Entrepreneurship has been widely seen as a driver for job creation and which can also boost the economy. Nevertheless, more people are faced with difficulties of being gainfully employed or laying hands on prospective jobs. For companies, if they plan ahead and adopt the right strategies during a recession, they still stand a much better chance of surviving an economic downturn and as such entrepreneurship can be promoted.
No wonder the International Monetary Fund (IMF) made some predictions for the year ahead and warned that there would be recession in Third World Countries as a result of economic downturn in China, Europe and the United States. It did happen!
First of all, recession is defined as a decrease in economic activity over a given period of time. It can happen in any country or region. Usually, a recession is characterised by rising unemployment, decreased spending and decreased economic output.
In Nigeria, economic growth is typically measured by examining our gross domestic product (GDP), which is the value of goods and services produced within the country. During any recession, GDP usually decreases as businesses scale back operations or shut down entirely. It can be extremely damaging to any business…say new small business or startups spend less even when costs rise.
As an economist, an entrepreneur and a business analyst, I strongly advise that some practical actionable measures should be adhered to. Business owners or companies that have suffered so much loss should consult trusted financial advisors for a unique and effective advice on business success.
I will say technically that we are in a recession because two consecutive quarters of GDP declined. The economic situation in Nigeria right now is slowing down and getting weakened. In the first part of 2023, Nigeria’s economic growth actually got weakened, and real gross domestic product (GDP) growth fell from 3.3% in 2022 to 2.4% year-on-year (y-o-y) in Q1 2023.
The challenging global economic context never helped matters either, instead it increased the pressure biting Nigeria’s economy growth.
Unemployment is one deadly bug that is seriously biting Nigeria’s economy and yet Bureau of Statistics brought out a controversial analysis saying that unemployment has dropped . How? When some of our teeming educated youths are still helplessly unemployed .You see, inflation and recessions are all traits to the economy and are intertwined. They are like the ocean which makes economy naturally move in waves. During inflation, prices of goods and services increase. In like manner, recession too affects and slows down the economy and unemployment rate often rises. Inflation and recession are closely related and they take your finances into rough economic waters.
Inflation affects the Federal Reserves and also affects your finance by making you pay more for goods and services. Obviously, there’s less money in your budget to save and buy things you want. As a result, you may spend less and companies may profit less. Its implication is that everybody’s budget for spending will minimize and economic growth will slow down and unemployment will keep rising because companies cannot afford to keep paying their whole workforce wages. This is why I said inflation and recession are related. They both affect economic growth and businesses suffer more.
Recession is a period of continued negative economic growth. It happens because of mismanaged funds. Subsidy removal should put smiles on the masses’ faces if the palliatives are channelled into the rightful places and used appropriately .
Recall that the 2020 pandemic lasted for two (2) months and it short-lived and induced a kind of recession. I also recalled how my mobile food company businesses were affected by the pandemic. It folded up eventually due to poor sales .Then, most customers were scared of eating out, had hygiene issues. They preferred cooking for themselves so as to keep the rules of Covid-19 girdled on social distancing and sharing of personal things with people. All these affected most food companies during Covid-19 pandemic. Automatically, my workers too were laid off initially so as to trim costs before the company folded up eventually.
Stock markets too were not left behind. They went down drastically too in that people no longer bought stocks then and shareholders in turn had no other option but to cash out.
According to Alex Sienaert, World Bank lead economist for Nigeria,’ Nigerian government has made a welcome, bold start to implement the critical macro-fiscal reforms needed to address the persistently high inflation and low fiscal revenues hindering economic growth’. He also stressed that deepening and sustaining these changes was imperative, and would enable Nigeria to break out of the cycle of macroeconomic instability, low investment, sluggish economic growth, escalating poverty, and fragility.
Having created momentum, the government has the opportunity to undertake further comprehensive reforms encompassing a range of complementary measures, such as lifting the foreign exchange import restrictions which continue to distort the Foreign exchange market.
The above World Bank growth prospects reviewed upward via the implementation of fuel subsidy removal and foreign market unification. This will work as against the earlier prediction of 2.8 percent for Nigeria in April 2023. The Bank, in its Nigeria Development Update for June 2023, says that the country’s GDP is now expected to achieve 3.3 percent in 2023, 3.7 percent in 2024 and 4.1 percent in 2025.
Despite all these, measures can be taken for businesses to survive recession and inflation. Firstly, it is very important for businesses or companies to let their employees know that they are valued and properly cared for. .
As business owners, you should begin or start with your sales team to your financial team, work to inspire all the members of the team to work together and be the best at their jobs so the company can not only survive, but find ways to thrive. Do not forget that fear of the unknown kills productivity drastically. Engage in actionable things to show you care, such as providing new, affordable benefits and resources that help alleviate fears and showing how much their services or work is valued .
Again, I am simply saying that businesses should focus more on execution. The leadership team needs to drive operational efficiency throughout the company, New sales need to be closed promptly with a focus on retaining existing customers and supporting their needs. Eliminate unnecessary or redundant expenses. Implement new customer contracts on a timely basis to drive cash receipts, which will enhance the company’s overall working capital position
Recall again that recession is informally defined as two successive quarters of negative GDP growth. The last two quarters fit that bill, with GDP contractions of 1.6% in Q1 and 0.9% in Q2.
In simple terms, it’s a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.
With what happened a few months ago, from a new political dispensation, new policies, nothing is stable from foreign exchange market and other instabilities going on economically, Nigeria is in the depths of a recession. Believe it or leave it.
If there is no recession, then why are most employees being laid off and their benefits also reduced?
More businesses, be it large or small, may likely experience layoffs so as to cut costs, especially if they need fewer workers to meet the reduced demand for their products and services. Productivity per employee may increase, but morale may suffer as workloads increase while pay gains slow or stop amid the risk of further layoffs.
Recessions cause declines in sales that bring huge profits and it brings about layoffs of employees; depresses demand. Credit access tends to tighten amid rising economic uncertainty, while loan delinquencies and defaults increase alongside bankruptcies.
The bitter truth remains that even big businesses are not left out when recession hits a nation. They suffer the hit too.
Yes. A recession can hurt companies whether big or small. Even though the larger ones have more of a financial cushion and more cost-cutting options that can help them welder the downturn. The small businesses thus fold up. It’s also so disheartening that lenders are less trusted when it comes to lending to a business because they do not have significant cash reserves and capital assets that can serve as collateral. Recession triggers a lot of uncertainty and heightens fear of the unknown and it comes with business risk.
On the other hand, public liability companies or business do not suffer recession like small business or startups.
Small business cannot even raise funds by selling stocks let alone issuing bonds in secondary offering. In Nigeria, most small businesses suffer a lot. They cannot seek financial help from government unlike their public listed companies who do and still in competition with the small business.
In order to survive recession and to avoid bankruptcy, my advice to companies or businesses is to concentrate or focus more on their customers because customer-base is the key. During difficult economic times like recession , the businesses that succeed more are those that comprehend and satisfy their customers’ needs .This is not just about lowering prices; it’s also about the business improving in customer service relationship and management. Provision of customers with more value for their money is also a soothing balm. The good nurture sometimes pay off in that the customers at this juncture are willing to pay back for good services rendered to them.
In conclusion, recession forces businesses both big and small to adjust to an abrupt downturn in demand while pruning costs geared for growth. Small businesses have a smaller margin of error than larger ones when a recession strikes. The most capable survivors may increase market share as competitors fail, positioning them for success and ensuring that gross domestic product (GDP) grows, incomes rise, and the unemployment rate falls as the economy rebounds. This is called economic recovery, where the economy undergoes a process of adaptation and adjustment to new conditions, including the factors that triggered the recession in the first place, the new policies and rules.
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