Hurray, we are finally out of recession. The NBS announced this morning that the economy grew by 0.55% year on year in the second quarter of 2017, the first quarterly growth since 2015 and officially ending the deepest recession in maybe 20 years. At least the deepest recession since we started recording quarterly GDP. Cue the celebrations.
At 0.55 percent growth, the celebrations feel a bit weird though. It’s almost like we just narrowly crossed over zero. Like those goals in football where nobody actually sees the ball go over the line but the goal decision system signals a goal and so it’s a goal. It doesn’t matter if the economy grew at 0.55 percent, we are still out of recession and no one can say otherwise.
Still there needs to be some caution, or as the official communication by the government puts it, cautious optimism. 0.55 percent is not that much different from zero. If you add the fact that the Nigerian population is growing at somewhere around three percent, then 0.55 percent growth looks just as bad as a recession. In per capita terms, we are still in recession, with average incomes still falling by some 2.5 percent year on year. Although given that we have not had a census in 11 years then one can’t even be sure of that.
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The official exit from recession has some sad undertones though. Crisis usually give policy makers the opportunity to push through difficult reform since people are more willing to accept change under the auspices of getting things back on track. For example, who would have thought that an increase in fuel prices would lead to almost no protests. In our case however, we appear to be coming out of the crisis without actually implementing any major reforms. We still technically have fuel subsidies. The oil industry bill is still somewhere in limbo. No talk about land reform, police reform, education reform, health reform, and so on. In terms of institutional quality, we are basically the same as we were in 2014 before the crisis.
Prior to 2014 we had at least a decade of high oil prices that allowed us gloss over our deficiencies. Unfortunately, we do not have that now with oil prices looking to remain where they are for a while. Then there is the question of what increasingly looks like the beginning of a debt crisis. The fear then is , while we would technically be out of recession, we might stumble along at near zero growth, or growth slower than population growth, for a while. That would be almost as bad as still being in recession. The unemployment numbers are also still pointing the wrong way, although thankfully the spike in inflation appears to have slowed down, with the exception of food prices.
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In general, though we should be wary of resting on our laurels. For policy makers, getting out of recession was the bare minimum. The hard work of reform to get back to real growth must continue, else we may find ourselves stuck with another decade of no growth like we did in the 80s. Given our population growth, and general sense of restiveness, the no growth scenario is scary and one we should look to avoid.
Nonso Obikili is an economist currently roaming somewhere between Nigeria and South. The opinions expressed in this article are the author’s and do not reflect the views of his employers.