Peak in economic cycle is the highest level of economic activities, when activities are falling from this level then the economy is approaching a recession. RECESSION by most acceptable definitions refers to a fall in GDP for two consecutive quarters, a sustained recession is called DEPRESSION. At the lowest point of economic activities, we have TROUGH. When economic activities are rising from the lowest point, the economy is in RECOVERY period. The stages from a Peak to the Trough is called Business Cycle. Nigerians should not that this is cyclical not periodic, and every economy experiences it.
Now, often times these days Nigerians confuse inflation with recession. Traditionally inflation should occur in a time of economic boom or expansion, as recession is theoretically a time of low economic activities, with prices steeping downwards. Majorly a recession features increase unemployment as firms will have to lay off workers due to fall in prices, incomes are also falling because there are few jobs and firms might have to cut workers’ salaries too, a recession is often characterized by deflation, not inflation. Hence we can say that Nigeria is a very unique situation which is often called STAGFLATION, a situation when increase in prices is accompanied by increase in unemployment.
How long these issues will last in every economy depends on how effective policies by made by planners are. Presently, most talks from government and ministry of finance are about getting money from international or regional bodies. These two problems cannot be solved by just putting more money into the economy, trying to expand an economy experiencing inflation, will further escalate issues and a recession should be solved by expansionary policies. What planners should do in this situation is to understand causes of these two issues, and proffer solutions.
Hence, we should understand what has stimulated inflation in our economy, which is really obvious. Increase in local price of oil products (majorly PMS) and fall in the value of our currency relative to other currencies. To solve Nigeria inflation problems, government must implement policies to reduce cost of oil production in Nigeria, so that the increase being transferred to consumers can be reduced.
Recession is due to reduction in economic activities, which is measured by GDP. To end recession, production must be stimulated, with reduction in oil production this problem might further escalate. Hence there is the need to solve the problem of vandalism.
Following the discussion to this point, it can be noted that stimulating local production can reduce inflation by reducing import bills and also stimulating local production can solve recession by increasing GDP.
Hence it seems a great idea to want to borrow so production can be stimulated by raising funds from available sources, but we should not forget that prices of other products depends on price of PMS, hence to solve inflation in the short run will be to reduce its cost of production(PMS). Also, it should be noted that getting more funds will not solve the Nigerian recession problems but, actually using the money to stimulate productions.
No comments:
Post a Comment