RECESSION & ORDINARY CITIZENS: WHAT SHOULD BE DONE
BY STEVE BRENDAN
Around 2016, a young man named Fred worked as a Regional Sales Manager with an indigenous pharmaceutical firm that imports its products from the USA. The company had been in existence for over a decade, and had before that year, achieved steady growth. Its staff members were adequately remunerated which reflected in the commitment they put to their work. In keeping to its reward system, management always presented cash gifts and awards to top performing staff at the end of every year. The word around the company was that employees hardly resign due to the job satisfaction, but those who did voluntarily, went on to set up their own companies.
Fred was a sales super star. He had joined the company in late 2015, at a time when demand for its products was dip. Upon completing his first survey, he found out that the major challenge that caused the low demand was due to lack of effective marketing and promotional activity in the region. And so he went to work. Within ninety (90) days, he and his team members surpassed the region’s sales target by over 300%. Expectedly, the management praised him to high heavens, and confirmed his appointment just after three months of employment, to the envy of his colleagues in other regions. His operational headquarters was Port Harcourt, but he covered south east and south south, and had seven reps reporting to him.
But there was a problem along the line. The exchange rate of the dollar to the naira had increased by over 100% prompting corresponding increase in the prices of his products. And as was the case with all imported goods, demand for the products had dropped significantly due to the sudden increase in prices. Against this development, Fred struggled to push through, albeit unsuccessfully. The following months were characterized by low sales, and in spite of the radical marketing and promotional measures initiated by him, he still could not meet his team’s targets which had increased proportionately to the exchange rate. Pressure was on everyone including management who was worried about rising overhead costs, the drop in revenue, and the need to remain in business. As the pressure line moved from mild to moderate, and later to severe, top management made a decision.
On the morning of December 3, 2016, Fred received a call from a man who introduced himself as a consultant to the company. The man went straight to the point. ‘’Good morning Fred, I am Stanley Idoko, and I consult for your employer, Mr Obiora’’. Mr Obiora is the MD of the company, and Fred had met him only once during the 2015 AGM when he was still new in the company. The consultant continued – ‘’the economic situation in the country resulting from the ongoing recession has impacted negatively on the company’s business. The company can no longer afford to meet most of its commitments. Top management has therefore decided to downsize. I’m sorry Fred, but I have been directed to ask you to tender your resignation, handover your official car to the company’s logistics manager, and come to Lagos next week with your hand-overnote and pick up your severance cheque’’. After that call, Fred held his phone to his ear, and stood there thoughtful for a long time. He quickly recalled that two of his friends who lost their jobs in the same industry earlier that year hadn’t regained employment. He recalled also that his wife was unemployed, and that all the bills in the house, namely the rent, school fees, feeding, medicals etc were all on him. And he felt terribly devastated. He had spent only one year with the new company.
Fred’s experience in December 2016 is similar to those of other Nigerians who suffered job losses and hunger, whose businesses folded-up due to the recession that year, and families who lost their loved ones to armed robbery and kidnapping due to bad leadership and poor management of the economy.
Since achieving independence in 1960, Nigeria has entered recession thrice: 1984, 2016 and 2020, all under president Buhari. In all of these cases, the president only passes the bulk; blaming previous administration for his own failures. There is certainly something about President Buhari that is not right. There is something about him that evokes pain and misery on the citizens each time he is in power. There is something about his behavior that has left Nigerians wondering and asking if he is suffering from Amsterdam Syndrome; a multiple congenital anomaly syndrome characterized by mental retardation, with the resulting diminished ability to handle simple situations. It’s a common saying that every fish rots not from its guts, but from its head. It may sound offensive, but the truth is, since he assumed office in 2015, the economy has been on a downward spiral. This recent recession is yet another proof that the captain navigating the ship of the nation is literally incompetent.
It is true that not many people understand what recession means. And even more confusing and worrisome is the type of explanation given to it by people who discuss it on TV. Most commentators describe it in very technical and sometimes abstract terms using acronyms like GDP - (Gross Domestic Products), AG - (Aggregate Demand), and too many fractions all of which do not help the ordinary trader on the street to understand how the situation affects his business and family. When for instance we talk about 3.5% drop in GDP and low aggregate demand in the 3rd quarter of 2020 as precipitating this current recession, very little or nothing is said about how it affects petty traders and ordinary citizens on the streets. But we can help them to think of recession as a period in one’s business when it suffers low patronage because the customers are also experiencing low income in their own businesses or work place, or because there is fewer cash in the hands of people. The implication therefore is, as a trader, employee or student, your income will drop, and you will not be able to meet certain personal and family needs. But what affects everybody more, especially big organizations and employers of labor is the duration of the crisis. The longer the recession lasts, the more the negative effect on the economy and the citizens.
Last monday, the Minister of Finance, Budget and National Planning, Mrs Zainab Shamsuna Ahmed, announced that the economy would exit the recession in four months, but that raises the question -HOW? What measures will be implemented to ensure that the economy experiences an early exit? Will the Central Bank introduce low interest rates to encourage access to credits and thus boost businesses? Will the government borrow or print new naira notes and inject more funds into the economy? Will it increase taxes on luxury goods and services, whilst reducing same or granting tax rebates to low income earners? Will it set up industries or construction works and create massive jobs for its teeming unemployed citizens, whose income would trickle down in other aspects of the economy, and thus stimulate economic activity? Beyond projecting a quick exit, what practical steps or measures are underway?
Countries like Japan, Argentina, Russia and Ukraine that have experienced economic recessions in the past, all exited it through huge spending. Some adopted the Keynesian economic approach of borrowing from foreign governments, and reducing interest rates to encourage lending by financial institutions, so that businesses can as well spend to boost the economy. Although in some cases, the low interest rate approach has resulted in liquidity trap, a situation in which borrowers resorted to saving rather than spending, thereby defeating the aim of the monetary policy. Which of the following Quantitative Easing Techniques is in the plan of the government? Is it borrowing, lowering interest rates, printing new notes, or increasing luxury taxes? Whichever it chooses to do, timing is of the essence, and the first step to take in redeeming its image is accepting responsibility for the bad state of the economy and insecurity in the country.
I share the opinion of experts that the Covid-19 pandemic and the ENDSARS protests contributed to this recession, but whilst covid-19 pandemic played a remote role in the crisis, the ENDSARS protests played an immediate role, and should be blamed on the government. This is because, besides the demand for an end to police brutality, the hashtag #ENDSARS, also served as a metaphor for demanding for GOOD GOVERNANCE. The lootings, arson, and killings that trailed the protests could have been prevented had president Buhari managed the economy, and the police efficiently.
But there is still time to get things right. The experiences and lessons of the past five years of Buhari's administration have called for an urgent need for institutional reforms, and restructuring. The time to act is now.
***Opinions of Residents do not represent that of Management.
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