THE ROLE OF MACROECONOMIC INDICATORS IN ECONOMIC RECOVERY

CHAPTER ONE

INTRODUCTION

BACKGROUND OF THE STUDY

The current economic recession in Nigeria emerged like a thunderbolt based the negative growth rates recently released by the National Bureau of Statistics (NBS) of Nigeria. This admission was just an official declaration of the situation the Nigerian populace has been battling with overtime. The happenings in the country provided justification for this economic woe. Also, the present situation substantiates the effect of an absence of a clear policy direction on the part of government.

Economic recession is a downturn in the economy. It is often characterized by symptoms such as rising prices of goods and services, inability of government to meet its financial obligations, exchange rate fluctuations, and poor performance of other macroeconomic variables which defines the state of the economy per time. Economic recession is a recurrent issue because of the cyclical nature of the global economy. That is why most countries, especially the developed ones, often diversify the structural base of their economy to withstand any external shock. From historic viewpoint, there was an economic depression in the US in 1930s. Recently, in the dawn of year 2008, there was a global financial and economic meltdown attributable to the collapse of the US Sub-prime mortgage institutions; then the Euro Zone crisis and others. These cases showed that world economies face different cycles at different times. However, these countries instituted proportional policy responses which included bailout policies and stimulus packages to cushion the effect of the crisis and stimulate the economy back to normalcy.

In Nigeria, Government is keen to improve the resilience of the economy and make it less vulnerable to external shocks through a reduction in its over dependence on the oil sector of the country, and better implementation of government policies which would speed up the economic recovery process. The economy’s overdependence on crude oil has amplified the gravity of the recession that had its origin mainly from unfavourable developments in international crude oil market. In response to the need to lay a solid foundation for the economy to emerge out of recession and restore economic growth, the government of President Muhammadu Buhari on 7th March 2017 released the Economic Recovery and Growth Plan (ERGP), a medium term plan (2017- 2020) which builds on Strategic Implementation Plan (SIP) earlier developed for the 2016 budget. The economic recovery growth plan aims to achieve sustained inclusive growth, driven by the following principles: focus on tackling constraints to growth; leveraging the power of the private sector; promoting national cohesion and social inclusion; allowing markets to function and strengthening other macro economic factors that would naturally aid recovery.

STATEMENT OF THE GENERAL PROBLEM

Nigeria has been an economically slavish neocolonial state. The present economic recession in Nigeria is a manifestation of long-term ills in the structure of the economy that became full-blown under the present government. The recession seems to affect socio-political structures, Nigeria’s credit condition, general living standard, imports, production and employment as well as consumption demand in Nigeria. Fast developing economies like China, India, Brazil, including Vietnam and Thailand depend on exports to drive their economies. Nigeria cannot afford to do otherwise. 80 percent of Nigerians still lack access to electricity, decent housing, portable water and good healthcare. This figure is growing as a result of increasing unemployment caused by the recession. For many years, The importation of petroleum products covers 30 percent of Nigeria’s GDP, importation of toothpick, rice, fish, cassava starch, sugar and processed tomatoes take 20 percent; importation of garments and fabrics 15 percent, importation of cars and electronics 20 percent; resulting to sky-rockets inflation of 17.8 percent in 2016.The demand for foreign exchange and imports (including imports of petroleum products) remained high in the face of dwindling oil revenue. Nigeria is faced with the twin problems of reduced volume of exports and reduced price of crude, resulting to reduced revenue. The implications are that the federal and state budgets cannot be funded adequately resulting to external borrowing and debt financing. These have negative implications on foreign exchange and imports of raw materials, low absorptive capacity, job losses, increased tax evasion and avoidance, low purchasing power, low standard of living caused by economic recession. The question is that why the performance of the Nigerian economy always should be determined by industrialized external powers, if not for the internal structural deficiencies working against selfreliance? The Nigerian economy is now in the intensive care unit where America and Thailand’s agribusinesses have collapsed Nigeria’s agriculture, China’s garments and fabrics business has collapsed Nigeria’s textile industries, Japan and Germany’s automobile businesses have collapsed Nigeria’s Ajaokuta steel company.

AIMS/OBJECTIVES OF THE STUDY

The major aim of the study is to examine the role of macroeconomic indicators in economic recovery. Other specific objectives of the study include;

1. To examine the major contributors to economic recession in Nigeria.
2. To assess the level of economic recovery currently underway in Nigeria.
3. To determine the relationship between the selected macroeconomic indicators and economic recovery/growth
4. To determine the benefits of speedy economic recovery on the Nigerian masses.
5. To recommend ways of ensuring a sustainable economic recovery in Nigeria

RESEARCH QUESTIONS

1. What is the role of macroeconomic indicators in economic recovery in Nigeria?
2. What are the major contributors to economic recession in Nigeria?
3. What is the level of economic recovery currently underway in Nigeria?
4. What is the relationship between the selected macroeconomic indicators and economic recovery/growth?
5. What are the benefits of speedy economic recovery on the Nigerian masses?

RESEARCH HYPOTHESIS

H01: There is no significant relationship between macroeconomic indicators and economic recovery in Nigeria.

H02: Macro economic variables do not have a significant role to play in economic recovery of Nigeria

SIGNFICANCE OF THE STUDY

The study would greatly benefit government at all levels, economic policy maker and all related stakeholders as it would unveil the role and relationship of macroeconomic indicators on economic recovery in Nigeria. The study would also benefit students researchers and scholars who are interested in developing a further study on the subject matter by providing relevant literature.

SCOPE AND LIMITATION OF THE STUDY

The study is restricted to the role of macroeconomic indicators in economic recovery using the national bureau of statistics in Abuja as the case study.

LIMITATION OF THE STUDY

Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.