EXPLAINER: Will Nigeria’s economy slide into recession in 2024?

MANY Nigerians are worried about where the country’s economy is headed, especially now that most vulnerable people are suffering from acute hunger and hardship.

Jamiu Hammed, 38, falls in the category of Nigerians whose living conditions have been worsened by President Bola Tinubu’s economic reforms.

A father of two, Jamiu said he could no longer cater to his family’s needs and was considering leaving his barbing salon business for factory work where he could be sure of earning about N2,000 daily, not minding the rigour that comes with the job.

Jamiu opened his barber shop in 2010 after serving his master for three years at Ketu-Alapere, in Lagos State.

But since Tinubu removed fuel subsidy on the day he assumed power on May 29, 2023, he has struggled to keep the business, despite having his shop in a choice location at Mowe-Ofada Road, Mowe, Ogun State.

“When I started barbing here, people liked my style, and I had many customers who patronised me. In the morning, I might not see anybody, but at night, I could see up to 20 people and more during the weekend to barb their hair.”

Before the fuel subsidy removal that led to a hike in the pump price, Jamiu was charging N500 per adult haircut and could make N10,000 daily. He made more money on weekends and spent a little less than N1,500 to buy fuel daily.

But since the hike in the pump price of the product, he has had few people come to cut their hair and hardly has any money to take home after a whole day’s work, despite raising his charges.

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“Now, we manage to see seven people cut their hair during weekends,” he said. Every day, I will buy fuel of N3,500, about five litres, plus the money I will pay for transport to get the fuel.”

Jamiu said things would have been worse for his family but for his wife’s support.

“I don’t even know what to say about Nigeria’s situation. It tires me! I am thinking of leaving my shop. I may go to private companies to find work. I hear they could pay at least N2,000 daily.”

Jamiu’s challenge does not stop at having a few customers, his landlord has increased the rent for his shop to N150,000, much higher than what he used to pay.

 “I can’t pay it. I have a wife, and I have children. I can’t cope,” he whined.

Jamiu’s predicament speaks to the challenges many Nigerians currently face. Such frustrations metamorphosed into the recent protests in some states across the country, including the one organised by the Nigeria Labour Congress (NLC) on Monday, February  26.

Food stuff prices and other goods and services are snowballing daily.

While Nigerians face the economic crisis, market analysts in New York City “already sanctioned Nigeria as being in recession,” a development economist, Kazeem Bello, told The ICIR.

Bello, the chief executive officer of Afrique Capital and Equity Funds Limited in New York, said almost 40 per cent of the countries would witness recession again in 2024, and “unfortunately, the market believes Nigeria is already in recession.”

Indicators of an economy headed to a recession

Bello said many critical economic indicators pointed in the direction that Nigeria was already in recession.

1. Declining growth rate and Gross Domestic Product (GDP)

Some relatively fragile economies like Nigeria might slide into recession in 2024, Bello said the interpretation of the global market showed.

“The trajectory may have commenced in many parts of the developing world where the cost of living is spiking; inflation remains stubborn to tackle, global disposable income declining, challenging most countries with poor PPP (purchasing power parities) index, and generally apathy due to unemployment.

“Economists believe that when an economy is shot by three consecutive quarters of declines in GDP and declining growth rates, that economy may have been hit by recession altogether,” Bello said.

He argued that the above factors had resulted in the downward review of Nigeria’s growth rate three times since the start of the year, which speaks to uncertainty pervading the direction of policy decisions and implementation by the government.

2. Inflation menace

When an economy witnesses a continuous and untamable stretch in a massive divergence in the deposit rate or treasury bill rates and inflation, especially an inflation rate that may have emerged and stubbornly challenging to tame in over 12 months, the monetary and fiscal authorities must take this indicator seriously, Bello said.

Nigeria has been battling inflation trends for over 12 months. The situation is fast worsening and heating the commodity markets, exerting unusual pressure on the price level and disrupting the market permutation.

He said the trend was unacceptable and could severely damage the structural composition of the commodity market and the pricing mechanisms.

“Inflation resides right on the doorsteps of every ordinary citizen as it rears its ugly face. It is easily traceable and identified on the street daily. Unlike other economic indices or reports, inflation is what it is.

“But ordinary Nigerians might not understand if the country is headed to recession, but the economists do,” he stated, urging the government to reduce fiscal spending to help tame inflation.

“We must understand that in Nigeria, what fueled and created the degenerating inflation is primarily the government’s fiscal responsibilities and that of the immediate past CBN leadership that turned the Apex bank to a commercial and father Xmas Bank.”

3. Price level destruction

Some analysts believe that what has been witnessed in Nigeria in the last six months regarding changes in the prices of commodities is known only in places where there is war tension, acute shortage of consumer goods, and foods due to blockages or war, Bello said.

He added, “Even though there are security challenges in Nigeria, there is no war in Nigeria. This explains the narrative above that the misinterpretation of the recent government policies coupled with the inflation trends may have combined to create tension in the price level market, resulting in market disruption we may be witnessing in Nigeria.”

Bello pointed out that the price level market in Nigeria had been subjugated to the vagaries of the foreign exchange market rate forces and noted that during the last two recessions in Nigeria, the economy never witnessed such violent disruption in the price level market.

“Again, like inflation, price level disruption is tough to tackle. The regime of price control may result in massive bureaucracies, inefficiencies, and corruption; hence, we must not even consider using that as a solution,” he urged.

In June, the naira was about N640 at the official rate, and following deregulation, it peaked at over N1,700 at the official market, with the composite black market near N2,000. Similarly, the pump of fuel price averages N340 per litre and is about N700 per litre due to subsidy removal.

“This is a serious disruption that can impact any market anywhere on the planet,” he said.

4. Socio-economic perspective

To average Nigeria, even if they do not understand the word “recession”, they know they are way in trouble with their finances due to biting increases in poverty, Bello said. “An average of 120 Nigerians slide into the poverty zone every minute, 7,200 every hour, 172,000 every day, and approximately two million every month.”

He further said the decline in per capita income, declining disposable income, disruptive purchasing power parity, and worsening consumer apathy added to the challenges.

“The worst of all, however, is the PPP index, which in October 2023 was 3.2x of the global average of 5.5x but is now trending at 1.8x index in Nigeria. That is a world record for any country. Even in known troubled and war-ravaged areas worldwide, that index is never bad,” he said.

He noted the negative growth in the manufacturing sector, saying that if it continues into the next two quarters, it could result in economic failure, way more significant than economic recession.

Other indicators

According to Bello, disproportionate monetary policy dynamics, ineffective money control (liquidity) mechanisms, derailed forex market operations and generally, the lack of a coherent financial landscape, debt burden quagmire and a shortage of creative mechanisms to address continuous declines in government revenues constitute some significant bottlenecks that emerge in an economy with a recession landfall.

He went on, “The forex market needs an immediate fix in Nigeria before the entire system explodes and denigrates into what the world witnessed in Venezuela. Egypt and China have passed this line of deregulating the FX market and quickly reversed it.”

These are all signals that the Nigerian economy may have been hit by the recession, as the current productivity level in the industrial sectors is showing a negative index, Bello said. “Again, all these problems will result in slow growth that could precipitate a recession.”

World Bank projection

In its Global Economic Prospects report in January, the World Bank said risks of a global recession in 2024 had receded, but the fallouts of the COVID-19 pandemic, wars in Ukraine and the Middle East, and persistently high inflation left the growth outlook for 2024 “sluggish”, with the global economy facing its “weakest half-decade performance in 30 years.”

Countries in recession

Meanwhile, Japan and the United Kingdom, members of the G7 economies, had slipped into recession at the end of 2023 as their consumer spending slowed.



    On Thursday, February 15, Japan and the United Kingdom reported experiencing two consecutive negative quarters of GDP, while Finland said on December 19, 2023, its economy was in recession.

    Ireland also slid into recession when figures from the country’s Central Statistics Office on December 1, 2023, confirmed that the economy was in recession.

    Countries that may enter a recession

    More countries will likely enter into recession this year, including Bahrain, Canada, Denmark, Ecuador, Estonia, Iceland, Luxembourg, Moldova, New Zealand, Peru, and South Africa.

    Nigeria last entered an economic recession in 2020, which many analysts regarded as the worst in over three decades. The ICIR reported the country has had eight recessions since its independence.

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