Causes and Effects of Economic Recession in Nigeria

Economic Recession: Causes and Impacts on Socioeconomic Development in Nigeria

Due to falling oil revenue, over-dependence on imports, and inadequate inflow of investment, the Nigerian economy has been hit hard by a recession. In this article, we take a look at the causes and effect of the economic recession in Nigeria. Findings show that recession has a negative impact on socioeconomic growth and development. We recommend that there is need to diversify the economy, increase self-reliance (eat what she produces, and mostly use what she makes), in order to protect the country from economic recession in the future.

Economic Recession

According to the National Bureau of Economic Research (NBER), recession refers to a significant decline in economic activity spread across the macro economy, lasting more than a few months, normally visible in gross domestic product, income, employment, industrial production and wholesale-retail sales.

Recession in Nigeria has negative impact on the nation’s social and political structures, standard of living, imports, production, employment and consumption demand in the country.

Unfortunately, over eighty percent of Nigerians lack access to electricity, portable water, decent housing, and good healthcare. The situation is becoming worse due to the increasing unemployment caused by the recession.

Causes of Economic Recession in Nigeria

There are remote and immediate causes of the current economic recession in Nigeria. However, we shall consider only the immediate causes of the current recession in Nigeria.

These include the following:

1. Nigeria’s over-dependence on Oil:

The Nigerian economy contracted as a result from global fall in oil price, worsened by oil theft and oil pipeline vandalism.

Nigeria’s recession was triggered by a sharp drop in government revenues and /or a drop in consumer spending. A drop in global oil prices brought about a reduction in revenue and government spending.

2. Lack of economy diversification:

The structure of the economy has not only been export-dependent, but also on a resource that is non-renewable.

3. Over-reliance on imports:

Due to the importation of goods that can be produced in Nigeria, the nation export wealth and jobs to the exporting countries and import recession, unemployment and poverty to Nigeria.

Negative Effects/Impacts of Economic Recession on Nigeria

The present economic recession has severe negative and also some positive impacts on aggregate economic activities in Nigeria.

During recession, there is usually a decline in indicators such as GDP, employment, investment spending, capacity utilization, household income, business income, and high inflation, with the attendant increase in the rate of unemployment.

1. Economic Recession Worsens Poverty and Unemployment:

Economic recession makes life even more difficult for many working people and their families. It stagnates wage growth and increases the proportion of people on low pay, unemployment and underemployment.

It worsens poverty incidence in developing countries. It causes extreme poverty and suffering of the masse. In addition, children’s right to quality education, affordable healthcare are deprived.

The economy is deteriorating in human development indices, the quality of education and healthcare has collapsed, with poverty, hunger and starvation prevailing amongst the poorest poor.

2. Reduced Spending and Decrease in Sales of Goods and Services:

Recession results in scarcity of foreign exchange, few money, reduced income, decreased finances available to households and businesses. As a result, there is weak purchasing power, reduced consumer spending and decrease in sales of goods and services.

Due to the current economic recession, the purchase of goods and services by individuals, households and firms has drastically reduced.

3. High Cost of Living and Low Investment:

Following the loss of jobs is the loss of income; the cost of living has gone astronomically too high for the poor and the middle class. There is sharp decline in savings and investment.

4. Poor Standard of Living:

Due the current economic recession, many so called employed and underemployed workers can no longer afford to carter for basic needs, including proper and adequate food and health care, as a bag of imported rice (twenty thousand naira), costs more than monthly minimum wage (eighteen thousand naira) for an average worker. As the quality and standard of living declines, the life expectancy of many working and unemployed households is fast declining too.

5. Increased Crime:

Economic recession has also brought about an increase in the crime rates in Nigeria.

As life gets harder for a greater number of the people (the poor), living conditions has worsened and crime rates have escalated.

Consequently, we are witnessing an increase in robberies, petty stealing, street hawking, kidnapping, child trafficking, fraudulent schemes (419) and other financial crimes.

6. Natural Resource Management:

Indeed, the livelihood strategies and opportunities available to the rural and urban poor are shrinking with the recession, leaving more people in slums, darkness and hunger, thereby increasing the pressure to clear forests for food and firewood, hunting of animals for bush meat, just as a survival strategy.

Consequently, essential natural resources and ecosystem services provided by the environment to support economic growth and sustainable livelihoods are increasingly being destroyed.

7. Increased Government Debt:

Due to falling revenue, there is budget deficit in government spending. The Federal and state budgets are experiencing spending difficulties due to shortfalls in government revenues.

Federal and state governments are borrowing to cover for the fall in revenues. This has increased significantly the debt burden of governments at all levels. There is high rate of inflation attributable to hike in pump price of petroleum, low domestic production capacity, dependence on imports, a weak Naira, scarcity of foreign exchange and high cost of doing business in Nigeria, high interest rates, poor electricity supply, lack of portable water, high cost of transportation and poor state of infrastructure.

Positive Impacts of Economic Recession

1. Small Scale Businesses Flourish:

Economic recession gives an edge to small scale businesses such as low cost transportation, low cost canteen, small scale cropping, fishery and animal farms.

Low cost transportation business such as the Keke-Napep and commercial taxi thrive since it has become too expensive to move about with car given the hike in fuel price and the level of illiquidity. Generally, people prefer to pack their cars, except where very necessary, and patronize cheaper means of transportation. It has become more economical to use Keke-Napep.

Similarly, sales of food items and operating a low cost canteen, low cost health care are business opportunities favored by the economic recession.

2. Encourages Thrift:

The current economic recession has brought about individual, household and business austerity measures. Economic agents involved in a lifestyle that leads to wastage of money are making changes. For instance, needless and irrelevant travels, unnecessary shopping and flamboyant entertainment and food wastages have reduced.

Purchase of expensive phones, new cars, household gadgets and appliances when old ones are still in good condition are discouraged. People are fast imbibing maintenance culture.

From our findings, economic recession has negative impacts on social and economic development in Nigeria. It has serious negative impacts on government revenue, employment, income vulnerability, inflation, human health, infrastructural supply, poverty and natural resource management in Nigeria.


We have outlined the factors responsible for the current economic recession in Nigeria. Moreover, we highlighted some of the negative socioeconomic impacts of the economic recession on government revenue, employment, income, poverty, inflation, human health, infrastructure, poverty and natural resource management in Nigeria.

These have serious negative consequences on families. It affects the standard of living, education, healthcare, infrastructure and general wellbeing of Nigerians.


In order to minimize the incidence of recession in Nigeria there is the need to reduce dependence on crude oil, increase food production to reduce imported food, and encourage local household electronics and communication manufacturers.

By reducing the demand for foreign exchange on imports that could be produced in Nigeria, the nation would conserve its foreign reserves.

Furthermore, there is the need for reforms that would diversify the economy.

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