Why Is Nigeria In A Recession?

November 23, 2020

Citizen is a column that explains how the government’s policies fucks citizens and how we can unfuck ourselves.

Recession, palliative, ad-hoc committee, ultra-modern, bistro — you can’t claim to be a Nigerian if you’ve never heard these words. They are so popular, we wrote about them.

Speaking of recession, on Saturday, November 22nd, 2020, the Nigerian Bureau of Statistics reported that Nigeria’s GDP (Gross Domestic Product) reduced by 3.62% from September to October 2020 (Q3 2020). The economy had reduced by 6.10% from April to June 2020 (in Q2 2020), all of which led to the report that Nigeria is now in an economic recession.

A recession is a decline in economic activity for a few months. Usually, when many businesses in a country lose money instead of make profits for six months, economists declare that the country is in a recession. In Nigeria’s case, our trade, financial and manufacturing activity have reduced in six months — which means that the country is officially in a recession.

It is usually rare for a country’s economy to decline for two or more consecutive quarters, or over six months, but since 1960, Nigeria has entered into recessions only four times — in 1983, 1987, 2016 and 2020.

The curious thing, though, is that most of these recessions are usually linked to the low oil prices. Because 90% of Nigeria’s foreign revenue is gotten from oil, 80% of our export is crude oil and over 50% of all the money the federal government makes is also gotten from oil, any time the price of oil reduces, it badly affects Nigeria’s economy.

In 2020, COVID-19 has affected economic activity badly. For instance, China, Nigeria’s biggest oil importer, implemented large scale lockdowns in January, 2020. This meant that Chinese factories were not working, neither was any travel or economic activity that seriously required crude oil happening in China. Meaning that China had no need to import Nigeria’s crude oil.

Because of the low demand of crude oil from China and many other countries, oil prices fell to $28, and even less —  some of the lowest oil prices in history. All of which meant that Nigeria’s federal government had less revenue to balance the budget and pay for critical development activities. 

Worse, because oil sales are conducted in dollars, low oil prices also meant that Nigeria could not generate enough foreign currency, which ended up affecting Nigerian business people who wanted to import goods from other countries. This meant a higher cost of importing goods into Nigeria, which led to a higher price of goods or “inflation“.

Read: Nigeria’s Economy Shrank 6% From April To June. What Does That Mean?

Nigeria’s Recession In The 1980s

Again, it is important to note that this is Nigeria’s economic fourth recession since 1960, most of which is usually inextricably tied, one way or the other, to globally low oil prices.

In 1980, global oil prices collapsed as it has in 2020, and because the Nigerian government was spending lavishly in the 1970s, the oil price fall of the 1980s affected the government’s revenues.

With the fall in oil price, Nigeria quickly entered into a recession. The government was making little money and there was no foreign exchange to pay for Nigeria’s imports. All of this led to an economic crisis, which included high unemployment, the government’s inability to pay its debts, a foreign exchange shortage, and so on.

In 1986, General Ibrahim Babangida’s government decided to reject an IMF (International Monetary Fund) loan proposal. Instead, he adopted a modified variant of the transitional Structural Adjustment Programme (SAP), which was designed and implemented by Nigerians. The World Bank also supported the policy with a $450 million trade and export diversification loan.

The objectives of this modified Structural Adjustment Programme (SAP) was to:

  • Restructure and diversify the productive base of Nigeria’s economy so as to reduce dependency on the oil sector;
  • Reduce the amount Nigeria paid for imports while increasing how much we exported;
  • Reduce inflation in the country i.e the high cost of prices of goods.

The GDP growth objectives for 1987 was set at 3-4%, while inflation was supposed to reduce to 9%. 

The government decided to go about this modified Structural Adjustment Programme by:

  • Adopting measures to boost domestic production of goods;
  • Setting up of a “Second-Tier Foreign Exchange Market” where foreign exchange would be traded without government control;
  • Eliminating price control and commodity boards;
  • Reducing control of interest rates;
  • Reducing public sector enterprises and reducing public sector workers.

The government also introduced “relief packages” like the Urban Mass Transit Programme of 1988, the People’s and Community Banks of 1989, the Directorate of Food, Road and Rural Infrastructure (DFRRI), the Better Life for Rural Dwellers Programme of 1989, amongst others.

However, as of 1995, the modified Structural Adjustment Programme showed mixed results. The programme was shown to have brought few tangible results to the people, and the poor implementation and execution of the programme meant that it did not achieve what it set out to achieve.

Nigeria’s 2020 recession

Nigeria’s 2020 recession is not unconnected from the impact of the COVID-19 lockdowns that have reduced economic activity for a considerable part of the year.

Several countries are currently facing economic recessions because of COVID-19 and the consequent lockdowns. 

However, one way to reduce Nigeria’s exposure to recession is to reduce the overdependence on crude oil sales, which currently accounts for over 65% of our revenue and over 90% of our foreign exchange earnings. The Structural Adjustment Programme of the 1980s set out to achieve this independence from oil sales and “structurally adjust” the economy of the country, but it achieved mixed results, at best.

Going forward, Nigeria must diversify its economy from crude oil sales. By growing other sectors, especially agriculture, information technology, maritime, transportation, aviation, solid minerals and entertainment, Nigeria can withstand economic shocks better. 

Read: Should Nigeria Keep Paying For Petrol Subsidy?

We hope you’ve learned a thing or two about how to unfuck yourself when the Nigerian government moves mad. Check back every weekday by 10am for more Zikoko Citizen explainers.

Doyin Olagunju

Join The Conversation

Bring a friend.

You'll like this

Nigeria New Constitution
October 28, 2020

Nigerians are wondering if we can vote for a new constitution. The curiosity began, again, when Chileans voted on October 25, 2020, for a new constitution. 78% of Chileans voted in the referendum that the constitution should be re-written, and 79% voted that the constitution should be written by new writers elected by the people. […]

November 3, 2020

“A Week In The Life” is a weekly Zikoko series that explores the working-class struggles of Nigerians. It captures the very spirit of what it means to hustle in Nigeria and puts you in the shoes of the subject for a week. The subject of today’s “A Week In The Life” is a Medical doctor. […]

Watch

Now on Zikoko

January 21, 2021

It is an open secret that the music industry especially in Nigeria is a boys club. When you take a look at both the veteran and emerging acts who are making waves within and outside the country, it is overwhelmingly male. To assume it is so because women artists aren’t making good enough music or […]

Recommended Quizzes

November 30, 2019

With No Nut November FINALLY coming to an end, we’ve decided to mark the torturous month with some more horny content. After quizzes that guessed how many people you’ve slept with, how good you are in bed and who you’ll sleep with next, this one will guess when next you’ll get lucky. Take it to […]

April 9, 2020

At some point in life, we all learnt that someone can be very intelligent and still lack common sense. That’s the difference between being book smart and being street smart. If you’re not sure where on the spectrum you fall, well, that’s what this quiz is here to tell you. Take it:

December 11, 2019

In the past month, we’ve made quizzes that guessed the last time you had sex, how many people you’ve slept with, and just how good you are in bed. For our latest attempt, we will use your taste in Nigerian music from the 2010s to ascertain what you’re like in bed. Take to find out:

November 11, 2019

Everyone has something to say about what kind of person they are. But how well do we truthfully evaluate these things? Not that much, I can assure you. The average person is always lying to themselves to make sure they look good. But you know what and who doesn’t lie? Zikoko quizzes that’s what. Take […]

November 14, 2019

The fourth season of Big Brother Naija came to an end over a month ago, but the conversation surrounding the housemates is far from over. So, in a bid to keep the fire burning, we decided to create a quiz that tells you which famous member of the ‘Pepper Dem’ gang is your soulmate. Take […]

More from Citizen

January 13, 2021

On Tuesday, January 12, 2021, the Ministry of Finance, Budget, and National Planning presented the approved 2021 budget to the public via a virtual conference call. If you missed it, here are a few things we think you will be interested in.  1. How will Nigeria finance the budget deficit? Finance Minister Zainab Ahmed said […]

January 1, 2021

Abroad Life has a special place in my heart. I’m always super happy to speak to people about their lives and how living abroad has changed the way they view things. It’s also really great to hear people’s stories and see foreigners through the eyes of Nigerians. Today, I’m going to be sharing the most […]

December 28, 2020

On December 20, a video of Mrs Deborah Okezie, mother to Don Davis, an 11-year-old JSS1 student of Deeper Life High School, Uyo, was sexually molested and starved at school surfaced on the internet. In the video, Mrs Okezie lamented about her son’s status. “They [senior students] will remove his boxer and push their legs and hands into his anus,” she said. “Look at a child I sent to school,” she adds, “he came back with a broken anus.”

December 25, 2020

Today’s subject on Abroad Life talks about how she moved from Kaduna to Abeokuta to Lagos then Budapest while searching for a better quality of life. She doesn’t think Hungary is much better than Nigeria, but she’s satisfied there. Let’s start with Nigeria. Where did you grow up? I grew up in Abeokuta state. I’m […]

Ex-Swift Recovery
December 17, 2020

On August 20th, 2019, the Federal Government of Nigeria introduced “Operation Ex-Swift Response”. The goal of the operation was to reduce insecurity through a complete closure of Nigeria’s land borders. In the operation, the Nigerian Customs Service (NCS), the Nigerian Immigration Service (NIS), the Armed Forces of Nigeria (AFN) the Nigerian Police Force (NPF), and […]

Watch

Trending Videos

Zikoko Originals

December 14, 2020
What happens when a group of chatty young Nigerians talk about things they're passionate about? You get Nigerians talk. A show that discusses very familiar struggles for the average Nigerian. From relationship deal breakers to sex education with Nigerian parents to leaving Nigeria, be prepared for a ride.
November 2, 2020
'The Couch' is a Zikoko series featuring real life stories from anonymous people.
October 26, 2020
A collection of videos documenting some of the events of the EndSARS protests.
June 22, 2020
'The Couch' is a Zikoko series featuring real life stories from anonymous people.
June 22, 2020
Hacked is an interesting new series by Zikoko made up of fictional but hilarious chat conversations.
June 4, 2020
What happens when a group of chatty young Nigerians talk about things they're passionate about? You get Nigerians talk. A show that discusses very familiar struggles for the average Nigerian. From relationship deal breakers to sex education with Nigerian parents to leaving Nigeria, be prepared for a ride.
June 2, 2020
Quickie is a video series where everyone featured gets only one minute to rant, review or do absolutely anything.
May 14, 2020
Isolation Diary is a Zikoko series that showcases what isolation is like for one young Nigerian working from home due to the Coronavirus pandemic.
March 12, 2020
Life is already hard. Deciding where to eat and get the best lifestyle experiences, isn't something you should stress about. Let VRSUS do that for you.

Z! Stacks

Here's a rabbit hole of stories to lose yourself in:

Zikoko amplifies African youth culture by curating and creating smart and joyful content for young Africans and the world.
X