Possible Causes Of Nigeria’s Economic Recession

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Economic Recession- Recently you’ve been hearing the sayings that, Nigeria’s economy is in recession. But many people still don’t know what this economic recession is all about.

Nigeria Economic Recession

Hence we will be giving a general view of what economic recession is all about and some possible causes of an economic recession. So fasten your seat belt as we take the ride to getting some knowledge.

First of all, what is recession? what does recession entails?

A recession is a general downturn in any economy. A recession is associated with high unemployment, slowing gross domestic product, and high inflation.

Recessions generally occur when there is a widespread drop in spending. This may be triggered by various events, such as a financial crisis , an external trade shock, an adverse supply shock or the bursting of an economic bubble . Governments usually respond to recessions by adopting expansionary macroeconomic policies , such as
increasing money supply , increasing government spending and decreasing taxation .

Economic Recession Definition

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.

A depression is a deep and long-lasting recession. While no specific criteria exist to declare a depression, unique features of the last U.S. depression, the Great Depression of the 1930s, included a GDP decline in excess of 10% and an unemployment rate that briefly touched 25%.

The blame for a recession generally falls on the federal government, often either the president himself, the head of the Federal Reserve, or the entire administration.

Understanding Recessions and Gross Domestic Product

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An economic recession is typically defined as a decline in gross domestic product (GDP) for two or more consecutive quarters. GDP is the market value of all goods and services produced within a country in a given period of time. An example of one type of GDP would be the value of all the automobiles produced within Nigeria for one year. GDP only takes into account new products that have been manufactured.

Factors that Cause Economic Recession

So many factors could be responsible for the cause of a recession in a nation’s economy. Some of them include;

  • High interest rates are a cause of recession because they limit liquidity, or the amount of money available to invest.

  • Increased inflation: Inflation refers to a general rise in the prices of goods and services over a period of time. As inflation increases, the percentage of goods and services that can be purchased with the same amount of money decreases.

  • Reduced consumer confidence is another factor that can cause a recession. If consumers believe the economy is bad, they are less likely to spend money. Consumer confidence is psychological but can have a real impact on any economy.

  • Reduced real wages , another factor, refers to wages that have been adjusted for inflation. Falling real wages means that a worker’s paycheck is not keeping up with inflation. The worker might be making the same amount of money, but his purchasing power has been reduced.

There are various reasons why countries enter into a recession and it all depends on the economic framework of that country.

For Nigeria, an economic recession could be triggered by a dip in government revenues and /or a drop in consumer spending. A drop in oil prices for example, can trigger a drop government spending due to government not being able to earn what it used to earn before the dip.

In Nigeria where government are the highest spenders in the economy, a drop in Government spending can dovetail into a drop in consumer spending which in turns means business can’t invest in products and services.

Some Possible Causes That Lead To The Present Economy Downturn

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The following actions of the government quickened what we now see today:


In a bid to bring sanity, stop corruption and to consolidate all FG’s funds, PMB instructed that all ministries, departments and agencies of the federal government should transfer their funds in all commercial banks to the Central Bank of Nigeria with immediate effect.

Any contrary voice cautioning for a stepwise approach was tagged as corrupt. The banks that delayed in executing the instructions were heavily fined.

Government officials, party leaders and particularly our Finance Minister hailed and advertised the successful implementation of the program as a huge success.

TSA DECISION’S IMPACT: The withdrawal of huge deposits from banks reduced the ability of banks to grant loans to their customers. A bank lends a portion of its deposit to customers while the balance is reserved to meet withdrawal demands from the depositors. Govt’s deposit had been a very reliable source of deposit to commercial banks.

Companies will produce less, sell less, sack more of their workers or even close shop if they cannot access bank loans to fund their operations.

Painfully, some banks had to stop funding projects halfway hence making completion impossible and resulting in bad loans.

Not many read any ominous sign or bothered when the big banks recorded huge bad loan provisioning last December and diminished profit in the 1st Quarter of 2016.

We witnessed the gale of sacking of bank workers before the Labour Minister threatened banks with licence withdrawal.

Read also: how to get your dream job in Nigeria 2017

RESPONSIBILITY: The economists in GEJ’s administration who conceived the TSA idea knew the impacts of its speedy implementation and commenced the actual implementation but in a phased manner but PMB, who I’m sure acted with good intentions, didn’t obviously know the side effects of a wholesomely implementation of TSA with alacrity.

He wanted to stamp out a wide spread corruption and rent seeking in the management of govt’s funds.
There was indeed a serious corruption that needed to be stopped. Being that he hates corruption. He acted so fast, damning the consequences.

He now has to accept the consequences of his patriotic act. It contributed to where we are today.


The genuine-intentioned actions of PMB to suspend and probe all bogus contracts awarded by his predecessor especially to Niger Delta ex-warlords and the suspension of the implementation of the Amnesty Program gave the militants the excuse to recommence the sabotage of the national oil assets hence causing a reduction in the revenues from oil, and gas to fire our power plants.

IMPACTS : Reduction in the amount of crude oil available for export is like an addition of blindness to the problems of crippled man. There is already a global fall in crude oil prices.

Production level of 2.2million barrels per day inherited from GEJ came down to between 600,000-800,000 levels hence foisting on us a twin affliction of reduced volume and reduced price resulting in reduced revenues.

The implications were that the national budget cannot be funded adequately resulting in the failure of all tiers of government to fulfill their electoral promises packaged in the budget.

Also, the decrease in oil revenues reduced the ability of the CBN to provide importers the required foreign exchange leading to a reduced output by manufacturers as essential foreign raw material inputs cannot be sourced.

Consequently, companies have to reduce production capacity, buy less local inputs, sack more workers, pay less or no tax and finally close down. That’s a symptom of recession.

Also, Niger Delta is chiefly the investors’ destination or the investors would need raw materials from there to feed their production. Following the restiveness in the area, a huge portion of Niger Delta-attracted foreign direct investment that would have come into the economy has been kept in abeyance.

RESPONSIBILITY: The president should have weighed the consequences of his immediate actions in Niger Delta owing to the area’s strategic importance to our survival. You don’t use a live bullet on robbers at a refinery; it may result in a huge fire which will damage the products and the entire refinery you want to protect and which cost of repair outstrips the cost of the fuel being stolen.

Is it not an admission of an initial wrong approach to decide now to dialogue with the militants?

Our president is widely believed to think that all Nigerians are equally gifted or that all Finance or Accounting graduates can equally manage the nation’s economy.
I believe he is yet to get the best to do the work.

It is only in Nigeria that we give a job of driving a Trailer to a driver of an SUV who has not even driven a minibus in his career.

Critical economic problems are solved by the best economists in the country. No amount of passion or patriotism would make Yakubu Aiyegbeni play better than Ronaldo or Messi. Yakubu may have more stamina determination.

IMPACTS: Only experienced doctors know the exact dosage of multi-drug therapy. A rookie would keep trying and failing.

Perhaps, the current economic managers are gathering experience at the expense of our economic woes.

We have not yet seen any turn around Fiscal policies or Marshal Plans that would take us out from the woods. You cannot give what don’t have. “It shall be well” is only a wish and has no place in scientific management.

RESPONSIBILITY: All officials of this government are agents of the president. They take orders from him and also work for him.

PMB should please talk to the previous managers of the economy for valuable advise. Many of them still love the country and would help albeit on advisory capacity.

It’s very ironic that many Nigerians that PMB is leading out of a corrupt nation are now asking to be taken “back to Egypt”. They lived better under the “corrupt regime”.

Read also: how to make money online this recession

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About Abuku Orode 786 Articles
My name is Abuku Orode, I am a full time blogger and article writer. I make research on the best, possible and legal way to enhance your tech life, finance and other survival tips and make them available here on Cashrange. My goal is to show you what works for me in the hope that it will work for you too. Best Regards [Cashrange]


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