Strategies of reducing the effect recession on Low income earners in Nigeria

Strategies of reducing the effect of recession on low income earners in Nigeria a case study of Ebonyi state will focus on providing practical strategies to reduce the effect of economic recession those families that fall within the purview of low income index.

CHAPTER ONE

INTRODUCTION

Background to the Study

The word economic recession has become a household name in Nigeria since June, 2016. Ever since the Central Bank of Nigeria (CBN) and minister of finance admitted that Nigeria is experiencing economic recession on 3rd of June, 2016, it has become the major concern of all Nigerians (Noko, 2016).  Economic recession according to National Bureau of Economic Research (NBER) (2015) is “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in a real gross domestic product (GDP), real income, employment, industrial production and wholesale-retail sales.”  Economic Recessions generally occur when there is a widespread drop in spending (an adverse demand shock). This may be triggered by various events, such as a financial crisis, an external trade shock, an adverse supply shock or the bursting of an economic bubble (Wikipedia, 2011).

Still on Strategies of reducing the effect of recession on low income earners in Nigeria.

Economic recession can also be defined as a negative real Gross Domestic Product growth rate lasting for more than two consecutive quarters (first and second quarters) (Noko, 2016). He noted that there’s a drop in the following five economic indicators: real GDP, income, employment, manufacturing, and retail sales. Noko (2016) argued that recession cannot only be determined by negative real GDP growth rate since a recession can quietly begin before the quarterly Real GDP is out.

Udeh (2011) sees recession from the angle of persistent inflation when he noted that, recession is a generalized increase in the level of price sustained over a long period in an economy, that is, a persistent rise in the price levels of commodities and services, leading to a fall in the currency’s purchasing power. In the context of Nigeria, Recession has been attributed to many factors, Noko (2016) argued that Nigeria current recession is caused by poor economic policy, fall in oil output due to activities of the Niger – Delta militants and subsequent fall in oil price, others include over dependence on oil export, inflation due to ban on some basic foods like rise, and infrastructural decay in the country.

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It is worthy of note that during the period of economic recessions inflation worsen, unemployment will by skyrocketing – people being displaced out of their job as companies tries to minimize their expenses, naira exchange rate worsen, government and the households curtails their expenses due to low purchasing power, fall in aggregate demand, reduction in social well-being of the general masses – a state of general economic downturn.

Nwuzor (2016) noted that during the period of economic recession, economic hardship knows no limits and boundaries, it affects livelihood of everybody in one-way or the other, and this naturally gives impetus to survival strategies as people work harder and more effective to tackle the new economic situation. Families with little or no investment to resist the effect of recession are most likely to be hit severely – but there are ways this unfortunate condition could be managed. Because reduced income during period of economic recession leads to reduced employment, health care, and social amenities that often leads to general reduction in well-being (Noko, 2016).

Because during economic recession there is slow in economics activities, poor circular flow of money resulting to low earnings by the households. This ultimately reduce their social and economic well-being especially the low income households and as such often led the low income households to starts looking for alternatives sources of income to support their families towards improving their well-being (Nwuzor, 2016).

Low income households is generally referred as those families whose annual income is not sufficient enough to provide the basic family needs of clothing, shelters,  health care and food. The Nigerian National Housing Policy (FGN, 2014) sees low-income group as all employees and self-employed persons whose annual income is N216,000 and below (i.e. the equivalent of salary grade level of 01-18 within the Nigeria civil service). It should be noted that the minimum wage in Nigeria is pegged at N18,000 monthly making the sum of  N216,000 annually. Unfortunately, over 70% of Nigeria population fall within this category of earnings. In order words over 70% of Nigerians falls below the poverty line of $1.5 per day as recommended by the United Nation.

Arguably, the low income households feels the major impacts of economic recession.  One of the most damaging impacts of recession is unemployment, rise in the price of all commodities and financial insecurity. The high inflation rate, unemployment rate, and slow in economics activities often leads to economic instability in the country leading to general reduction in the well-being of the low income households especially in developing states like Ebonyi state.

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The poor state of Nigeria education especially in the early child education setting was further deteriorated by the current economic recession in the country. The incidence of low education enrollment, high primary school drop-out increased drastically from 5million in 2004 to 9.2 million in 2012 but skyrocketed to 13million in September, 2016 (UNESCO, 2017).

The untold hardship experienced during the period of economic recessions especially the low-income households often lead the policy makers and the government to be constant search of the strategies of resolving the problem of economic recessions as well as strategies towards reducing the impacts of economic recession on the low income households.

Noko (2016a) states that, if the current recession in Nigeria will be solved, it is imperative for the government to invest more in the energy sector, engage the Niger-Delta militants in a dialogue, reduce the tax rate or regulate same to avoid double taxation, borrowing from both domestic and foreign should be invested more on infrastructure, funds should be sourced more from the domestic economy than the foreign investor to avoid the incidence of capital flight, the government should work with the legislative body to ensure speed execution of her project, commodity price and raw material price should be regulated through consumer protection agency, the government should keep price control for other petroleum product like PMS among others.

According to (Nwuzor, 2016) during the period of economic recession there is high job losses as most private sector try to curtail their expenses, and the low income earners are often the major hits. He argued that households who are effected by this scenario should look for alternatives sources of income like engaging in petty trading, engage in factory work pending when they get a better paid job. In reducing the suffering of the low income households he argued that government should provide more job opportunities to the low income earners to reduce pressure on the family.

Noko (2016b) in his work, “addressing the menace of economic recession on the household in Nigeria” suggest some strategies that can be employed to cushion the effect of recession on low income household in Nigeria. He suggest that government should:

  1. Reduce personal income tax especially on low income earners in the civil service and taxes on micro and small enterprises in Nigeria.
  • Increase the minimum wage salary from N18, 000 to at least N25, 000 monthly.
  • Regulate the price of basic goods in the market like Rice, tomatoes, palm oil, garri, among others through consumer protection agency to curtail the rise of inflation in the country.

According to Adegbite (2016) the effect of no source of income to meet basic family needs and obligation may cause frictions among families, which may lead to long lasting damaged family relationships. He argued that this particular incidence can be reduced by the families jointly pooling their resources together to meet their basic needs while cutting down their expenses in the face of the new economic realities.

This was collaborated by Kelvin (2012) when he states that extravagant expenses for entertainments, social activities are curtailed down during the period of economic recessions. He argued that although the poor families are the most hit during the period of economics recessions, he quickly argued that this low income earners should set priority for their expenses so as to align with their new earnings.

Still on Strategies of reducing the effect of recession on low income earners in Nigeria.

Aghirebe (2012) states that one way to fight poverty in Nigeria is to invest more in skills acquisition by the households. He argued that if everyone in the family have at least a skill the burden on the family will be reduced drastically. This led Noko (2016) to states that training the youths on skills acquisition in IT, agriculture, food processing among others can reduce the burden of recession on the families as it increases household competences and the funds available to the families.

In attempt to reduce the impact of recession on low income households in Anambra state the executive governor of the state develop some strategies to cushion the effect. The governor declared tax relief intervention for wheelbarrow pushers, hawkers permit and other low income earners (Vanguard, 2016). He argued that the intervention will be focused on four key areas – tax relief programmes, special intervention programmes for Small and Medium Enterprises (SMEs) and large enterprises and social intervention programme for low income households and finally, intervention in infrastructure-for-jobs.

Given the serious economic impediment that results from economic recessions on the economy in terms of poor economic growth and development, low purchasing power by the households, low standard of living of the poor families due to job losses and high inflation, poverty and whole lot of economic hardship in the family. This research work will focus on the strategies for reducing the impact of economics recessions on the low-income households in Ebonyi state. The choice of the low income household is based on the fact that low income households and the most vulnerable and feels the major effect of economic recession through, loss of jobs, high cost of living, low salary, reduction in their purchasing power and the general well-being. And if these pending issues are not tackled it could leads to serious agitation and destabilization of government policy among others.

Statement of the Problem

All economic indications have shown that economic conditions are going to be a lot tougher in the coming months. The level of economic uncertainties would gain momentum as recession shock spread across the nation. This is an indication that families and individuals need to brace up if they are to cope through this period. Hence the need to adopt the strategies that will be suggested in this research work.

Ebonyi state is a developing state with no industries, few of her population are in the middle class while the larger population fall under the categories of low income earners. If left unchecked, the crumbling effect of the economic recession could adversely affect the developmental strategies of the present administration. This is because many low income earning families in Abakaliki over time will no longer be able to meet their needs and at such resolve to crime and this could in turn scare prospective investors away. The number of secondary school dropouts has been on the increase over the last one year and will increase as many parents are no longer be able to fund their children education. There has also been an increase in the number of teenage pregnancy according to (Pius, 2017) leading to increase in mortality rate, vesico-vaginal fistula (VVF) cases and human papilloma virus (HPV) which leads to cervical cancer (Agwu, 2016)  and other leading pre- malignant lesions. The number of street hawkers has also increased especially around major area in the town such as Presco, Spera n’ Deo amongst others. The most worrisome part of this particular menace of hawking is that children under the age of ten are now included, thus, every member of the family has to contribute their own quota towards running the family. The number of beggars in the state along the popular Ogoja road has increased, with new begging location at Union Bank round about, the number of locations and beggars will tremendously increase as the day goes by if nothing is done. The presence of the beggars all around major part of the town is a great discouragement for prospective investors. This is because it is assumed that beggars are dirty and also have criminal tendencies. These and other consequences not mentioned above are some of the impact of the economic recession among the low income earners in Ebonyi state, soon the state will hit record as the worst hit state by the economic recession, which is not good a title for a developing state in need of investors.

Still on Strategies of reducing the effect of recession on low income earners in Nigeria.

This research work will therefore focus on the strategies for reducing the impact of the economic recession among low income earning households. The choice of the low income household is based on the fact that low income earning household are the most vulnerable and feels the effect of the economic recession through loss of jobs, high cost of living, low salary, reduction in their purchasing power and the general well-being. And if these pending issues are not tackled it could leads to serious agitation and destabilization of government policy among others.

Purpose of the Study

The main purpose of this study is to identify strategies for the reduction of the effect of economic recession on low income households in Ebonyi State. Specifically the study tends to:

  1. Identifying the use of home gardening as means of alleviating the effect economic recession on low income households in Ebonyi State.
  2. To ascertain the use of nutritional education as means reducing the effect of economic recession in Ebonyi state.
  3. To determine the role of proper meal planning in curtailing the effect of economic recession in Ebonyi state.
  4. To determine the use of skill acquisition program like fashion & Designing, Cosmetology, Bag/shoe making, Hair dressing, catering services and  bead making in reducing the impact of economic recession among low income households in Ebonyi state.

Significant of the Study

Still on Strategies of reducing the effect of recession on low income earners in Nigeria.

The importance of the finding of this study cannot be overemphasized. This study will be important as it will explore the strategies for reducing and cushioning the effect of economic recession on the household in Ebonyi state and Nigeria as whole. It will benefit:

  1. Government and policy makers: Government and all policy makers would find this study useful especially in area of policy formulation in developing social welfare policies to address the high poverty level in Ebonyi state especially among rural dwellers.
  2. Low income households: It will explore the best strategies to cope with the impact of economic recession like home gardening, proper meal planning, skills acquisition, taking up low paid jobs among others.
  3. NGO’s: The non-governmental bodies will find the piece relevant in responding to humanities as they will know the area to focus their attention during the period of economic downturn.
  4. Students and teachers of home economics: This study will be useful to all students and teachers of home economics and others who wish to carry on a study on the same subject matters to have a background knowledge of the situation. In fact the study will be useful to the general public in solving the problem of economic recession and also coping with economic recession in the country.

Scope of the Study

This research work on strategies for reducing the effect of recession on low income households in Ebonyi state will focus on providing practical strategies to reduce the effect of economic recession those families that fall within the purview of low income index. The research will also be limited to the resident of Ebonyi state urban and rural dwellers.

Research Questions

Four research questions are formulated to guide the study:

  1. How can home gardening be used as means of alleviating the effect economic recession on low income households in Ebonyi State?
  2. How can nutritional education be used as means reducing the effect of economic recession in Ebonyi state?
  3. What is role of proper meal planning in curtailing the effect of economic recession in Ebonyi state?
  4. What is the role of skill acquisition program like fashion & Designing, Cosmetology,  Bag/shoe making, Hair dressing, catering services and  bead making in reducing the impact of economic recession among low income households in Ebonyi state.

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