate rise.

 The current recession in Nigeria is as symptom of monoproduct economic structure, lack of economic diversification and over-reliance on to global oil price shocks and violality, worsened by oil pipeline vandalism and depletion of foreign reserves by previous governments Nigeria recession was triggered by a sharp drop in government revenues and or a drop in consumer spending. A global oil price (which Nigeria cannot); triggered a drop in revenue and government not being able to earn what is used to earn before the drop. The mono product economy structure, heavy dependent on crude oil export and official corruption are the root cause of economic recession in Nigeria (Eneji,Dinis,&Umejiaku,2016).

Economic recession created harsh economic climate in Nigeria which is evidenced by highly energy lost, high naira exchange to dollar. The horrendous nosedive in stock manufacturing industries were delisted [in stock exchange there were massive labour turnover(layoffs) as a result of low capacity utilization and factory closure, textile industry was the hardest  hit with about 80% of its capacity utilization (Asian, 2005). The dwindling state of the economy made naira rate of exchange to Us dollar very unstable and tremendously high, it posed difficulty in importation of spare parts, equipments and raw materials for manufacturing industries (chukwu,Liman,Enudu&Ehiaghe 2015).

 The initial response of policy makers in Nigeria was meek, either they did not understood the crisis or underestimated its magnitude and insisted that the fundamental of the financial system look impressively strong even when the capital market capitalization had dropped from12 trillion to less than 9 trillion (Abdul, 2009). Base on the foregoing, this study examine the link between the state and the management of economic recession in Nigeria between 2014-2017

1.2 STATEMENT OF THE PROBLEM

Nigeria is a country blessed with abundant of human and natural resources. However these resources are not put to good use As a result, majority continue to wallow in poverty. Basic amenities such as water, food and shelter are in short supply. According to NBS data the Nigeria economy recorded two consecutive quarter of economic contraction, in Q1 2016,GDP growth was negative(-0.36%) and recently revealed Q2 data reflects a larger contraction of situation .the situation Nigeria masses have been battling with for quite something. the antecedent in the country provided justification economic woe, also the present situation substantiates the effect of absence of clear policy direction of the government . the international monetary fund (IMF) as well as the central bank of Nigeria (CBN) have all agreed that the Nigeria economy has plugged into recession. They asserted that the Nigeria economy may not regain stability until early 2017 with low rate of 1.5%

The impact or danger of the consequences of recession may lack visible team of management to sustain productivity as a result of layoff. The standard of living of people dependent on wages and salaries are more affected by recession than those wholly on fixed incomes and welfare benefit, the loss of job is known to have negative impact on stability on families and individuals’ health and well being (Vaililigan, 2009). The recession in Nigeria and the effort to manage it has attracted attention of writers. Some scholars have failed to investigate on how the government invests in education and empowerment and how research and innovative activities are not encouraged by the government. According to economic researchers the countries with least enterprising spirit are amongst the poorest in the world, Schumpeterian sense, the entrepreneurs are agents of change and economic development who anticipate and maybe even trigger economic booms (Koellinger&Thunks, 2011).

Again, some other scholars asserted that the government should encourage small scale business. Increase domestic production, domestic trade and employment. This will boost income and increase produce and improve macroeconomic variable in this business cycle of recession.(Fuphunda, 2012; Eneji, Malifia, &Umejiaku, 2016) these scholars failed to explain how Nigeria export raw materials only to end up importing finished products. This is because they either do not have adequate processing industries (disjointed industries without product linkage) or fail to meet international standard in the processing of raw material into finished product.

The effort or the contributions of writer in the extant literature reveals that the link between the state and management of economic recession has not been properly articulated. This form the gap or lacuna this study attempt to fill based on the foregoing, the study investigate the following research questions:

1. Did the failure to adequately manage oil resources contribute to recession experience in Nigeria from 2014-2017?
2. Has the implementation of economic growth and recovery plan (EGRP) reduced the hardship caused by the economic recession in Nigeria between 2014 -2017?

1.3 OBJECTIVE OF THE STUDY

 This study examines the state and management of economic recession in Nigeria from 2014-2017.However, the specific objectives for this study are:

1. To ascertain whether the failure to adequately manage oil resources contributed to recession experience in Nigeria from 2014-2017.
2. To ascertain whether the implementation of economic growth and recovery plan (EGRP) reduced the hardship caused by the economic recession in Nigeria between 2014 -2017.

1.4 SIGNIFICANCE OF THE STUDY

This study has both theoretical and practical significance. Theoretically the study will add to existing body of knowledge on the management of economic recession in Nigeria, it will also bring to light those factors that militate against effective utilization and mismanagement of resources meant for alleviation of economic growth and eradication of economic recession in Nigeria.

Practically, this study will provide information and empirical evidence that will enable the government, policy makers, donor agencies and stakeholders to redesign and adopt sustainable, effective and efficient policies and strategies for the realistic management of economic recession in Nigeria

More so, the finding will also be of immense benefits to non-governmental organization (NGOs) and civil society by exposing them to economic recession in Nigeria. It will be serving as a guide towards a more pragmatic and result oriented approach to curtail recession and also help in building programs there by creating opportunities for the poor and unemployed in Nigeria to gain control over their lives

Finally, this research work serves as a spring board for continuation of research and information for the state and management of economic recession in Nigeria.