Poverty and Recession Are Not Destiny And They Don't Have to be

Dr. Olayiwola Oladapo November 20, 2016©
1
Poverty And Recession Are
Not Destiny and They Don’t
Have To be!
Policy Synopsis & Brief:
Nigeria’s Economic Recession and How
to Get Nigeria out Of Jail: Part 1

2
Table of Contents
Context Setting................................................................................................................ 2
How Bad Is Nigeria‟s Recession? ................................................................................... 2
7 Key Headliner Impacts of “Hurricane E de ku Recession” on Nigeria‟s Economy........ 2
Conclusion ...................................................................................................................... 2

3
2016 has been a very memorable year for Nigeria. One all Nigerians from all social and
demographic groupings will not forget in a jiffy. The common denominating theme
across the length and breadth of the nation is the popular word that has dominated our
economic lexicon; Recession. Whether it is Technical or not, or whether it is termed as
stagflation, Nigerians regardless of party affiliations, ethnic identities, religious
persuasion or social status are for once in undisputed agreement that Nigeria‟s
economy growth in the last 18 months has stagnated or even worse declined.
Since the Yoruba‟s are fond of inventing a signature and bespoke greeting for anything
and everything, you certainly would have been welcomed by a Yoruba speaker seeing
you at this season with the greeting “E De Ku recession o”. For the purpose of this
piece, I seek your indulgence to call Nigeria‟s current recession “Hurricane E De Ku
Recession”.
The title of this piece sounds quite familiar
with the lingo common with motivational
speakers or some of our more charismatic
clergymen and women. Whilst the title can
perfectly represent the topic of a hot and
bestselling sermon, the motivation for the
topic is largely from a developmental economics and nation building point of view.
Preponderant evidence abounds to dispel the school of thought that believes poverty
and recession are actually pre-determined and terminal outcomes. The countless
nations and even individuals who seized wealth and development from the jaws of
absolute deprivation and underdevelopment and who also turned abject economic
recession conditions into miraculous stories of economic transformation are compelling
witnesses that Poverty and Recession are not destiny. I am quoting from the works
of Justin Yifu Lin, the founding director and Professor at the Centre for Economic
Research at Perking University who was the first non-westerner who became the Chief
economist of the World Bank. He debunked the concept of poverty as being terminal
and therefore a product of destiny when he said;
Context Setting

4
Poverty is not a destiny. African countries can grow as dynamically as any
successful countries in East Asia and other parts of the world, if they have an
enabling government to facilitate private firms to capture the window of
opportunity of industrialization from the pending relocation of light manufacturing
due to rising wages in China and other emerging market economies. A change in
mindset is key for success: Africa should look at what Africa can do well based
on what Africa has now, instead of looking at what Africa does not have or
cannot do well based on what the high income countries have and can do well1
.
He further reiterated this theme in his book “The Quest For Prosperity: How
Developing Economics Can Take Off” where he laid out the framework for economic
development in underdeveloped and emerging economics not based on the blue prints
of the Bretton woods institutions or the templates created based on the adopted and
assumptive contexts of the experiences of developed and matured economies. I am
fortunate to have a copy of this book per courtesy of the gracious benevolence of Mr.
Segun Awolowo, the CEO of Export Promotion Council and to whom and I owe a world
of endless appreciation for the gift of the book. The message for Nigeria and Nigerians
is that poverty and recession are not destiny and don‟t have to be for Nigeria.
Having completed our preamble let us quickly touch on “Hurricane E De Ku
Recession”, which is the trending issue in our land and how Nigeria can get out of Jail
as we begin the countdown to the end of 2016 and await the outlook for Nigeria in 2017.
Nigeria is officially experiencing economic recession. That is no longer the news.
Whether all Nigerians are in recession is another cup of tea. Quoting a very good friend,
brother and professional colleague “Nigeria is the entity in Recession, Nigerians are
not in recession”. That claim carries some validity as a significant number of Nigerians
are probably recession-proof going by how their expenditure profiles and lifestyles did
not experience a decline but significantly grew despite pervading harsh living conditions
in Nigeria. Big parties are still being thrown all over the big cities, monies are still being
sprayed at parties, countless people are on the road and in the gym trying to burn off
unhealthy fat, luxury items are still being purchased from the many big shopping malls

5
and supermarkets, mansions are still being built and expensive automobiles are still
being bought. So who said Nigeria is in recession?
But many Nigerians, and most likely the majority will disagree with that claim as their
experiences have been directly at polar variance with the folks who you may describe
as being recession-proof. Ask many who lost their jobs, or many whose jobs are on the
line to be chopped under the legitimate guise of business restructuring or employee
right sizing or go to Apapa port and ask importers and clearing agents how the year has
gone, or many households who have had to restructure their personal finances, or
countless workers across the length and breadth of Nigeria who are been owed many
months of salaries or army of workers who had to forcefully take salary cuts and the
consensus would be that Nigeria is in recession. So whilst some Nigerians may have
smiled to the bank, many with accounts in debit cried because they had no business
even going to the banks. The Bottom Line is that there are overwhelming facts to show
that Nigeria‟s economy is in recession and relatively significant population size are
experiencing the deleterious impact of recession.
An economy is said to be in recession if it had negative growth in the GDP for 2
consecutive quarters. On July 21st
2016, Mrs Kemi Adeosun Nigeria‟s Honourable
Minister of Finance officially described the current economic plight that Nigeria was
journeying through as “Technical
Recession”. This revelation came
days after the National Bureau of
Statistics had reported that the
second quarter of 2016 GDP growth
rate declined further from -0.36 % in
the first quarter to -2.06 % year-on-
year.
How Bad Is Nigeria’s Recession?
It's a recession when
your neighbor loses his
job; it's a depression
when you lose yours.
Harry S Truman

6
Having established that Nigeria‟s GDP growth had gone south for two consecutive
quarters, she also presented a chunky and inspiring silver lining in the thick cloud of
recession by declaring that “the worst is over”2
Where exactly does one place her
declaration; a prophetic statement and prayer, a policy statement or a statement of
reality? I am sure you will decide what to term her declarations at the end of this piece.
It is instructive that her declaration was made
just 2 days after IMF had released a report
that revised down the growth projections for
Nigeria and Mrs Adeosun comments that the
„worst is over” literally debunked this IMF
position. Mrs Adeosun must have taken a cue
from the CBN Governor who days earlier had
also declared that “the worst is over”3
!
I honestly was not in concurrence with Mrs Adeosun and the CBN Governor (both
senior officials of the President Buhari‟s Administration) on their evaluatory remarks on
the “worst being over” concerning Nigeria‟s economic recession when the statements
were made and even now .
My non concurrence was premised
on the compelling evidence and a
number of overwhelming social
economic indicators that suggested
otherwise that rather than the storm
being over or put in the words of
the Honourable Minister‟ the worst
being over” for Nigeria as it plots
its way out of economic recession,
the economic recession storm may
just have begun to strengthen and heady-windy days may still lie ahead of Nigeria. This
prognosis is not a product of psychic science or spiritual mysticism. It is based on
incontrovertible facts. The purpose of this piece is to empirically debunk the statements

7
that the „worst is over‟ and correctly situate Nigeria‟s economic problems within the
context of factual continuum, so that we all can start working at recovering Nigeria‟s
economy from its current state of decline. This is not by any means glorifying our
present predicament or an attempt at relishing in the cesspool of pessimism about
Nigeria‟s ability to weather the storm of current economic recession. The aim is to
highlight the key headline impacts of the recession on Nigeria and present “fact
checked‟ reasons why “the worst is not yet truly over” to enable us recalibrate and better
manage our expectations in addition to rec-crafting our strategies to effectively and
sustainably deal with the deep seated economic challenges of Nigeria.
1. NIGERIA IS STRESSED FUNDING ITS 2016 BUDGET
 We can‟t fund every project in 2016
budget – Mrs Kemi Adeosun4
 The Secretary to the Government of the
Federation (SGF), Babachir David
Lawal, on July 14, 2016 declared that the Federal Government cannot fully
implement the N6.06 trillion 2016 budget as passed by the National Assembly.
Lawal told a joint Senate committee on Appropriations, Finance and Ethics,
Privileges and Public Petitions that the revenues of the government had dropped by
50 to 60 per cent contrary to projections5
.

The Minister of State for Budget and National Planning, Zainab Ahmed on Oct 26
2018 placed the implementation of capital expenditure in the Federal Government‟s
2016 Budget at 50%6
2. NIGERIA’S DEBT PROFILE IS FRIGHTENINGLY ON A RISE
Dateline Oct 25, 2016
According to the Director-General, Debt Management Office (DMO), Abraham
Nwankwo;
8 Key Headliner Impacts of “Hurricane E
de ku Recession” on Nigeria’s Economy

8
“for Nigeria to pull the economy out of recession, government must
seriously embrace “conventional public borrowing” to fund critical projects.
Mr. Nwankwo said long before the drop in
global crude oil prices in mid-2014, it was
clear Nigeria needed to invest about $25
billion per annum for 7 to 10 years to cover its
huge infrastructure deficit. With the drastic
drop in oil revenues, he said the country faced
additional challenge in financing gap in public
revenues estimated at about $20 billion per
annum. “This means Nigeria’s total
investment deficit is not $25 billion per annum,
but $45 billion per annum.7
Dateline August 18, 2016
 The Federal Government and Sub National tiers of Government still owes local
contractors unpaid obligations to the tune of N2.4 trillion with the FG having a lion
share of N1.97 trillion. (The National Contractors Association8
)
Dateline September 21 2016
 Nigeria‟s debt profile has risen to N16.29tn, according to the Debt Management. The
total debt liability had risen to N16.29tn as of June 30, 2016. As of June 2015, the
country‟s total debt stood at N12.12tn (DEBT MANAGEMENT OFFICE9
)
Dateline Nov 2016
 The African Development Bank (AfDB) will
support Nigeria with the sum of $1 billion to
help address the N2.2 trillion deficits in the
2016 budget. AfDB President, Akinwunmi
Adesina, said the facility would attract a 1.2
per cent interest. He further revealed that the
bank has a portfolio of $4.1 billion dollars to
support Nigeria‟s new lending operations

9
from 2016 to 2017 which the bank intend to a portfolio of $10 billion dollars in
201910
.
 President Buhari is seeking the legislative approval of the parliament to take $30.54
billion (about N9.61 trillion) loan.
Dateline Nov 16, 2016
 The Nigerian National Petroleum Corporation (NNPC‟s) under-funding cash calls hit
2.5 billion dollars in 2016 (Group Managing Director Dr Maikanti Baru11
):
3. FISCAL & MONETARY POLICIES ARE ANTI ECONOMIC GROWTH
 Exchange Rate of Naira to Dollar
suffered more depreciation
o From $1 to N199 in Jan 2016, the rate
is one dollar to N304 in Nov 2016. This
is 53% depreciation in the value of
Naira within a year. In the light of
anticipated strengthening of the United
States Dollar against all other
currencies as a result of Donald‟s
Trump election as the next President of
United States of America and his make
America great again campaign, the
depreciation of the Naira against key
foreign currencies and especially against the US Dollar may worsen.
 Inflation Rate on an uncontrollable Ascent
o Consumer Price Index (CPI) increased to 18.3% (year-on-year) in October from
17.9 per cent recorded in September. (National Bureau of Statistics-NBS12
)
 CBN Raised Monetary Policy Rate- Interest Rate To Banks
CBN Raised the Monetary Policy Rate (MPR) from 12% to 14%, the highest rate in a
decade. The MPR is the anchor rate at which the CBN, in performing its role as
lender of last resort, lends to Deposit Money Banks to boost the level of liquidity in

10
the banking system. This has jerked up commercial bank lending rate to as high as
30%. Contrast commercial lending rate of 4.4% in China and 10.5% in South Africa
and the impact on private sector business growth and overall economic
development13
.
4. THE FINANCIAL SERVICE SECTOR IS GASPING FOR BREATH
 Commercial Banks Non Performing
Loans Went Up In 2016
As at June 2016, Nigeria Bank‟s Non-
Performing Loans (NPLs) rose by 158 per
cent from N649.63 billion as at December
31, 2015 to N1.679 trillion as at the end of
June 2016. Industry wide NPL ratio rose to
11.7 per cent from 5.3 per cent, thus
exceeding the prudential limit of 5.0 per
cent. At end-June 2016, loans to the oil and
gas sector constituted 28.77 per cent of the
gross loan portfolio of the banking system
as credit to that sector grew to N4, 511.34 billion, compared with N3, 307.87 billion
at end-December 2015.
Loans to state governments rose to N1, 386.61 billion from N1, 053.97 billion at end-
December 2015, as declining revenues continued to constrain payment of salary by
some states, funding of key services and execution of developmental projects. The
report also disclosed that:
“The total exposure to the top 50
obligors stood at N5.23 trillion
(33.4%) of total industry credit
exposure of N15.68 trillion. Credit
exposure to the dominant sectors
as follows: 28.77% to oil and gas
sector; 12.95% to manufacturing;

11
8.84% to governments; and 8.69% to general commerce.” Perhaps, more
significantly, the report predicted: “Credit risk is expected to trend higher
into the second half of 2016 owing to increased loan impairments resulting
from the depreciation of the naira, inability of obligors to service foreign
currency denominated loans, as well as bank exposures to the oil and gas
sector. (CBN Financial Stability Report14
)
 CBN Granted One Off Forbearance to write off Fully Provided For NPLs
In view of the current macro-economic challenges, however, the CBN hereby
grant a one-off forbearance this year 2016 to banks, to write-off fully provided for
NPLs without waiting for the mandatory one year,” she wrote in the circular
addressed to all banks 15
.
5. THE NON-OIL SECTOR EXPERIENCED SIGNIFICANT DECLINE
 The Non-Oil sector, which is meant to serve as the buffer for the Oil sector and the
target of the diversification drive of the Federal Government suffered a debilitating
decline in revenue from $10.53 billion in 2014 to $4.39 billion in 2015. It is very
unlikely though not impossible that 2016 non-oil export performance will significantly
outperform 2015 results ( CBN16
)
6. THE OIL AND GAS SECTOR IS COMATOSE AND ON LIFE SUPPORT
 The Global and Nigeria Oil & Gas
sector economically has been
comatose, clearly evidenced by
the retrogressive trend of events in
the sector in the last few years as
the following statistics show.
 From a Rig Count of 22, Nigeria
has only 5 Rigs
 From 2.7 Million Barrels Per day in
August 2012, Nigeria now
produces an average of 1.44mbp in August 2016 though production amongst OPEC

12
oil production among the 14 member states rose by 120 000 barrels a day in August
2016. Prices in 2012 hovered around $97-99 per barrel contrasted with $43-45 in
Nov 15 201617
.
7. MANY COMPANIES SHUT DOWN AND OTHERS LEFT NIGERIA
 The harsh and stormy operating
environment unleashed on Nigerian
and even non Nigerian businesses led
to massive shut downs and exits from
Nigeria of organizations. Many of them
have divested their investments from
Nigeria and relocated them to
neighbouring West African nations. The
roll call of organizations that shut down
their operations or left Nigeria is rather
distressing in the light of the ripple
effect on Nigerian economy. The list
includes the following;
o In 2015, Brunel a Dutch Human
Resourcing multinational left
Nigeria18
o Lagos – Houston route United
Airlines operated the last flight on the
30th of June 201619
.
o In 2016, About 272 firms had been
forced out of business, 50 of which
were manufacturing companies.
Some of the affected manufacturers
have relocated to neighbouring
countries. At least 222 small-scale
businesses have closed shops,

13
leading to 180,000 job losses. (Manufacturers Association of Nigeria20
)
o Over 3,000 Oil workers were right sized in 2016 and some multinational oil
companies like Trans Ocean have totally shut down operations in Nigeria21
o Nov 2016, Erisco Food shuts down $150m Tomato plant and company in
Nigeria. Relocates to China. The estimated job Losses was put at 1,500 22
.
o The ranks of the unemployed obviously swelled and the unemployment rate
obviously witnessed a spike as, there were a total of 26.06 million persons in the
Nigerian labour force in Q2 2016, that were either unemployed or underemployed
compared to compared to 24.5 million in Q1 2016 according to NBS
8. MANY NIGERIAN STATES ARE CLOSER TO ECONOMIC INSOLVENCY
 Fifteen states in Nigeria are facing extreme funding constraints as their Internally
Generated Revenues (IGRs) are far below 10% of their Federation Account
Allocations. The IGR of Lagos state is higher than that of 32 states combined
together 23
.
From these few key statistics x-raying the
performance of the key sectors of the Nigerian
economy and impacts of “Hurricane E De Ku
Recession”, the statements credited to the
Honourable Minister of Finance and the CBN
Governor earlier in the year that the “Worst is
Over” is at best a prophetic prayer for Nigeria
and one to which all patriotic Nigerians should
shout Amen to.
It must be noted that without the current
commendable efforts of President Buhari‟s
Conclusion

14
administration in the head long fight against corruption and minimization of leakages in
Government‟s revenue sources, the situation would definitely have been direr than it is
currently. But that said Nigeria needs a more radical and unconventional economic
development blue print to resuscitate the Nigerian economy from the comatose position
to which it has slide into.
The journey into borrowing loans to offset our endemic economic mismanagement and
development recklessness is worrisome. We must remember that there are no free
lunches anywhere in the world, surprisingly even in Freetown! Every loan comes with its
set of conditionality and responsibilities. A lot of times, such conditionality are
counterproductive as they are many times directly and deliberately inimical to the long
term strategic socio economic development goals for which the loans were taken,
especially when the objective is to help the debtor nations develop sustainable local
economic capacity and eliminate dependency on the creditor nations or institutions.
And one also wonders how we intend to pay them back in the light of the revenue
declining strait we have found ourselves. What also becomes of the next generation of
Nigerians who will bear the burden of these loans? Are we not encumbering and
mortgaging the future of the next generations, having already squandered the economic
assets that should have given them a head start. Debts and borrowing to address
problems created by mismanagement of our commonwealth and failure of leadership
may become a bottomless pit if care is not taken.
I will end this first part of the series with a Yoruba Proverb “Eyan meji ko padanu iro,
bi won ba tan e je, ma tan ra re je”
Literarily translated into English, it means “The deceived and deceiver cannot be
both victims of deception. Even if you were deceived, stop deceiving yourself”.
The Worst definitely will be over some day but it is not yet over as we speak! The road
ahead is still a bit long and arduous.
The responsibility for the challenges of Nigeria especially the current economic
recession the nation is facing can be laid on the doorsteps of all the previous
administrations we have had the fortune or misfortune of having to govern us. It also

15
squarely lies on all of us for bad followership that never held our leaders accountable for
the delivery of their service mandate. The problems of Nigeria have always rested on
the failure of leadership and responsible followership. In this regard there are no saints
in Nigeria who you can exempt from the blame for the rot we have found ourselves as a
nation.
The present administration of President Buhari’s cannot therefore be held
responsible and accountable for our current economic recession. It was an
unfortunate economic misfortune that was bequeathed to the administration.
However President Buhari’s administration will be held responsible and
accountable for succeeding or failing to take Nigeria out of this present economic
quagmire. This therefore places an imperative on this present administration to conjure
a sustainable winning, recession proof economic framework for Nigeria.
The concluding part will focus on what Nigeria needs to do from an economic policy
point of view beyond some of the high sounding, highly politicized, largely verbose,
mainly academic, ultra ethicized and sophisticated rhetoric that pervades most
conversations around recovering Nigeria‟s economy. So watch this space in the next
two weeks.
May God strengthen President Buhari and his team for the task ahead. May God bless
them with strategic wisdom and know how to bring us out of recession into the land
flowing with economic milk and honey. God bless Nigeria!
Dr.Olayiwola Oladapo is the Managing partner of Sweat Your Asset Derivative Limited.
He can be contacted at olayi72@gmail.com. You can also visit his page on
https://about.me/DrolayiwolaOladapo or through his tweeter handle @Drolayioladapo

16
Key References
1. 1. Justin Yifu Lin-How to Jumpstart Industrialization and Economic Transformation in Africa
and the Author of the Quest for Prosperity
2. http://www.vanguardngr.com/2016/07/recession-worst-adeosun/.
https://www.youtube.com/watch?v=WfyQYztduoM
3. http://www.vanguardngr.com/2016/09/recession-worst-cbn-gov/).It
4. http://www.vanguardngr.com/2016/05/cant-fund-every-project-2016-budget-adeosun/
5. http://sunnewsonline.com/we-cant-implement-budget-fg/)
6. http://breaking.com.ng/nigeria/2016-budget-fg-achieves-fifty-percent-capital-expenditure-
implementation/
7. http://www.premiumtimesng.com/news/headlines/213778-taking-huge-n9-61-trillion-loan-
nigerian-government.html
8. http://allafrica.com/stories/201608181016.html
9. http://punchng.com/nigerias-debt-rises-n4-17tn-one-year/
10. http://www.premiumtimesng.com/business/business-news/211359-african-development-
bank-offers-nigeria-4-1-billion-loan.html
11. http://www.vanguardngr.com/2016/11/funding-jv-cash-calls-now-2-5bn-baru/
12. http://www.vanguardngr.com/2016/11/nigerias-inflation-rate-hits-18-3-october-nbs/
13. http://www.vanguardngr.com/2016/07/mpc-raises-mpr-14-cbn-battles-inflation-stimulate-
growth/
14. http://www.financialwatchngr.com/2016/10/11/non-performing-loans-surge-nigerian-banks-
struggle-survive/
15. http://www.thisdaylive.com/index.php/2016/08/10/cbn-grants-forbearance-to-banks-to-write-
off-2016-npls/
16. http://www.vanguardngr.com/2016/03/revenue-from-non-oil-exports-down-by-58-to-4-3bn-
cbn/
17. http://www.nnpcgroup.com/PublicRelations/NNPCinthenews/tabid/92/articleType/ArticleView
/articleId/380/Nigerian-Crude-Oil-Production-Hits-27-Million-Barrels-As-NNPC-Benue-
Pledge-to-Resuscitate-Makurdi-Depot.aspx
18. http://www.dw.com/en/nigeria-corruption-scares-off-companies/a-18710146
19. https://www.bellanaija.com/2016/05/another-major-airline-exits-nigeria-united-says-goodbye-
to-lagos-houston-route/
20. http://punchng.com/272-firms-shut-one-year-man/
21. http://www.premiumtimesng.com/news/headlines/213738-mass-sack-nigerias-oil-industry-
3000-affected.html
22. http://sunnewsonline.com/erisco-foods-shuts-down-nigerias-factory-relocates-to-china/
23. http://www.vanguardngr.com/2016/06/red-alert-15-states-may-go-bankrupt-report/

17
24. http://www.vanguardngr.com/2016/06/red-alert-15-states-may-go-bankrupt-

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