The speedy passage of the 2021 Budget which is currently before the National Assembly would kickstart the recovery of Nigeria’s economy from recession.
In economics, a recession is a business cycle contraction when there is a general decline in economic activity.
Recessions generally occur when there is a widespread drop in spending. This may be triggered by various events, such as a financial crisis, an external trade shock, an adverse supply shock, the bursting of an economic bubble, or a large-scale natural disaster such as a pandemic.
Nigeria recorded it’s worsts recession since 1987 as the
Gross Domestic Product in real terms declined by -3.62% (year-on-year) in the third quarter of 2020.
The contract mark the beginning of a full-blown recession and second consecutive contraction from -6.10 per cent recorded in the previous quarter of this year.
This is according to the third quarter GDP report, released by the National Bureau of Statistics (NBS) on Saturday.
According to the numbers contained in the report, oil GDP contracted by -13.89 per cent from -6.63 per cent in the second quarter of this year and 6.49 per cent in Q3 2019.
The country’s non-Oil GDP contracted -2.51 per cent from -6.05 per cent in Q2 2020 and 1.85 per cent in Q3 2019
Speaking on the development in a telephone interview with , the President, Association of Capital Market Academics of Nigeria, Prof Uche Uwaleke, said that the contraction is a reflection of the negative impact of the Coronavirus pandemic on the economy.
He said while the economy may have gone into recession, the Federal Government could quickly kickstart the process of recovery through speedy implementation of the 2021 Budget.
President Muhammadu Buhari had presented a budget proposal of N13 08trn up by 22.9 per cent from the N10.8trn 2020 budget, with revenue projected at N7.5trn, while the deficit amounted to N5.21trn.
The President had said the proposed N13.08trn expenditure comprises Capital Expenditure of N3.85trn, Non-debt Recurrent Costs of N5.65trn; Personnel Costs of N3.76trn; Pensions, Gratuities and Retirees’ Benefits of N501.19bn; Overheads of N625.5bn; Debt Service of N3.124trn; Statutory Transfers of N484.49bn; and Sinking Fund of N220bn to retire certain maturing bonds).
The aggregate revenue available to fund the 2021 budget is projected at N7.89trn which is 35 per cent higher than the 2020 revised budget of N5.84trn.
In aggregate, 31 per cent of projected revenues is to come from oil related
sources while 69 per cent is to be earned from non-oil sources.
Uwaleke who is also the Chairman of the Chartered Institute of Bankers of Nigeria, Abuja Chapter said predicted a quicl recovery of the Economic Sustainability Plan of the government is effectively implemented.
He said, “The NBS Q3 real GDP number is a confirmation of the fact that in terms of economic contraction occasioned by COVID’19, Q2 2020 represents the worst experience for Nigeria.
“Compared to a contraction of 6.10 per cent in Q2 of this year, it is actually an improvement reflective of the the ease in lockdowns and movement restrictions, the reduction in the cases of COVID’19 and the gradual return of investors confidence in the economy.
“This improved confidence has also manifested in PMI readings and stock market performance.This explains why, although still in the negative territory, sectors like Manufacturing, Trade, Transportation and Education recorded improvements over the Q2 numbers.
“However, the performance of the Agriculture sector in real terms which came in at 1.39 per cent was disappointing. This corroborates the high food inflation rate now above 17 per cent caused in large part by insecurity in many parts of the country.
He added, “Yes, the economy has officially entered a recession but I see a quick V-shaped recovery as the effect of COVID’19 recedes and the impact of the interventions by the government and CBN begin to manifest including the implementation of the Economic Sustainability Plan.
“The early passage of the 2021 appropriation Bill will also go a long way in supporting economic recovery.”
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