Recession Brewing: Private Sector Implores Nigeria Government to Save Economy as Insecurity Worsens

 

Members of Nigeria’s organised private sector (OPS) have urged the federal government to rise to the occasion and arrest the worsening insecurity in the country in order to salvage the nation’s economy from a total collapse.

Representatives of the Nigeria Employers’ Consultative Association (NECA), the Lagos Chamber of Commerce and Industry (LCCI) and the Nigeria Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), in separate telephone interviews with THISDAY said the economy could slide back into another recession if the government fails to combat insecurity.

They also warned that insecurity could hurt manufacturing, severely undermine microeconomic stability, scare away investments and constrain multinationals to shut down businesses and vacate the country.

According to them, the worsening insecurity could impair Nigeria’s hope of benefiting from the African Continental Free Trade Area (AfCFTA) agreement.

NECA Director-General, Mr. Timothy Olawale, told THISDAY that the implication of the current insecurity on the economy is an unstable business environment that would impact negatively on the economy.

Olawale said: “Insecurity can depress or decimate consumer confidence, which in turn reduces consumers’ spending. Not only does insecurity affect individual spending; it also affects businesses due to the uncertainty insecurity creates, put off investment decisions. This certainly affects economic output and could be a major factor for total disruption of a nation’s economic growth.”

He stated that the insecurity would negatively affect Nigeria’s participation in the AfCFTA agreement.

“In an insecure environment, production and manufacturing are highly affected and Nigeria can only benefit more and compete in the AFCTA when it has products to export under the agreement.

“But when insecurity has affected the process of production, there would be little or no form of exportation in the country, thereby making Nigeria to be at the receiving end of the bargain, as other nations under the agreement with relative peace would be bringing in their own goods into the country under the agreement.

“Thus, to ensure Nigeria active participation in the AFCTA and sustain Nigeria’s economic growth rate, the government needs to protect domestic investments by stepping up its national security,” he added.

According to him, insecurity has reached an alarming proportion leading to loss of lives on a daily basis, comatose businesses, nose-diving investments and soaring unemployment.

He said: “Clearly, insecurity poses a threat to governance and economic growth. We have witnessed how economic activities in the North-eastern states of Nigeria have been crippled over the last decade due to the violent Boko Haram insurgency.

“We have also seen how agricultural produce in Benue State and a number of other North-central states of Nigeria have been badly affected by the herdsmen-farmers clashes. Thus, the spread of violent activities to other parts of the country, particularly the South-east, will further affect the general economy of the nation.

“But there is still hope for the economy if the federal government can quickly rise to the occasion and arrest these issues in a bid to salvage the nation.”

Olawale added that the impact of insecurity on investors’ confidence is already at play in Nigeria as the United Nations Conference on Trade and Development (UNCTAD), stated that FDI flows to Nigeria averaged $5.3 billion annually from 2005-2007 but dropped to an average of $3.3 billion from 2015-2019, a period that has been marked by heightened and widespread insecurity in the country. It even went down to $2.6 billion in 2021.

News coverage on insecurity in a nation, according to him, could make things look worse to outsiders than they really are, thereby affecting their decisions to invest in such a country in less positive ways.

He said: “This is more reason the government needs to act quickly against this spate of violence.

“Insecurity will no doubt affect the economic growth rate and when the economic growth rate is impacted, the Gross Domestic Product would definitely be impacted negatively.

“We, however, hope that government will act now to stop the rising rate of violence in the country and prevent the nation from sliding into another recession, which is imminent in the event of their failure to act swiftly.”

Also, the Director-General of the LCCI, Dr. Muda Yusuf, expressed concern about the implications of the worsening insecurity on the economy, including the huge reputational cost for the country.

He said: “Nigeria’s country risk has been aggravated. There is a high risk of capital flight, which would complicate matters for an already floundering economy.

“Unless we quickly stem the degenerating insecurity, it would be difficult for Nigeria to benefit from the AFCFTA. If we cannot make Nigeria a good investment destination, then the benefits of AFCFTA to us can only be very limited.

“The risk is that we may become a market destination for finished goods rather than an investment destination for production.”

Yusuf’s counterpart in NACCIMA, Ambassador Ayo Olukanni, lamented the impact of insecurity on inflation.

He said the security situation in the country “will worsen inflationary trends as farmers are abandoning their farms while the distributive and logistics chain are being disrupted due to activities of bandits and kidnappers among others.

“As a national chamber with members across the country, we are deeply worried and call for urgent action to end this very serious problem. The situation, if left unchecked, will certainly have a negative impact on the economy and reverse recent economic gains.”

The Chief Executive Officer of the BIC Consultancy Services Limited, Dr. Boniface Chizea, told THISDAY that the worsening insecurity would undermine the country’s microeconomic stability desired by economic agents to be able to predict the economy.

Chizea said: “The Nigerian economy is wobbly and in dire straits and what is happening now (insecurity) would make it even more difficult for headway to be found. The beat must change.

“Generalised insecurity, as we have it today, could even negatively impact on some unlikely indices such as something as basic as the exchange rate. The insecurity in Nigeria has affected productivity at the farms and pushed up the inflation rate. Moreover, 73 million Nigerians are out of work today, estimated at 33 per cent of the workforce.

“Funds spent on attempting to curtail insecurity are money that could have been spent on the social sectors like health, education and for the provision of municipal services, including water supply and environmental sanitation. At the level of the individual, money is also diverted for the provision of security instead of being spent in other welfare-enhancing engagements.

“Generally, insecurity, as we have it in Nigeria today, is a piece of veritable bad news and this is the major reason why we must spare no efforts and expenditure to curb insecurity in the land.”