IMPACT OF THE ECONOMIC RECESSION ON NIGERIA IN THE SOCIO-ECONOMIC CONTEXT
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IMPACT OF THE ECONOMIC RECESSION ON NIGERIA IN THE SOCIO-ECONOMIC CONTEXT
Chapter one
INTRODUCTION
1.1 Background for the Study
International experience has become increasingly valuable in today’s business world. Global trends have influenced the processes and outcomes of company fortunes, even in underdeveloped countries, prompting industrial relations actors to reconsider their objectives.
Every country is affected by the business cycle, which is defined as countrywide swings in output, trade, and general economic activity over the medium to long term in a free market system.
The Nigerian economy is currently experiencing the repercussions of global economic problems, which have resulted in breakdown and a reduction in economic vitality. Understanding the dynamics of the current global economic catastrophe requires serious research and evaluation of the topics at hand.
The Nigerian economy has continued to experience a prolonged and sustained recession, marked by skyrocketing prices, unemployment, and dwindling activity. Recessions have an impact on human resource management.
Interest rates, inflation, and economic growth all have an impact on labour availability and are included in organisational goals and objectives. Economic conditions are determined by overtime, wage decisions, and worker layoffs or hirings.
The Nigerian economy has suffered as a result of the global economic catastrophe. Every industry has had its fair share of problems, and businesses are licking their wounds, with consequences for the general public.
Retrenchment and downsizing have been the way forward; there is no use in making it gigantic. This adds to the increase in the number of unemployed people on the streets because there are no positions to which these people will be tied if they are laid off. This study will look into the economic recession and the different hurdles to the country’s economic progress.
There are numerous factors of Nigeria’s present economic recession. Globally, there is geopolitical tension, causing a global crisis and a drop in commodity prices, as well as the drop in crude oil prices
Brexit, the crucial American election in 2016, South China Sea issues, the Russia-Syria crisis, ISIS, illegal migration, and the refugee crisis, all of which are remote but significant causes of the recession because Nigeria is an integral part of the global economy.
This loss of confidence causes firms and/or consumers to cease buying and go into defensive mode. When a critical mass approaches the exit sign, fear sets in. This causes a dangerous downward spiral.
In short order, huge layoffs and rising unemployment cause a downturn in retail sales. Manufacturers cut back in response to decreased orders, resulting in more layoffs.
To reestablish trust, the federal government and the central bank must normally intervene. However, it should be highlighted that a drop in GDP growth is a warning indication that a recession is on the way, but it is rarely the reason.
That’s because GDP is only released after the quarter has ended. By the time GDP has turned negative, the recession may have already begun.
The following are identified as possible causes of the present recession in Nigeria:
High interest rates reduce liquidity, or the quantity of money available for investment. The Federal Reserve frequently hiked interest rates to defend the value of the currency.
The Fed hiked interest rates to combat stagflation, which caused the 1980 recession. It did the same thing to protect the dollar-gold connection, which exacerbated the Great Depression.
A stock market crash: A quick loss of investor confidence can lead to a bear market, draining capital from enterprises. This is how a stock market meltdown might result in a recession.
Falling property prices and sales: As homeowners lose equity, they are forced to cut back on spending since they can no longer take out second mortgages. Over time, it will result in foreclosures.
This was the root cause of the Great Recession, although for very different reasons. Poor economic planning: Nigeria’s present recession is primarily due to poor economic planning and a lack of tangible implementation of her economic plans
as well as budget delays and currency rate policies. The Nigerian government declared the standard generalities that any government makes: diversifying the economy, boosting the manufacturing/mining sector, increasing agricultural output, and attracting international investment.
Increased inflation: Inflation is a general increase in the prices of goods and services over time. As inflation rises, the proportion of goods and services that can be obtained for the same amount of money falls.
During a recession, various macroeconomic indices such as GDP, employment, investment spending, capacity utilisation, family income, company income, and inflation typically fall, resulting in an increase in the unemployment rate. (CBN, 2012).
Chinguwo and Blewit (2012) investigated how economic recession, financial crisis, and climate change issues conspired to make life even more difficult for many working people and their families.
Mailafia (2016) hypothesised in his own research that economic downturns slow wage growth, increase the number of low-paid workers, and exacerbate unemployment and underemployment. Bauer (2009) found that economic recession and the global financial crisis are linked to poverty incidence in emerging nations.
Economic recession is caused by a combination of circumstances, including inflation, loss of consumer confidence, surplus supply over demand, excess demand over supply, and a worldwide economic crisis.
The current economic recession has both negative and positive effects on Nigeria’s overall economic activity. It generates terrible poverty and misery among the masses, deprives children of their entitlement to decent education and inexpensive inclusive healthcare, and creates adverse demand and supply shocks.
It has a contractionary influence on aggregate demand and supply, resulting in volatile fluctuations in economic activity. There is a scarcity of foreign exchange, little money, lower revenue, and fewer funds available to households and enterprises.
There is also a lack of purchasing power, less consumer expenditure, and decreased sales of products and services. The economic recession has significantly reduced the buying of goods and services by individuals, households, and businesses.
Business activity is at a low ebb, with job losses and an increase in the unemployment rate. The drop in employment is attributed to lower sales of goods and services by business owners, corporations, street vendors, farmers, shop owners, retailers, and wholesalers. The overall purchasing power has dramatically fallen.
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