The key to understanding its effects in the country is first understanding what it is, why it happens, what causes it to happen, what economic changes it occasions, and what the possible approaches are to ameliorating the situation.
What is Recession?
In plain terms, recession simply refers to a period of total economic meltdown. According to the English Dictionary, recession can be a period when there is unusually less trading and regular business activities in the country. When the trading frequency drops significantly and it remains that way for a period, it can be said that the country in question is in recession
Recession can also be referred to as a negative growth in Gross Domestic Product, for at least eight consecutive months. That is, a country can be said to be in recession, if its GDP takes a negative turn and continues that path for two quarters of the year in a row.
Recession is usually characterized by many of the following features:
a. Low trading and business activities
b. Average income will be drastically reduced
c. High unemployment rate
d. Increased crime rate
e. Increased inequality
f. High inflation rate
And many more.
It is worthy to note that a time of recession is a very unpleasant time for any country.
Recession versus Depression
While we have clearly seen what recession really is, we must also understand what depression is all about. The major difference between recession and depression is the timeframe involved. When recession lasts for a very long time and its characteristic hardships bite even harder, it becomes officially recognized as Depression.
Thus, Depression can be referred to as Advanced Recession.
Now, we can categorically state that recession is simply a period of economic hardship in the country. Let us no consider the effects of recession in Nigeria.
Effects of Economic Recession in Nigeria:
1. Increased economic hardship
This is perhaps the most common effect of recession that Nigeria has experienced. During the last recession, poverty increased exponentially among the masses. There were huge declines in market sales across all sectors of the economy. The cash in circulation was not enough to go around, and the economy became generally tough and hard to thrive in. Many companies could no longer pay their staff their full salaries and benefits, and only made matters worse for many people. Many businesses crumbled, many people fled the shores of the country, seeking asylum in other African and European countries; and many families were affected too.
Food commodities were now more difficult to procure, and the prices of goods increased exponentially. People now had to pay far more for their needs that they used to, and even transport costs increased.
2. Unemployment and Retrenchment
This is another effect of recession that was very glaring during the period of recession. In the year 2016, the National Bureau of Statistics estimated that in the year 2016, over four million Nigerians lost their jobs.
Because of the decline in sales and market activity that recession brings, profits in companies across all sectors decreased significantly, and many firms began to lay off workers in order to stay afloat. There was increased government borrowing, and this did not turn out well for public and private workers. Many people lost their jobs and are still unemployed until now, many others who were not working now have an even slimmer chance of getting jobs.
3. Mental imbalances
This is one of the subtle effects of recession. Many people could not cope with the loss of jobs with numerous responsibilities abound, that they decided to take their lives to end the situation. On the 21st of March 2017, a certain health worker in Lagos state, Dr. Allwell Orji, allegedly took his life by jumping off a bridge into the Lagos lagoon. His reason for committing suicide was easy to decipher; life had become unbearable for him to live in. the economic hardship had bitten him hard, and, with no solution in sight, resolved to end his life. As a matter of fact, a recent study by medical staff at LASUTH (Lagos State University Teaching Hospital) revealed that there was a direct correlation between economic recession and certain kinds of mental problems.
The case of Dr. Orji, is only one of many cases of people who decided to commit suicide due to economic hardship.
4. Increase in Crime rates
When jobs become scarce and unavailable, and prices of stuffs increase drastically, one thing usually resort to is alternative means of livelihood. Unfortunately, in Nigeria, many youths resorted to crime as a means of livelihood. Armed robbery, kidnapping, and home burgling were at their peak during the period of recession. Ritual killing too increased in the southern part of the country, as many decapitated bodies of humans were found in strategic places. People basically resorted to nefarious means to make ends meet.
5. Increase in Suicide and Suicide Attempts
Asides the case of Dr. Allwell Orji who successfully committed suicide, there are many other cases of people who tried to take their lives also. Some were stopped at the point of performing the act, some performed it and it backfired. There was a case of an individual, a lady, who tried to drink a bottle of poison to die. After she drank it, sooner or later, she slept. She did not expect to wake up from that sleep, so she penned a suicide note on her desk and left it. For some reason, she did not eventually die, to her dismay. She woke up several hours later, feeling perfectly normal. Recession had driven her to the point of attempting suicide, but in the end, she was glad that her plan failed.
6. Loss of foreign investors
The recent recession in the country saw many foreign investors relocate their companies and establishments to neighbouring countries like Ghana and Togo. The economic recession made it harder for them to run their businesses smoothly and make steady profits, so they absconded and went in search of more stable climes to establish their businesses.
This led to unemployment, as many of the workers in these foreign establishments were Nigerians, who had to be let off due to the situation in the country. In the same vein, some Nigerian companies that relied heavily on the services of expatriates in the country eventually had to lay off their foreign workers. This is because, the recession brought about a drastic increase in the conversion rate of the naira to other currencies; and because most of these expatriate workers were being paid in hard currency, recession brought about an exponential increase in the amounts to be paid them. For example, word had it that Dangote had several expatriates who worked for him, and who he paid in dollars. When recession set in, the dollar exchange rate nearly tripled, and this meant that Dangote was now required to pay his foreign workers thrice their normal amount in salaries. He continued for a while, but could not continue anymore, for fear of incurring astronomical operating costs. He eventually replaced them with multi-skilled locals.
7. High currency exchange rate
This is perhaps the most striking effect of recession on the Nigerian economy. Before recession hit, the exchange rate for the naira to the dollar was one dollar to one hundred and sixty naira. Immediately recession set in, that rate increased till it got to more than one dollar to four hundred and fifty naira. Which was approximately three times the former rate.
Recession brought about a devaluation in exchange rate.
8. Increase in local prices of home-made commodities
The economic recession brought about an increase in the currency exchange rate, and this significantly affected import businesses. As a matter of fact, it nearly shut down imports in the country, because most importers could no longer cope with the high exchange rate. As a result, local alternatives of such imported products began to gain more relevance, and their prices increased exponentially. Many businesses which were solely into importation died, and some others are barely hanging by threads, due to recession.
9. Increased cost of healthcare products and services:
One of the sectors of the Nigerian economy that was severely affected by the recession is the health sector. Recession occasioned an era of low productivity, awfully substandard service delivery, and of course, poor health outcomes. Recession brought about an increase in the prices of drugs and medication, costs of accessing quality healthcare, high disease morbidity and mortality, widespread production and sales of fake drugs, and any other unpleasant phenomena.
10. Increased incidence of Bad loans by bankers:
The banking industry is one that was also severely affected by the economic recession. In the year 2016, when the recession as at its peak, the banking industry suffered heavily from bad loans. As a matter of fact, the Central Bank of Nigeria’s financial stability report indicated that Nigerian banks recorded a total of 1.02 trillion naira in bad loans, in only the first half of the year. In the second half, it became worse.
This of course, led to many bankers losing their jobs, and others fighting to keep theirs.
This list is by no means exhaustive. We have only represented the major effects of economic recession in Nigeria.