Recent statistics indicate that Nigeria has fallen into recession for the first time in more than a decade with 2.06% economy growth contracting between April and June.
The negative growth of two consecutive quarters, which the country had gone through means it had met the generally accepted definition of a recession. While things have always been tough in Nigeria, and previous recessions were taken as part of standard economic austerity, this recession will be one of the hardest.
Brent crude oil sales account for 70% of the government’s income and with the falling price of oil, the coffers would not be as robust as it normally used to be. Brent crude oil sold for $112 a barrel in 2014 and $48 on Wednesday, August 31st, 2016. Though prices have recovered a few times over the last year, they are below what producers need to drill profitable wells.
As a result, even before this recession, major oil companies in Nigeria had to decommission more than two-thirds of their rigs and lay off thousands of workers.
A devalued naira in a recession is a recipe for hardship. According to experiences of recession, the value of any currency depreciates during a recession, as was the case in the UK during the 2008 recession. The pPound fell nearly 20% experiencing a significant depreciation. However, Euro and Dollar were less affected. This might be because the US and most Eurozone economic power were not in services like the UK but in manufacturing and producing
Currently, Nigerian is more dependant on the provision of services.
Mobile phones-GSM was introduced into the Nigerian market in 2001 and created jobs that never existed in such scale in Nigeria. The provision of service rather than the production of goods provided many with financial security.
Domestic air transport in Nigeria also started thriving from early 2000. Aero Contractor, ADC Airline, Bellview, Kabo Air, IRS Airlines to name a few all created job opportunities for thousands of people.
Private schooling was also a cushion many fell into for employment.
If what happened in the West during the 2008 recession is anything to go by, then harsher time ahead is inevitable. Already, Aero Contractors, the oldest domestic airline in Nigeria has suspended flights and placed its staff on leave. Two international flights in June also suspended flights to Nigeria due to the economic crisis- low demand and foreign currency restrictions.
When push comes to shove, other things will take priority over recharge cards, and mobile phones which inevitably leads to less demand for the service and as such, layoffs follows.
This period will be the most trying for most businesses, however; some will be hit harder than others.
Financial information from the UK recession gives a glimpse into what people consider unnecessary during tough times.
Hospitality Industry: The first thing consumers cut during tough time is eating out. This had a dire consequence for the industry in the UK where pubs and restaurants are still recovering from the recession while other sectors are beginning to boom. Hotels and motels will also be affected, as people would also spend less on vacationing.
Airline industry: The ripple effect from the hospitality industry will trickle down to the aviation. With people looking for cheaper ways to travel around, chances are road would be more affordable than air. If it is not a priority, then people mainly cut travel during recession. Pilots and flight attendants are directly affected. Already Iberia and United Airlines have halted services to Nigeria. Indirectly, such cuts will affect flight engineers and even down to airport cleaners and airport taxi drivers.
Construction: House building, road construction and maintenance, and construction of any kind take the back seat when budgets are being tightened as a result, both the local bricklayer and engineers working with big companies will suffer the same fate.
Cement and Concrete Product Manufacturing: The halt in new projects and slowing of existing ones in the construction sector will produce a domino effect that hurt other industries that are dependent upon it. Cement and concrete product sellers and manufacturers might have to diversify to outlive the recession.
Carpentry: The need for carpenters and carpentry is highly influenced by economic status, which is linked to construction of houses. For this reason, carpenters will see a significant loss in job opportunities.
Office Supplies, Stationery, and Gift Stores: Vendors including those selling school supplies took a hit during the UK recession.
Printing: Although this sector saw a decline in theWest, it might not necessarily be the case in Nigeria as businesses from churches might boost sales, unlike the UK where churches holding conferences are not as much, and the majority of them uses digital means for advertising.
Furniture Stores: People mainly hold off making major purchases during tough times. Furniture usually falls into that category, and home furniture stores suffered as a result.
Newspaper, Periodical and Book: buying of newspapers and books is not usually a priority during an economic downturn.