Diagnosis and Prognosis of the Nigerian Recession

Abstract

This study explored economic recession in Nigeria as a result of negative economic growth and a business cycle contraction which results in a general slowdown in economic activity. This study analyze the impact of economic recession on the policy variable on key macroeconomic indicators such as Industrial production, trade, capital flows, oil consumption, employment rate, per capita investment and per capita consumption. Data were collected and transformed into a simulation model used for monetary policy experiments with the primary aim of assessing the impact of a medium to long-term decline in the policy instrument on exchange rate variability, inflation rate, employment rate and economic growth. The results showed that recession has led to the decline in the country’s Gross Domestic Products (GDP) as well as posed negative impacts on exchange rate variability, economic growth as well as employment objectives of the Nigerian economy. However, the alternative scenario of Nominal GDP targeting is more amenable to a multiple-objective monetary policy, as it generates higher economic growth, higher exchange rate stability as well as lower inflation rate. The study recommends that Government can respond to recession by adopting expansionary macroeconomic policies such as increasing money supply, increasing government spending and decreasing taxation.