In economics, a recession is a negative growth for two consecutive quarters. For a layman’s understanding, a recession is a period of general economic slow down.
Recent information from the Governor of the Central Bank of Nigeria and the National Bureau of Statistics indicates that the Nigerian economy is at the verge of a recession.
Here are some of the effects of an economic recession:
1. Decrease in sales of goods and services, due to decreased finances available to individuals and families, the purchase of goods and services decline.
2. Increase in unemployment, due to decreased sales of goods and services by business owners and Companies , a reduction in the workforce takes place, leading to loss of jobs.
3. High inflation rate, Nigeria have been experiencing high inflation rate due to scarcity of foreign exchange, a weak Naira, high interest rates, poor electricity supply, dependence on importation and the high cost of doing business in Nigeria. As Nigeria goes into a recession the inflation rate will go higher as the above mentioned factors still persist.
4. Budget deficit in government spending, the National and States budgets will experience spending deficit due to shortfalls in government revenues. The government may decide on borrowing to cover for the fall in revenues, and this will increase the debt burden of the Federal and State Governments.
5. Decline in the stock market, investors would avoid investing in companies that might suffer loses, while some investors would pull their funds from the stock market.
6. Increase in crime rate, as life gets hard for many and living conditions get worse, crime rate will escalate. There will be increase in robberies, kidnapping, petty stealing, fraudulent schemes and other financial crimes.
7. Strained family relationships, as a result of unemployment, loss of income and high cost of living, inter-family relationships would come under strain which may lead to marital and family conflicts.
Families and individuals may not be able to avoid the effects of the coming economic recession, they can make changes that can improve their situations and help them prepare for the future, while waiting for the economy to recover.
Here are some tips and strategies to cope:
1. Unemployed people should accept a low paying job as a short term solution pending when a better job offer is available.
2. Part time job, business or small scale farming ; an option available for dependent members of the family is to take a part time job, operate a small scale business that requires little capital, and engaging in farming of crops that are of short harvest period, as well as rearing farm animals on a small scale.
3. Change of plans; individuals and families would need to make changes in their plans, such changes may include relocating to affordable accommodation and switching of children’s school to affordable ones.
4. Making changes in financial spending ; people should understand the difference between needs and wants during a recession.
Areas of priority spending should be housing, food, affordable health care, transportation, clothing and education.
5. Life style changes; people involved in a lifestyle that leads to wastage of money need to make changes, examples are excessive smoking and alcohol consumption, excessive clubbing, womanizing, unnecessary and irrelevant travels, buying new household gadgets and appliances when old ones are still in good condition, as well as buying new phones several times in a year. Another lifestyle to be changed is the buying of new clothes for every social functions and events.
6. Business opportunities; in an economic recession, as people’s spending power deprecate, spending of money is focused on areas of essential needs. For those planning to go into business, they should consider the following areas (a) sales of food items (b) operating a low cost canteen (c) low cost transportation business (d) health care business (e) small scale crops and animals farm.
7. Keeping a positive attitude; as the economic recession lingers people should have a positive attitude both at work and home, and while in company of friends and strangers . Having a positive attitude generally makes it easy to deal with tough times. On the other hand; anger, bitterness, hopelessness, frustration and persistent complaining makes it difficult for people to deal with tough times.