Nigerians groan as recession grips national economy

Staff of Aero Contractors, second largest airline operators in Nigeria, were seen with moody faces on Wednesday, August 31, when management of the airline, unknown to the staff, announced the suspension of scheduled flights and operations indefinitely.

At the Asaba Airport where the airline lifts passengers to Lagos and Abuja, the staff were seen removing every resemblance of Aero Contractors from the airport and locking same in their rented office. The atmosphere was actually not palatable as friends and other airport staff empathised with them as they bowed out of the airport. Not less than 1000 staff of the airline nationwide lost their jobs following the suspension of services by the airline.

Airlines suspend operations

The suspension of services by Aero Contractors came on the heels of the ongoing economic recession sweeping through and crippling various sectors of the economy and bringing down supposedly viable and vibrant organizations in the nation. The suspension of operations has thrown not less than 1000 staff into the labour market that is already over bloated by graduates and other job seekers.

The airline was, however, said to have downsized its staff strength by 50 percent prior to the suspension of services, NAIJ.com learnt.

Kemi Adeosun, finance minister

Besides Aero Contractors, there are indications that more airlines may close shop before the end of the year, due to the biting economic recession, poor business plans, humongous debts and lack of support from banks. The airline trade deficit, a source close to the airline revealed stood at N20billion.

Also, the suspension was a consequence of series of challenges the airline has faced in the past months, a development which has negatively affected the operations of the airline, resulting in suspension of services.

The implication of the suspension of scheduled services operations, Chief Operating Officer, Fola Akinkuotu, revealed, extends to all staff directly and indirectly involved in providing services as they are effectively to proceed on indefinite leave of absence during the period of non-services.

Barely 24 hours of Aero Contractors suspension of operations, another domestic carrier, First Nation Airlines, suspended its operations. It was learnt that the airline suspended its operations to enable the carrier to carry out the required maintenance of its aircraft. Although authorities of National Civil Aviation Authority, (NCAA) refuted claims that the airlines in Nigeria were winding up, the First Nation has left operation.

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Godwin Emefiele, Governor CBN

As at today, the number of airlines in the country has reduced by over 60 percent of what it was a decade ago. Investigation shows that over 600 commercial pilot certificate holders are without jobs in the country.

Oil firms, Banks, beverage companies sack workers

Not only airlines are receiving the hard knock of the harsh economy in Nigeria, giant oil firms, beverage companies, brewing firms, construction companies, government and financial institutions are not left out as the hard implication of the recession is telling hard on the firms, leading to mass sack of workers and reduction of earnings.

For oil giants, Chevron, Shell, the story is not different. By the end of 2016, Chevron revealed that it would lay off 8,500 staff in addition to the 1500 it announced earlier in 2015, according to a 2015 report. Shell had also revealed its plans to sack 10,000 staff and slash direct contractor positions in the company.

Mobil Producing Nigeria, operator of the Nigerian National Petroleum Corporation MPN/NNPC Joint Venture in Akwa Ibom laid off about 150 contract staff and 40 drivers from its employ, while Total fired 100 in its Nigerian operations. Other companies such as ExxonMobil, Total are said to have also sacked about 4,000 workers secretly in their global operations.

To help protect their balance sheets and remain afloat, companies have deferred or cancelled billions of dollars of projects, re-negotiated contracts with suppliers and eliminated thousands of jobs. This is because companies’ earnings have plummeted, debts have increased and credit ratings have been cut low. This is a result of the economic crisis rocking the nation in the second year of President Muhammadu Buhari.

President Muhammadu Buhari

Investigations have revealed that the industrial sector had lost close to N200 billion in the last one year as some businesses that could not continue with operations laid-off their workers which contributed to increase in unemployment rate to about 46 per cent.

A banker, who did not want to be named, blamed the recession on the speedy implementation of the TSA. He said “things have become more difficult since the full implementation of the TSA started. Many banks are struggling to survive. Right now, their marketers have to hustle for other means of bringing in deposits from individuals and private organizations.”

Another banking industry source said since the implementation of the policy, many bank employees had found it difficult meeting their monthly targets and had thus been asked to resign, falling back to the unemployment market.

Diamond Bank had sacked 400, Ecobank sacked 1040 staff. Ecobank had earlier sacked 50 senior managers in February, citing need to cut cost and improve efficiency. First City Monument Bank sacked over 400 while First Bank was said to have concluded plans to sack 1, 000 staff.

There have also been unconfirmed reports that other banks have retrenched employees, though on a small scale. While some firms have resorted to cutting salaries, others delay payments, sometime well into the next month, while yet others do not pay at all.

Construction firms not left out

In the construction industry, not less than 65,000 workers have been sacked following the economic recession plaguing the nation. This followed their inability to meet up with their obligations to the workers as the recession hits the sector with over N600billion debt which the federal and state governments owe the sector.

President of Federation of Construction Industry (FOCI), Solomon Ogunbusola, explained that the 135 construction firms registered and operating under the association are being owed, a situation which has compelled some to lay off their staff.

CBN headquarters

Food, beverage and tobacco firms not left out

Investigation also showed that the food, beverage and tobacco sector of the Nigeria economy is on the verge of shutting down and that over a million jobs would be lost due to the inability of the companies to source foreign exchange to import raw materials for their operations.

Already, leading companies in the sector, such as Nigerian Flour Mills, Nigerian Breweries, Guinness Plc, Nigerian Bottling Company, 7-UP Bottling Company Plc, Friesland Campina, Wamco Plc, among others, have written to labour for discussions on retrenchment of workers. In the last three months, no fewer than 1,500 workers had been sacked in the sector as employers seek ways of coping with foreign exchange crisis.

President of Food, Beverage and Tobacco Senior Staff Association, FOBTOB, Quadri Olaleye, called on government to intervene to save the industry and over three million jobs. He claimed that employers in the sector had devised every opportunity to sack workers, noting that between the 2012 and the first half of 2015, over 3,000 workers were sacked in the guise of re-engineering, restructuring, right sizing, downsizing, redundancy and re-organization.

He said: “the current situation has reached a pathetic level, because it seems all the employers in our sector are in competition with each other on who can lay off the most workers. Every company is now calling for a downsizing of the workforce, and this time under the guise of lack of foreign exchange due to the federal government’s recent policy on foreign exchange.

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Job seekers

Hotels, tourism workers also affected

Also, thousands of workers employed by hotels and tourism firms across the country may also lose their jobs following the worsening economic downturn caused by the foreign exchange crisis. With hundreds of thousands of workers in the hotel and tourism business, the hospitality sector is one of the highest employers of labour in Nigeria. But with the situation in the country, most of these jobs now hang in the balance.

The scarcity of dollars has impacted negatively on the industry. Foreigners can’t come and do businesses in the country as a result of dollar scarcity. Also, the exchange rate of the dollar to the naira is not favourable to importers anymore, considering the margin between the two currencies.

The body is calling on government to begin to tap solid minerals deposits to earn more revenue. It is anticipated that government can earn additional $20 billion yearly from mining, which will help to improve the nation’s dwindling external reserves. The hoteliers also want government to relax some of its monetary policies on foreign exchange management.

Economists apportion blames

Economic experts have pointed out that the full implementation of the federal government’s Treasury Single Account (TSA) policy, which commenced in October last year, as a key reason for the current wave of job losses and economic mess weighing down the nation.

The policy mandates all Ministries, Departments and Agencies (MDAs) to remit revenue into a single account, thereby denying banks a cheap source of funds to transact business with customers. According to available figures, the policy led to MDAs pulling out N1.2 trillion, about $60 billion from commercial banks to the Central Bank of Nigeria. Also, over 20,000 accounts were said to have been closed as the process was speedily executed.

An economic expert, Anayo Nwosu, blamed President Muhammadu Buhari for the pains Nigerians are passing through at the moment. He listed certain actions of Buhari that added to the speedy recession of the economy. He identified the speedy implementation of the TSA as one significant cause of the recession.

Aero Contractors suspended operations

He said the withdrawal of huge funds from the commercial banks reduced the ability of banks to grant loans to customers, thereby reducing money in circulation. Painfully, some banks had to stop funding projects halfway hence making completion impossible and resulting in bad loans. Though he agreed that the TSA was good, he faulted its speedy implementation.

He also blamed the stoppage of pipeline surveillance contracts and probing contracts awarded by the previous administration and suspending the amnesty programme to militants, saying that action gave the militants the excuse to go back to their arms and the sad reality is the blowing of pipelines and destroying oil facilities. This activity, he said, has affected the revenue from crude oil.

He added that production level of 2.2million barrels per day inherited from former President Goodluck Jonathan came down to between 600,000-800,000 levels hence foisting on the nation a twin affliction of reduced volume and reduced price resulting in reduced revenues. The implications, he said, were that the national budget cannot be funded adequately resulting in the failure of all tiers of government to fulfill their electoral promises packaged in the budget.

Also, the decrease in oil revenues reduced the ability of the CBN to provide importers the required foreign exchange leading to a reduced output by manufacturers as essential foreign raw material inputs cannot be sourced. Consequently, companies have to reduce production capacity, buy less local inputs, sack more workers, pay less or no tax and finally close down. That’s the symptom of recession.

Also, Niger Delta is chiefly the investors’ destination or the investors would need raw materials from there to feed their production. Following the restiveness in the area, a huge portion of Niger Delta-attracted foreign direct investment that would have come into the economy has been kept in abeyance.

Niger delta militants also affected the economy

He said the president should have weighed the consequences of his immediate actions in Niger Delta owing to the area’s strategic importance to the nation’s survival,“You don’t use a live bullet on robbers at a refinery; it may result in a huge fire which will damage the products and the entire refinery you want to protect and which cost of repair outstrips the cost of the fuel being stolen,” he said.

He said Buhari is yet to get the best persons to run the economy with him. He noted critical economic problems are solved by the best economists in the country. “No amount of passion or patriotism would make Yakubu Aiyegbeni play better than Ronaldo or Messi. Yakubu may have more stamina determination.

“We have not yet seen any turn around Fiscal policies or Marshal Plans that would take us out from the woods. You cannot give what don’t have. “It shall be well” is only a wish and has no place in scientific management”.

Buhari adopts Jonathan’s policies

The recession has driven Buhari to adopt policies of the past administration which he earlier banned over a year ago to revive his government. One of the two policies he earlier banned but revived is the Growth Enhancement Support (GES) policy in agriculture.

The presidency announced that is reviving the e-wallet system for fertilizer allocation to farmers. This, the presidency is putting together to combat the recession biting hard on the economy of Nigeria.

From the state levels, many state governors are finding it difficult to pay salaries. Many are owing workers while local governments are almost forgotten. Some state governments are now paying 50 percent of their workers’ salaries while some like the Delta State government pays junior and interior staff in different months. Hence, employment is no more in the agenda of the state governments.

Buhari employing soldiers to fight the militants didn’t help the system

Sokoto State Government for instance, has transferred back home 39 students schooling in Dubai over the economic recession hitting the state economy. Governor Aminu Tambuwal said the decision was to save fund to run the administration. He said the state spends N500m to finance scholarship for 17,000 students in Nigeria but spends N400m for only 39 in Dubai, noting that the action was telling heavily on the state and it cannot continue.

Tanuwal said, “As at the time we sent the children to Dubai to study last year, the state government was spending over N400 million per annum to maintain them there. The last administration had good intentions when it sent them to Dubai to further their studies, but the current financial situation of the state can no longer allow us to continue with this burden.

“We explained to the parents and guardians of the students that as at today, Sokoto state government spends over N500 million to maintain 17,000 of its citizens on scholarship in various schools in Nigeria. So having to pay N400 million for 38 students in Dubai was weighing heavily on the scarce resources of the state. We thank them for their understanding,” the Governor added.

Factors that aid recession

Economists have said a recession is a general downturn in any economy. It is associated with high unemployment, slowing gross domestic product and high inflation. It is a general economic decline which is accompanied by a drop in the stock market and an increase in unemployment. They listed such factors as increased inflation, reduced consumer confidence and reduced real wages as factors that lead to recession.

According to the National Bureau of Economic Research (NBER), recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real gross domestic product (GDP), real income, employment, industrial production and wholesale-retail sales.

Nigerian Stock Exchange

Many factors contribute to an economy’s fall into a recession, but the major cause is inflation. In an inflationary environment, people tend to cut out leisure spending, reduce overall spending and begin to save more. But as individuals and businesses curtail expenditures in an effort to trim costs, this causes GDP to decline. Unemployment rates rise because companies lay off workers to cut costs. It is these combined factors that cause the economy to fall into a recession.

Nigerians regret voting for Buhari

Following the declaration of recession in the country, Nigerians are currently regretting voting for President Muhammadu Buhari at the last presidential elections. Nigerians lamented that the APC led government had failed to do the needful to sustain the level of economic growth recorded by ex-President Goodluck Jonathan.

They said Nigeria is in shambles, the people can hardly feed, the naira has crashed to over N400 to the dollar. Some agreed that there are issues of militancy in the Niger Delta, other governments also faced same challenge. Buhari came in with a military mentality to crush them but his efforts have failed woefully and the nation is now in crisis

In the midst of the mess, Finance Minister, Kemi Adeosun, assured Nigerians that the country will bounce back and grow stronger from the current economic recession. She maintained that Nigeria will get out of the current challenges sooner than expected.

She, however, added that for this to be achieved there should be discipline in government spending. She said, “I believe this economy will turn around in no distant time. I know people are concerned about recession. We can come out of a recession as soon as possible by sticking to the prescription which is, we must be disciplined in our expenditure. We must invest in our capital and we must diversify our economy.”

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