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JULY 2023
Philosophy’s response to the problem of recession in Nigeria
by Dr Valentine Ehichioya Obinyan, (Ph.D) and Dr Faith Gloria Eheimua, (Ph.D)
Abstract
What is the cause of the rise and fall of the wealth of nations? Is a question Adam Smith has paddled the philosophical interest in economics with. This to some extent informs the idea of fluctuation and recession noticeable in nations around the world. But what is recession and its causes? Development is a typical characteristic or focus of man. The aim of philosophy has been to see the development of every individual and the society, through effective economic policies and activities. Hence an epistemic foundation for economic development is instrumental in the economic of nations. Nigeria is wrecked with economic challenges with evident indices of recession. The interest of this study is a response to the problem of recession in Nigeria from a philosophical perspective. It therefore critically and empirically examines the content of recession reflecting on other economies. It identifies the reasons for recession in Nigeria, seek an economic policy for Africa and proffers suggestions worthy of stabilizing and sustaining the economy through an egalitarian instrument of economic equality in wealth and value distribution.
Key Words: Economic, Recession, Development, Philosophy, Nigeria
1. Introduction
Man's primary interest is to sustain himself from natures resources. Altering this cast a burden on human existence. In social, political, religious and economic pursuit, dimensions for survival and continuity takes priority. The objective of philosophy and other sciences is specifically to aid development through rational ethical principles formed from the general knowledge and consciousness of the nature of and challenges in man’s environment. There are various forms of development; Human, Psychological, Economic, and Societal development. These are central concerns of philosophers in their propositions for man's needs while respecting his dignity and value. Imhotep, Ptah hotep, Socrates, Aristotle, John Locke and Thomas Hobbes1, Hume, Marx etc., have advanced delibrations and principles for sustainable development from various perspectives.
Economic development has always been in direct relationship with ethical issues especially with regards to medical, environmental, religious issues, Economic development is also the process by which a nation improves the economic, political, and social well-being of its people. A historical cases of development is the 4th dynasty in of drought in Egyptian through the Nile valley irrigation systems. What will happen to countries without economic philosophy or development policies? Many scholars have argued that Africa as a continent and Nigeria as a nation lack economic theories to sustain and provide new expansion avenues. The 21st century economics affects directly and indirectly, lack in economic philosophy therefore is a dangerous venture into economic collapse and recession
2. Philosophy and the problem of recession
Lack of pragmatic developmental policies and economic philosophies in a nation causes recession using stable economies as examples. What philosophy can revamp the Nigerian Economy? Does Africa have authentic economic developmet theories? According to Omoregbe Joseph in ‘knowing philosophy’ "philosophy in its practical aspect is the most important aspect of development as it sharpens the human development practical development and even our daily living, as pragmatist have said that, only that which is useful should be carried out that’s the aim of philosophy in development."2 Philosophyhere, is the practical aspect of development /economic development. Todaro and Smith in 'on Economic development' argued that "it’s not just enough to talk about economic development, but also to talk about various factors that could hamper development and therefore lead to recession in a nation".3 This various arguments are pointers to justifying this study.
3. Economic development and recession
3.1. What is recession?
The period of general economic decline4, typically accompanied by a drop in the stock market, increase in unemployment, and a decline in the housing market, is recession. According to the reports of the National Bureau of Economic Research (NBER, 2010): Recession is a Significant decline in the economic activities visible in real gross Domestic product (GDP) growth, real personal Income, employment (non-farm pay rolls), Industrial production, and wholesale- retail sales.5
In philosophy of economics and economics as a science, quantitatively and ‘technically’, a recession is a period a nations GDP declines at least for two consecutive quarters in a quarter to quarter comparison. Compared by various economic indicators like GDP decline, duration, unemployment, fall of industrial production, downturn of stock market indices, decrease in trade volumes or real personal income and many others. One recession may be evaluated as ‘mild’ or ‘severe’ in quantitative terms. From research, a deep recession influencing more than one country and lasting for a long time is called a ‘depression’6. It is a sustained, long-term downturn in economic activity in one or more countries. It officially began on the Black Tuesday of October 29,1929, although, there might have been earlier cases of it that were not taken into book; it was due to crashed in wall street stock market rapid in stock prices. Popularly called 'The great depression' in the USA and lasted for 4 years affecting terribly more among others, the Afro- Americans but causing the end to prohibitions7. This, many egalitarian philosophers like O’Neill, Pietro Meffetone8 have identified as lack in distribution of socially valuable resources in the restructuring plan. In philosophy of social change, recession can be considered a factor and an instrument for policy implementation and revolution. Are they types of recession? What are its causes?
3.2. Types of Recession
3.2.1. V Shaped Recession
V Shaped Recession
In this diagram, the economy falls into sharp recession but is quick to recover. This shape V shows a sudden fall followed by a quick recovery.
3.2.2. W Shaped Recession
Also called the ‘double-dipped’ recession of up to 10 years. It has a very sharp downturn followed by a temporary recovery. After this small recovery, the economy falls downward again after which it finally recovers completely. It is diagrammatically represented as follows. However, world economies try to avoid this through the implimentation of workable economic ideologies.
V Shaped Recession
3.2.3. U- Shaped Recession
U shaped recessions involve a prolonged period or recession ( up to 24 months). This is said to be the current stage of global recession. Unlike V shaped recessions, they are not quick to end.
3.2.4. Boom and Bust Recession
This occur after a previous economic boom when growth is above the long run trend rate of growth causing inflation and current account deficit This soars consumer’s confidence resulting in fall in saving ratio and a rise in private borrowing to finance higher spending. The economic boom is financed by rising debt. In explaining this, Tejven Pettinger noted "many recession occur after economic boom in growth above the long run trend leading to rapid growth, inflation, and a current account deficit and growth is unsustainable".9 The 1973 recession in UK following barber boom in 1972, the 1990-1992 recession following Lawson boom of late 1980’s are sticking examples.
3.2.5. Balance Sheet Recession
This is a large decline in balance sheets due to falling asset prices and bad loans leading to fall in investment and spending and fall in assets prices.10 This kind of recession can last for a very long time and it’s susceptible to double-dip shape of recession.
3.2.6. Supply Side Shock Recession
This caused by a very rapid rise in oil prices due to the decline in living standards. For example, in 1973, the world was highly dependent on oil, the tripling in the oil price caused a sharp fall in disposable income and also caused lost output due to lack of oil11. This kind of recession is not so common since the world is less dependent on oil than in time past.
3.3. Causes of recession
Generally, recessions are caused by a fall in aggregate demand due to financial crisis, rise in interest rates or fall in asset prices, high inflation and taxation, leading to low purchasing power, debt accumulation and servicing (foreign debts), high- interest rate discouraging investors, fall in aggregate demand, wages or income, mass unemployment and general loss of confidence in the government economic planning etc,..
Some philosophers of economics such as Heidi Grasswick, Ian Carter, Daniel M. Hausman, Peter Hylton, and Gary Kemp, Willard Van Orman Quine George Smith, strongly deviate from the above as the real and only causes of recession. For Brian Duignan, after studying the Great Recession, recession is caused by financial crisis or liquidity.12 For Pietro Meffetone, the main causes of financial instability... [that] …has gone unnoticed by the philosophical community is income and wealth inequality coupled with income stagnation at the bottom of the income distribution13 For Arthur Burns in a presidential address to the Anerican Economic Association and supported by Paul Krugman, Nouriel Roubini, from the Great Moderation, the biggest economic threat had become inflation14 others are from the Keynesian, Jon Maynard Keynes shown clearly as a result from the lower aggregate expenditure in the economy of the nation which contributed to a massive fall in income and employment below the average thus the nation’s economy reached equilibrium at lower economic activity and very high unemployment rate. From the monetarist, Milton Friedman and Anna Shwartz, it is as a result of the great contraction.15
4. Nigerian economy and recession: Way forward
According to the analysis of the Nigerian economy carried out by the CIA world fact book, Nigeria’s economy is a middle income, mixed economy and emerging market with expanding manufacturing, financial, technology and entertainment sectors. Ranked as the 21st world largest economy in nominal GDP terms and the 20th largest in term of purchasing power parity16 (PPP). Nigerian is a major exporter of oil, yet only 2.7% of its supply is gotten from Nigeria. This economy, once buoyant in agricultural produce is now dependent on importation of food stuffs for consumption. In 2014, the Nigerian economy changed its economic analysis to account for the rapidly growing contributors to its GDP, such as telecommunications, banking, and its film industry17. In 2005, Nigerian economy achieved a milestone agreement with the Paris club of lending nations to eliminate all of its bilateral external debt. Nigeria ranked 151 in the United Nations Development Index in 2004 and non-energy- related infrastructure is inadequate18.
Nigeria’s economy is unstable In 2003 to 2007, Nigeria attempted an economic reform program called the National Economic Empowerment Development Strategy (NEEDS) to raise standards of living through macro-economic stability, deregulation, liberalization, privatization, transparency, and improve agricultural productivity. Although with a Debt-to-GDP ratio of 16.075 in 2019, the height of insurgency and herdsmen attack in the North-East affecting agricultural activities, employment and distribution of food produce, sveral efforts will be needed to improve the economic and health sector to combat recent effect of COVID 19.
4.1. Nigeria and economic recession: Philosophers response
Studies shows that recession is caused by lapses in a economic policies by insensitive government to changing economic models. Reflecting on Adam Smith's Wealth of Nations and Why Nations Fail, crytalize perennial evolutionary admonitions about future changes in a relatively booming economy. When we examine closely world economy before the World War II, economic decentralization and wealth and value distribution was lacking. Meffestone identified several reasons for recession but primaryly recommends government close study the economic models to ensure efficient policies. Our country Nigeria is more an Increase-in-debt-to-GDP economy than an economic-growth-wealth-distribution-oriented economy. If an economy runs on any of both, we can tell the result.
Philosophy as a second order discipline aims at analysing and moderating the policies of other disciplines. Its interest in recession is as it affects human stability and continuity. We cannot estimate the death rate caueed by hunger, diseases and starvation during the great recession. The case in Nigeria is no different owing to poverty, instability/regulation policies, corruption issues etc. The effect of this on lives and properties cannot be overemphasised. Towards strengthening the economic policies to stabilize and avert recession while improving human conditions therefore, the philosopher recommends the following;
4.1.1. Fight Corruption and Insurgency Sincerely
A cross sectional survey of data points to the fact that corruption, bad governance, political instability, insurgenc has been a major challenge of Nigeria. Several agencies like the ANEEJ, Anti-corruption Academy of Nigeria (ACAN), Bureau of public procurement (BPP), Economic and Financial Crimes Commission (EFCC) etc, are to no avail. Even the #END SARS# protest were in view of this change.
Various administrations like President Muhammadu Buari launched an anti-corruption drive after taking office in May 2015 with the mandate for change but here we are, still recovering loots, increasing debt, struggling with development and unemployment, importing even the most common commodities, being silent to insurgency amongst others. The reason is our social-economic and political philosophy is vague. We must improve on our justice system, and revaluate our currency. Government must ensure security of lives and propertied, strengthen our foreign relations and investment, introduce effective diversification policies, create jobs, preserve our national treasury and better the economy through effective and responsible leardership.
4.1.2. Small and Medium Scale Empowerment
SME are very important part of the Nigerian economy. SME contributes a much higher proportion to GDP around the world. SME’s in NigeriNigeria play an important role in the growth, and development of the economy. Although, these SME’s aere affected by several problems from environmental related factors, government instabilities and frequent policy change, it has been defined by the National council of industries as busines enterprises whose total cost excluding land is not more than 200 hundred million naira. SME's are empowered through advantaged policies, soft loans and other fiscal incentives.
In 2019, World Bank has estimated the growth rate for Nigeria’s economy at 2.1% with job creation rise of 10% quarterly if local or raw materials and resources are utilised efficiently. An epistemology of economic factors is required here. Government and industries must put the best machinery and think tanks in place to ensure solutions. Attention should be given to SME sub-sector from the Support and Training Entrepreneurship Programme (STEP), the Association of Nigerian Development Finance Institution (ANDFI) as well as Individual Development Finance Institution’s (IDFI). SME’s is the engine of growth in any economy around the world.
As labour intensive, capital savers and job creators, government and other NGO's should support SME's. They constitute 97.2% of companies and contribute immensely to national development by positively influencing income distribution in both functional and nominal terms. The central bank report of 2003 noted that SME are very important catalyst in developing the industrialised countries, in developed countries, 98% or more than belong to the small and medium scale business.19 This clearly would empower the workforce of the nation, engage industrial activities and stabilise the business cycle of the economy while averting recession.
4.1.3. Popularization of Our Local Product and Stabilize Power Supply
In the Nigerian economy, less concern has been shown towards the issue of stable power supply and value for our local product. For example, middle class citizen would prefer a foreign product than made in Nigeria. Our local products ranges from our locally produced crops to our locally made clothes and cars: building materials, locally made drugs and other products.20 But we prefer the imported products because we consider ours inferior. A need to adjust our sense of value through for foreign product over the local is a step in the right direction. Can this be possible without stable power supply and reorientation? No. The government should work on power through sincere spending and transparent co tract allocation and monitoring. Government should change this inferiority ideology and inspire interest in our local product through support that will expound interest and increase involvement. An aesthetics of packaging is required here. This would encourage production in quality/quantity, increase demand/supply, reduce importation, control price and value, distribute wealth, create employment moderate total reliance on foreign product and cub recession.
4.1.4. Shutting Down Our Importation
Importation in Nigeria has increased the expenditure of government and industries. Importation, which is the buying of goods from other countries to supplement the available goods we have is a very common activity in developing countries but the case of Nigeria is irritating. Too much dependence or reliance has been placed on imported goods. In Ben Murray Bruce idea, if the Nigerian government could legalise the illegal firms in the country and empower them, then pump finance into their productivity, then more products will be gotten from these firms and this could help us.21 Thus if this illegal refineries could be legalised and are reconstructed and stocked with the right equipment it will help a long way. For many years the rate of importation has been at an alarming increase. The embarrassing part is that we import all that we can produce e.g matches and tomatoes, tooth pick, rice wmong others. In fact it is as a result of laziness in all part. In 2019, the federal government implemented policies against importation but with ‘the North and us’ taking the center discussion, sincererity is in doubt. However, stopping importation of some products would increased patronage of locally manufactured products and in the long run, avert recession.
4.1.5. Inputting Price Regulation Policy
The prices of goods / products in Nigeria is uneven. A commodity can have four different princes within the same location, (a product gotten at 100 naira in this place, could be gotten for 400 naira at another) This has caused an imbalance and dissatisfaction in the economy. Price policies/regulation refers to the policy of setting prices by a government agency, legal statue or regulatory authority. Under this policy, minimum and maximum prices would be set for all products; it would also consist of “guidelines” which specify the magnitude by which prices can increase as in the case of rent control. These four major methods are the means through which our economy could get better and step out of recession. The government should implement price regulation policy for every product, in other to manage the cost of living of the common man, avert inflation and recession in a reasonable way.
4.1.6. Over Dependency on Oil and Diversification of Economic
The fall of Nigeria’s economy as a result of dependency on oil and the neglect of other economic avenues is still a problem. The issue of development in Nigeria over the years has been unstable. At the very point of developement, several factors abort the process. Even the fiscal policies to salvage the economic issue appear inefficient. Due to dependency on oil, other areas suffer; livestock and the aquatic space are destroyed by spillage; farm lands and produce are destroyed. Sadly, government to no responsible steps. Due to this dependency impacting farmland/producenand, the Nigerian economy was predicted to slide into famine early 2017. Although significant economic researches has shown that Nigeria could become the best economies in the world hence government aim is at diversifying the economy, shifting reliance on oil sector to other areas of the economy. Efforts are being made to validate locally made goods, reduce importation and empower individuals as this will boost economic expension and cub recession.
4.1.7. Economic Egalitarianism
Nigeria is consumed by segregation and group interest. This is replicated in the political, religious, power, oil, and primarily the economic sector in terms of infrastructure, policy making and representation. In the long run, other areas are relegated to the background and left undeveloped as there is no responsible representation and distribution of wealth. To combat recession, government must ensure economic equality which emphasise the equal distribution of value and wealth of the nation. This will lighten dark areas the nation economy annexing resources to sustain the economy against down slide.
5. Conclusion
Philosophy of development always takes importantly the ideas that compose development such as micro and macro- economic that determines the well-being of nations and their citizens. Economic development requires a high level of epistemological and empirical investigations, namely the development of mindsets, a spirit of the times, an ethos, such as moral norms (like Hegel's ‘Geist’). With this epistemological tool, philosophy of economics rigorously and critically examines the scientific nature of the economic theories of nations with special interest in the theory structure, theory confirmation, explanatory adequacy, and ethical foundation. It also suggests that nations must incorporate more studies of their economic institutions, paying more attention to its comparative trajectories. Is a culture of interest in the academics and educational stability is reqiured? For Africa’s economic development the existential realities of our social-economic space must be well understood to determine consumptiond, production and supply. Thus the existential theory of national development is the desideratum for Africa’s meaningful development. To achieve this, the following must be encouraged;
Patriotism among the political class.
Ensuring a highly scientific or technological culture among African nation states.
Underscoring the importance of Indigenous value systems as the energy for efficient development theories.
The political class in Africa must rise to the mental and cultural responsibilities needed to inspire home-grown economics development. They must embrace economic existentialism.
This reflection takes us to undue dependence on Breton Wood institutions for blueprints on national development. But beyond this, the level of dependency of African on other economies is alarming. Has Africa noting to bring to the international table on economic developmentt policies? A few policies philosophy importantly propose. To address and sustain human development avert recession in Nigeria and Africa we must invest in;
The right economic education
Inculcating of good moral up-bringing to combat corrupt practices
Addressing ambiguity in the scope of distribution of resources
Resolute in the adoption of egalitarianism that is, the principle of equity through theory of distributive justice.
Empirically, no determination of a recession defense mechanism should solely rely on macroeconomic indicator, namely GDP, as other parameters such as geographic scale, unemployment rates, decrease of stock indices, fall of industrial production or real income and ethics of bussiness are of great importance even though ambiguity arises. This is a new perspectives on comparative studies in recent economic downturn, their causes and likely solutions.
Endnotes
Locke John Social Contract Theory UKEssays.com11 2018, All Answers Ltd. 03 2020<https://www.ukessays.com/essays/philosophy/john-locke-social-contract-theory-philosophy-essay.php?vref=1>and Hobbes, Thomas Levithan, (Lodon: Penguin. 1985) p.223
Joseph Omoregbe, Knowing Philosophy: A General Introduction (Maryland; Joja Educational Research and Publishers Ltd.,1990) p. 192.
Micheal Todaro. P., and Stephen Smith .C. Economic Development 11.ed. ( USA: Pearson Higher Education, 2003) p.1
Jim Chappelow, “Economics: Overview, Types, and Economic Indicators” in Investopedia, June 29th 2019http://www.investopedia.com/term/e/economic-asp assessed 21/02/2020 See also Jiri Mazurek, Elena Mielcova,The Evaluation of Economic Recession Magnitude: Introduction and Application”, (Ukraine, 2013), p.182
“Business Circle Expansion and Contractions Natona Bureau of Econmic Research” Achived form the original on 12 October 2007assessed 29/02/2020
Chappelow, Ibid
Washu Olin, “Stock Market Crash of 1929”, in History.Com.Editors https://www.history.com/topic/great-depression/1929-stock-market-crash assessed 02/03/2020
Pietro Meffetone, “Egalitarianism and the Great Recession: a Tale of Missed Connection” in Res Publica 24, 237-256(2018)https:doi.org/10.1o007/s1158-016-9349-7
Tejvan pettiger, “Types of Recession”, in Economics. Help: Helping to Simplify Economics October, 1, 2019 https://www.economicshelp.org/blog/4848/economics/types-of-recession/ assessed 12/03/2020
Ibid
Ibid
Brain Duignan, Great Recession: Economics {2007-2009}, Enclyclopaedia Britannica https://www.britannica.com/topic/great-recession, assessed 3/03/2020
Meffetone, Ibid, p. i
Herica Handloff, “The Great Depression and the Great Recession in the North Atlantic” May 4, 2015 (ed) Washington Center For Equitable Growth: Evidence for a Stronger Economy.https://equitablegrowth.org/great-depression-great-recession-north-atlantic/ assessed 5/03/2020
Pierre Berton, The Great Depression, See also Robert S. MacElvaine, The Great Depression: America 1929-1941, 1984 https://en.m.wikipedia.org/wiki/Great_Depression assed 23/02/2020
“Manufacturing Sector Report:2015. Manufacturing in Africa” https://en.m.wikipedia.org/wiki/Economy_of _Nigeria_ assed 23/02/2020
“Africa’s New Number One” in Economist.com. Ibid
Adenikinju Adeola “Efficiency of the Energy Sector and it Impact on the Competitiveness of the Nigerian Economy” Ibid see also Arinze Ngwube Matthew Ogbuagu,” Global financial crisis and Nigeria Economy” Vol 14, Issue 4 (2014), p. 25.
Essay, U K. Importance of Small and Medium Enterprise in Nigeria. November 2018 Retrieved from https://www.ukessays.com/essays/economics/importance-of-smaol-and-medium-entreprise-in-nigeria-economics-essay.php/vref=1 assessed 2/03/2020
Ayo Teriba, “Nigeria’s economic outlook in 2017” in Proshure ( April , 11, 2017).
Ademiluyi Tony, Ben Murray Bruce, “Boosting Our Economy” (March 2, 2017).and “Nigeria: The Hanging of Ben Maurice Bruce” The Guardian, Https://allafrica.com/stories/201905230379.html assessed 21/02/2020
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