Solutions to Economic Recession in Nigeria will be discussed in this article. This is to tackle the problem of the economic recession faced in Nigeria.
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W. Lee said that once recession starts, it tends to build upon itself much as a Forest fire, once underway, tends to create its own draft and give internal impetus to its destructive ability.
The agency called the National Bureau of Economic Research (NBER) defines a recession as a negative real GDP growth rate for two consecutive quarters (e.g. first and second quarters).
Judging by the above definition, Nigeria experienced an economic recession during, her first and second-quarter growth in 2016 which were statistically -0.36% and -1.5%.
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As a result, profit margins started declining while costs started overtaking prices. Measures can be taken to avoid economic recession as it affects the economic structure negatively.
Definitely budgeting through the expansion of aggregate Demand is an important fiscal measure to correct demand deficiency. A deficit budget can be attained in two ways.
Solutions to Economic Recession in Nigeria
The Solutions to Economic Recession in Nigeria are discussed below
Government should first increase expenditure on goods and services and not allow itself to be matched by the imposition of flesh taxes or without raising the rates of old taxes.
All capitalist economies of the world suffered severe repression in 1930. An increase in government expenditure on public works programs such as the construction of roads, canals, railways, irrigation works, school buildings, electrification of villages, etc. to tackle the problem of demand deficiency was recommended by Keynes.
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Worthy of note is the fact that the increase in public expenditure has a multiplier effect on employment and raising income.
Also, a reduction in taxes through the increase of disposable income is another fiscal measure to raise aggregate demand. When the reduction in taxes, people’s disposable income will rise, and consequent to this, their spending on goods and services will raise as well.
In 1964, on the advice of an Economist popularly called the Keynesian Economist government in the US made a huge reduction in income tax and this did a miracle in reviving the economy of America, and subsequently, employment and output increased substantially. The recession was then overcome with the application of fiscal policy.
In June 2003, the President announced a tax cut of 3.5 billion dollars to revive the American economy which was quite successful, and applying a tax reduction in seasons of the recession could help rescue the Nigerian Economy from such an economic crisis.
Furthermore, monetary policy can also be used to control economic recession in Nigeria through credit Expansion. Monetary policy can also be used to overcome recession by removing demand deficiency to increase the availability of credit.
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When there is an economic recession in Nigeria, the central bank tries to overcome it by lowering the bank rate and as a result of the fall in the Bank rate, the market rates of interest also fall.
With the fall in the market rates of interest, investment is enhanced and this brings an increase in aggregate demand and helps to remove recession.
Another instrument used by the Central Bank to control recession is to stimulate expansion in credit supply thereby lowering the Cash Reserve Ratio (CRR).
With this, banks will have more available funds which there will be willing to lend to business firms for investment purposes. This will increase aggregate demand in the economy and in turn, leads to the expansion in income and employment.
Moreover, the solution to the economic recession requires export promotion to raise aggregate demand. The deficiency in aggregate demand can be corrected through the promotion of the export of goods.
When domestic demand or market for goods is limited due to the operation of some adverse factors, the goods can be sold abroad.
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This shows that expansion in exports of those products can be achieved in which the country Nigeria has comparative advantage will promote exports and the foreign exchange note of the domestic currency will be reduced.
Thus, when these several measures are spelled out to solve the problem of economic recession, this announcement strengthens firms, banks, and generally the private sector at a time when ominous signs of distress were appearing in the economic structure.