By Emeka Okoroanyanwu and Blaize Udunze

LAST week, Central Bank of Nigeria (CBN) confirmed what many Nigerians had known for so long, that the country’s economy has slipped into recession. According to the CBN, the nation’s economy formerly entered into recession in the second quarter of this year, i.e beginning from the month of May.

For those who may want to know, recession is a time of general decline in economic activities characterised majorly by fall in Gross Domestic Product (GDP) for two or more quarters consecu­tively.

The first sign that all was not well in the na­tion’s economy emerged during the last year of the Goodluck Jonathan’s administration when crude oil prices that hitherto hover between $100 and $120 per barrel began to slid steadily until it hit a twenty five year low of $30 dollars per barrel during the first year of the Muhammadu Buhari’s administration. Because Nigeria depends over 90 per cent on crude oil sales for its foreign exchange earnings, the fall in oil prices affected all economic activities negatively.

As a result, life become a big hassle for the average Nigerian, especially in the past one year, getting tougher by the day, as one could no longer afford the basic necessities of life. Prices of goods hit the roof top with a 50 kilogram bag of rice now selling at N18,000 as against N8,000 to N9,000 it was selling a year ago. The prices of Nigeria’s main staples, garri, yam, plantain and beans have also skyrocket by over 200 per cent. This is even as the Federal Government just increased the pump price of Premium Motor Spirit (Petrol)from N86.50 to N145 per litre.

Latest reports from the banking industry shows that the sector is grappling with liquidity squeeze, poor earnings and low profit margins as the scar­city of foreign exchange has affected the sector’s fortune badly. Most of the banks recorded poor results in their first quarter 2016 outings.

Equally, Nigeria’s external reserves declined to about $26 million, just enough to back about three months of imports even as the exchange rate of the naira to the dollar is now N351 to $1 in the parallel market. Inflation has hit the double digit of 13.72 per cent while unemployment figure is frightening.

The National Bureau of Statistics (NBS), first raised the alarm that Gross Domestic Product (GDP) has contracted by 0.36 per cent from what it was a year ago. This is against the growth of 2.11 per cent in the previous three months. The last time the economy was this bad was the second quarter of 2004, according to CBN. At the stock market, which mirrors the goings-on in the economy, the flagship index, the All Share Index (NSE ASI), has lost more than 6.56 per cent this year. Its twin indicator, the market capitalisation does not fare better as it shed about 6.70 per cent.

The CBN report on the state of the economy revealed that the Purchasing Manager Index (PMI) for June showed a speedy decline in eco­nomic activities in the country. For example, in the manufacturing sector, production level, new orders, employment level and raw material inven­tories decelerated at a very fast rate, while supplier delivery time improved at a faster rate.

The report also indicated that the non-manufac­turing sector did not fare better as business activity, new orders and employment level slowed down at a faster rate while raw materials inventories de­clined at a slower rate.

According to the apex bank, the manufacturing PMI dropped to 41.9 index points in June 2016, as against 45.8 points in the preceding month. The composite PMI for the non-manufacturing sector recorded decline for six consecutive months as the index dropped to 42.3 points, showing a faster de­cline than in the previous month of May.

The index declined at a faster rate when com­pared with the level in the preceding month. Of the sixteen sub-sectors, twelve recorded declines in the following order: non-metallic mineral prod­ucts; furniture & related products; chemical & pharmaceutical products; electrical equipment; fabricated metal products; printing & related sup­port activities; paper products; plastics & rubber products; textile, apparel, leather & footwear; food, beverage & tobacco products; computer & electronic products and cement. The transporta­tion equipment sub-sector remained unchanged. The remaining three sub-sectors recorded growth in the following order: appliances & components; primary metal and petroleum & coal products, the PMI stated. The health care and social assis­tance sub-sector remained unchanged, while the remaining three sub sectors recorded growth in the order: water supply, sewage & waste manage­ment; agriculture; and transportation & warehous­ing.

Voicing his opinion on the state of economy,Head, Research Investment and Adviso­ry of SCM Capital Ltd, Sewa Wusu, who spoke to Sunday Sun on telephone hinted that with the manufacturing PMI dropping to 41.9 index points compared to 45.8 in the preceding month, was an indication of further decline in the GDP, which shows that the economy would fall into recession again.

He stated that the belated attempt to arrest the deterioration in the system via the recent reforms in the foreign exchange flexible market adopted by CBN, partial deregulation of the downstream sector of the oil industry, followed by passage of the 2016 Budget have translated to some form of stability in each respective sector of the economy.

Wusu was optimistic the remaining half of the year would improve, as quick implementation is required in the policy areas of the economy.

According to him, the inflationary report may reduce with the need for more spending to boost the purchasing power and Nigerians can be rest assured that the economy would pick up.

He, however, added, “that does not mean we will not experience recession.”

For the CEO of Economic Associates Lim­ited, Dr. Ayo Teriba, the contraction “shows that Nigerians and particularly the central bank should now reconsider the tightening stance they have embarked upon.”

“It is now likely that Nigeria’s economy will contract over the year as a whole,” a London-based Africa economist at Capital Economics Limited, John Ashbourne, said in an emailed note to clients. He added, “We have long warned of a slow-burning crisis in Nigeria. It now seems that this view was too optimistic: the country is headed into a full-blown crisis.”

The Head of the Department of Economics, Finance and Accounting at the Lagos Business School, Dr. Ikechukwu Kelikume, and the Dean of the Faculty of Business Management, Universi­ty of Uyo, Prof. Leo Ukpong, both agreed that ‘we are not on the positive side. Whichever way, we are going into full-year recession,” said Ukpong.

Kelikume of the LBS, said that all indices actu­ally show that growth would dip further, especial­ly as the country recorded negative growth (-3.6 per cent) in GDP in the first quarter.

“Now, what makes it so complicated is that the first quarter growth data showed that we have entered a stage called stagflation. This is when un­employment is rising, inflation is rising and GDP is coming down.”

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Describing Nigeria’s situation as precarious, Kelikume stressed that it is unusual for an econ­omy to be experiencing inflation and unemploy­ment going on in the same direction while GDP is coming down. “That is what we experienced in the first quarter (Q1).”

He, however, observed that, for the second quarter, oil price suddenly saw a rebound. “Oil price is high, but Nigeria, is not going to produce 2.2 million barrels per day; currently, we are pro­ducing less than 1.6 million barrels per day.

“We are producing below 1.6 million barrels per day because of the Niger/Delta Avengers. So, we are not leveraging on the positive side of the oil price; meaning that, for the next quarter, output would be reduced. Government revenue has also gone down due to oil crisis.”

Kelikume projected that output would experi­ence further reduction, “meaning we are going to have a negative growth in GDP in the second quarter, which officially put us into recession whichever way you want to look at it.”

Ukpong, on his part, said: “The exchange rate could stabilise at N350 per dollar but oil produc­tion and oil price are not moving in favour of the Nigerian economy, especially with the disruption of production in the Niger Delta region.”

He argued that oil price could inch up but “we cannot sell; so, we have to depend on very prudent economic management. Frankly, it doesn’t look good; foreign exchange, instability, oil price and unemployment.”

“Based on all economic and financial indica­tors, we would likely see a full-year recession. At best, you might have additional three months of drop in Gross Domestic Product (GDP). The Eco­nomic Team should put together a good stimula­tive economic package so that we could possibly see a reversal in the last quarter of the year,” Uk­pong advised.

Also, Head, Investment researcher and Adviso­ry at Afrinvest, Robert Omotunde on a note made available to Sunday Sun affirmed that although the significance of the recent effort of the govern­ment to salvage the economy may not translate into a sharp swing in the tide of things in the short-term due to huge confidence deficit impeding the system, “we anticipate the overall impact of recent policy actions to be positive for the economy in the medium to long term.”

“We are quite positive about H2:2016 and be­yond given the quantum of reforms that have been introduced over the last six months. The economy is gradually shifting towards a market based sys­tem in the allocation of scarce resources given the liberalisation of the downstream oil & gas sector and the introduction of flexibility in the foreign exchange market. “In addition, the implementa­tion of the 2016 budget, which is meant to reflate the economy and set it on a growth path, is one of the recovery catalysts we envision for H2:2016. Amidst our positivity however, we remain cau­tioned by the fact that it may take a while to regain investor confidence and earn market credibility especially with the new FX policy. As our inter­actions with key market dealers suggest, investors are still keeping their fingers crossed, studying and timing a perfect time of entry,” the investment re­searcher explained.

How to survive in time of recession

In times of an economic slump, when sales plummet to an appalling low, business owners often tend to get discouraged and despondent. They try to find short-cuts to get themselves back in the running. Many resort to panic measures such as retrenchments and cutbacks to address the problem. But business experts say that instead of panicking and resorting to desperate measures, they have to begin at the beginning and strategi­cally plan their way back into the game. Here are some tips to get businesses back on the road in recession.

Seek outside assistance

Businesses these days are often very closeted and thus, tend to bottle up their crises within their company walls. What they need to do is break free from such sectarian, old-world concepts and reach out to their customers, clients and public for feed­back. Listening to customers needs and under­standing their expectations is crucial in increasing product sales and also helps in developing new kinds of products to suit their preferences. Small business owners should separate the macro-econ­omy from the micro-economy, looking inward at your operations and customers, engaging in real, candid discussions with customers, prospects and even competitors to monitor the unique circum­stances affecting their businesses and the local market. Having your ear to the ground to under­stand what’s going on in your market is critical. Customers will tell you if they’re considering pulling back or shifting the money they do have to invest. When you hear that feedback, you can adapt accordingly.

Cut down on costs but not personnel

The reflex reaction of most employers is to lay off their employees when they are faced with a slump in business. Layoffs are sometimes likely to stifle productivity and growth. Therefore cut down on everything else that you can, before you let people go. For example, if you are run­ning a restaurant business and it is facing a fall in business, instead of immediately firing waiters or cooks or other staff, have a closer look at the menu, more often than not, it will be found that only a certain percentage of their standard dishes are ordered by their customers. In such a case, what they need to do is re-structure the menu and cut down on the variety of dishes offered which would significantly lower their cost incurred in business in the form of lesser ingredients.

Specialise and stand out

Carve a niche for your business and develop products that are tailor-made for specific custom­ers instead of trying to reach out to all the custom­ers in the market. You need to find out what your customers need and then turn your marketing fo­cus towards products desired by them. Instead of trying to outplay every competitor out there, pick a smaller slice of the market and target them.

Recognise existing opportunities

Economic uncertainty can create growth op­portunities if business owners are willing to take calculated risks.There certainly can be acquisition opportunities, and you can pick up customers that are no longer being served, or served well, by struggling companies.

“Strategic hiring also could be a good calcu­lated risk,” she says. “It can be a good time to prune your own tree of under performers and up­grade your talent pool by recruiting top talent from struggling competitors,” says an expert.