Soludo: How Nigeria can get out of Recession- Former CBN Governor

A recession is perhaps rather simply a reduction in economic activities, particularly in trade and industry, it is generally accompanied by rising inflation. In my view, a focus on inflation is an ideal way to explain a recession to Nigerians. Inflation means rising prices due to a reduction in a currency’s purchasing power. Basically, as prices rise people spend more on less, this creates a knock down effect which reduces economic activity. For example, the average University student who used to visit the barber two times a month, due to having to spend more on food now visits every two months. The barber’s income is reduced so he too cuts down on his spending.

The reason I’m emphasizing inflation is due to an in my opinion very dangerous idea that is slowly taking root. Seriously, looking at where we find ourselves despite our “potentialities” (as our Senators keep saying), despite our culture being very respectful of elders, I think its fair to say if an economic idea comes from somebody born before the war, ignore them with extreme prejudice. This “Buy Nigeria to Grow the Naira” nonsense our rulers are pushing, its very dangerous. As I explained, a key factor in a thriving economy is boosting the spending power of your citizenry. The “advanced economies” achieve this by a system of credit and cheap goods. We don’t have a credit system and somehow the idea is growing that switching to more expensive (albeit patriotic) goods will work. Aside from the fact that there is a limit to “buy Nigeria”, I for example need to buy more games and a new laptop. A concerted switch to local goods will just make inflation worse. It will still be a case of demand outstripping supply and considering Nigeria’s productivity problems, I shudder at the thought.

There really is only way to beat a recession and that is increasing economic activity. The government’s plan is sound, borrow, invest the funds in infrastructure. I would suggest a slight reduction in taxes and a massive reduction in the salaries of our politicians, they already live on our kobo, they don’t need extra millions. Also an underrated possible cause of the inflation in my view is the disparity in income among classes (economic) in Nigeria. Take for example, recently the government announced tax holidays for mining investment, suddenly our most patriotic richest man decided that coal mining is attractive. There is a massive squeeze on average Nigerians. They’re being asked to pay more taxes, their shops are being demolished e.t.c. In my view, a slight increase in luxury, property and upper income taxes is ideal. Use the funds to subsidize transport or education. Leave more cash in the hands of Nigerians likely to spend it as opposed to those likely to park it in offshore holdings or property.