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1. What is recession?
It is common knowledge that one major issue that led to the recession in the
country is the fall in both volume and price on sale of crude oil as the US
stepped up shale production leading to a glut in the market. This has further
been exacerbated by restiveness in the Niger-Delta from militants. The
government needs to adopt both short term and long-term strategies to come
out of recession.
1.2 Solutions
In the short term, government needs to put in place structures, which would
ensure all eligible taxes are collected. That is, the need to widen its tax base
and cut taxes to encourage investment and boost consumer spending. Tax
breaks should be given where there is certainty that the extra funds will be
spent/re-invested leading to increment in productivity
Capital projects are vague. The process of operating the TSA needs to be
efficient. Salaries need to be paid to civil servants as and when due. Projects
need to be funded as and when due. Contractors need to be paid as and when
due to enable them to meet contractual and funding obligations.
The combined effort of government spelling out exact policy decisions, and
implementing them would influence the system to spend. Right now, people
are not spending. No one is sure what the government is going to do and the
government is seen not to be spending. About N3trillion was recovered
through the TSA but there has not been clarity on the re-injection of these
funds to the system. The government needs to boost confidence both by its
actions and by spending. Naturally markets are data driven but sentiments
also play some role. The government must be seen to be speaking with one
voice, across all its organs.