The present-day economic situation in our country is indeed concerning. The two-year long recession has caused money problems for millions of citizens. It’s no wonder that people refer to this period as the economic depression in Nigeria. The circumstances may be dire, but there’s always a light at the end of the tunnel. If you would like to know the solution to Nigeria economic recession, continue reading below!
What is economic depression?
For people living an economically-stable country, the difference between an economic depression and recession may not be significant. After all, even the words themselves sound a lot alike. However, the distinction between the two becomes very painfully apparent when you find yourself in the middle of one of them.
To answer the question written in the title, an economic depression is a severe type of recession. It lasts for several years and is caused by several catalysts. Depression is quite rare, but when it does happen, it leaves a lasting mark in the history of a country. Thus, unlike in a case of a “simple” recession, you can’t get out of it by making one or two changes to your policies.
We’ve prepared a short list of the problems caused by entering an economic depression:
- Disruption of a stable business cycle;
- Catastrophic levels of unemployment;
- Banking crisis;
- Little to no amounts of available credit;
- Bankruptcies of several large and small businesses;
- Increased amount of foreign debt;
- Decrease in demand leading to a decrease in supply;
- Lower rates of production and manufacturing;
A lot of these issues are also typical for a recession. So how do you know when a country is in an economic depression? Two main criteria can be met. Either a country’s GDP is in a decline of over 10%, or the recession lasts for two or more years.
Another aspect that has become a subject of debate is how to judge a length of an economic depression. The first group of economists states that it occurs only for the period that the economy is in decline. The others claim that the depression lasts until the economic state of a country bounces back and returns to normal.
Economic depression in Nigeria
The current recession in Nigeria began last year. Prior to 2016, our country enjoyed about ten years of six percent of annual growth. The first sign of the depression was the two-percent drop of the GDP. Add to that the poorly distributed budget funds, lack of policy implementation, and the ever-increasing national debt, and the answer to why Nigeria economy has found itself in an economic depression becomes obvious.
The numbers are truly concerning. The national economy has lost 1.7% in 2016, and a troubling half-percent in the first quarter of 2017. One of the biggest reasons why Nigeria has fallen into a recession is the plummeting of the oil prices on the global market. With crude oil sales making up two-thirds of the national income, we couldn’t expect anything else. Another factor that played a role in the downturn was the free fall of the Naira currency.
Below you’ll find even more situations that led to the economic depression in Nigeria:
- The government’s inability to save money;
- Over-reliance on imported products;
- Increased levels of vandalism;
- Illegal oil mining;
- Poorly planned 2016 budget;
- Inactivity of the CBN
Now that you know about all the problems caused by the present economic depression, it’s time to talk about how to find a way out of economic recession in Nigeria.
How to survive economic depression?
During such harsh times, there’re two things every citizen needs to know. First of all, you need to know how to survive yourself. Secondly, you may want to learn the solution to the recession.
Concerning your personal life, the first thing you should do is to teach yourself financial discipline and limit your expenditures. Some people battle money shortages by reducing their monthly food purchases by one fourth. Other Nigerians, who were previously accustomed to living an extravagant lifestyle, have reduced their spendings to only basic needs.
If you have children, another option to survive economic depression is to transfer your kids from a private school to a public educational establishment. You could also turn to farming, as it can help provide both for your family, and prove to be a prosperous business opportunity. In addition, you can save money by trekking instead of using your car.
Of course, no one wants to do anything from the suggestions provided above. However, when times are this tough, we often don’t have a say in the matter. The best we can hope for is that the government will force price control onto the essential needs such as food and medications.
But that’s not all they have to do. The solution to Nigeria economic recession lies in focusing on agriculture, and to slowly drifting away from relying so heavily on the crude oil industry. To even further improve the chances of Nigeria coming out of the present economic depression, the government should do the following:
- Decrease the tax rates;
- Improve the budget spending;
- Provide more accessible credits;
- Increase the amount of funds spent on skills;
- Increase manufacturing production and export;
- Spend money into the power sector;
- Learn from countries that already went through such a phase.
Now you know everything that answers the question, 'what is an economic depression', how Nigeria found itself in the middle of one, and how to survive in such difficult times. Feel free to share this information with your friends and colleagues, and let’s hope for a better future for our country.