The Nigerian economy is heading towards a major depression, not a recession, two economists and financial analysts have said.
The two experts, Tope Fasua and Paul Aladje, spoke on Saturday in Abuja in separate interviews with PREMIUM TIMES.
Mr Fasua is the Chief Executive Officer, Global Analytics Consulting Limited, Abuja, while Mr Alaje is the Lead Economist/Enterprise Partner, SM Professionals.
The duo spoke amid reports the Minister of Finance, Budget and National Planning, Zainab Ahmed, on Friday expressed fears the country may be heading towards another recession if the current global crisis is prolonged.
The global economy has been devastated, with the International Monetary Fund (IMF) saying global economic activities dropped by an unprecedented 80 per cent in two months.
Answering questions through Skype in a television programme monitored in Abuja on Friday, the Finance Minister said the Nigerian economy risks sliding into another recession if the current Coronavirus pandemic continues beyond the next six months.
"We are hopeful that this pandemic will be limited in time. If it is an average of three months, we should be able to close the year with positive growth. But, if it goes longer than six months, to one year, we will most likely go into recession," she said.
Although both experts agreed with the minister on the impact of the current crisis on the Nigerian economy, they differed on the severity.
Nigeria already in a recession
"The Minister is trying to be nice, maybe so as not to cause panic. She is talking about the economy going into recession in the next six months. She is relying on the theory of recession being two consecutive quarters of negative growth in the economy. Otherwise, the truth is that we are already in recession," Mr Fasua said.
He said with the current lockdown in the economy as a result of the stay-at-home order by the government for two weeks to curtail the spread of the deadly Coronavirus pandemic, the next Gross Domestic Product (GDP) report by the National Bureau of Statistics (NBS) would report a drop.
"People have not been productive, because they have not been working. Businesses have shut-in for some time. Therefore, there is likely going to be a drop in GDP.
"Even if people will return to work in two or three weeks, there would still be that lag effect that would be lingering.
"We planned to grow by about 2 per cent this year. Now, everything has come to a halt. Nobody is producing. Everybody has locked down because of Coronavirus," he said.
With the global GDP predicted by the IMF to fall by 12 per cent this year, Mr Fasua said Nigeria's economy cannot come out of the current crisis with less than a 10 per cent decline.
"Nigeria's GDP is about $450 billion. Imagine that the country is losing about $1.5 billion every day. If one is conservative to say half of that is shut-in because people are doing nothing, sitting at home, that means we are losing about $400million every day.
"Multiply that with 30 days of the month, that translates to a loss of about $12 billion, to be deducted from the country's GDP every month. So, it is clear, we cannot escape recession.
"If some economists define economic depression as a situation where the GDP of a country falls by more than 10 per cent over a period, then if the global economy goes down by 12 per cent, it means Nigeria, which is part of that global economy will be in depression," he argued.
Mr Alaje was even more convinced Nigeria's economy was in depression.
"If the current lockdown in the economy lingers beyond three months into the third quarter of the year, many people and families would be completely devastated," he said.
"How are we going to maintain 80 million people who are doing no work? Even if one is charitable to say half of that figure, excluding their families, even the food stock available would have exhausted because people do not go to farm anymore and the supply chain does not continue. How would people survive?
"So, if we say everyone should stay at home, and we cannot even guarantee something very basic as power supply, how can we survive? Although those generating power are classified among those providing essential services, where is the means to pay for the power they generate if people are not working?
"How would people pay their rent now, when work that people could have done to guarantee payment is not there? How do families resolve with their children's school fees? How do people handle the issue of putting food on their tables? We are in a state of flux and confusion right now," he noted.
Mr Alaje said long before the IMF said recently that the world economy was in recession, the Nigerian economy was already in recession, with mass unemployment, mass joblessness, and high inflation, and millions of Nigerians wallowing in poverty.
He said when all these indices are present in an economy, with the majority of the population not having access to the basic necessities of life, like food, water, and toilets, with no hope in view that development will come and growth in terms of income per head is not guaranteed, then there is more than a recession.
"Economic depression is a complete state of devastation of an economy. It is a situation where the economy suffers from attacks from an invisible vampire that sucks out its vitality. It is a situation where there is rising stagflation and there is no hope for development.
"So, the world economy will go into depression if the situation persists for another two to three months for the simple reason that people are not working," he said.