By Providence Obuh

The year 2016 would be remembered for the economic challenges that hit every sector of the economy, especially as it started from increase in petroleum products prices to shortage and naira depreciation precipitated by crude oil price crash and drop in oil production from the activities of militants in the Niger Delta.

President Muhammadu Buhari and Vice President Yemi Osinbajo at the opening of a 2-day National Economic Council Retreat at the Statehouse Conference Centre on 21st March 2016.

To this end, Lagos State Chapter of the National Association of Microfinance Bank (NAMBLAG) described the economic recession as “Stagflation” saying it is more than recession.

Chairman, NAMBLAG, Mr. Omololu Fatunbi, who spoke with Financial Vanguard on telephone said: “What we have is more than recession, what we have is stagflation, which is something higher than recession, with a consistent decline in GDP for three quarters, it is now more than recession. Whatever affects the general populace affects the banking industry.

“What we have is the impact, there is every tendency that the non performing loan will increase because people will be willing to pay but the ability is not there because of lack of money. What you see is more of people tending to collect loan at the expense of mobilising, those are the effect on the industry.”

Fatunbi, who said that government policy is also having an effect on the industry, lamented that unemployment, is on the increase, as a result of companies’ effort to reduce cost in order to remain afloat in the industry. So the consequence is the downsizing of staff.

“Of course, that is what we are seeing, in the industry, what you see is that government policy is also having an effect because when inflation rate is going higher, that means what ordinarily you would have given N50, 000 to do the business, N100,000 would not be enough and much money would be chasing fewer goods and that is recess on the microfinance industry. Everything is at the lower ebb in the industry,” he said.

Continued, he said recession drives activities in the micro area due to the volume of loan. “we cannot speak in isolation, Lagos State is one of the 36 states under my purview, but what I would say is that in a normal setting in the micro space, usually when there is recession, activity is meant to boom in the micro area because we are giving out small loans for people to jump start business but when the situation is more than recession that is when you have recession.

“If you compare the Deposit Money Banks (commercial banks) and the microfinance banks, in terms of those who are doing activities in loan, in terms of percentage and in terms of volume, the microfinance bank is doing more than the commercial banks.

Speaking as well on the impact of recession in the industry, President NAMB, Mr. Valentine Whensu, said that the Impact of recession has a ripple effect. If there is recession and people do not have work, there will not be economic activity, if there is recession where the country is dependent on one product and there is a problem with that product, it will affect all sectors because it is a value chain.

Whensu said recession affects everything in the economy, “if it affects purchasing power, it will affect repayment capacity. If banks give out money and people cannot afford to pay back because of recession it will have effect on the institution.  It can affect any sub-system in a system and every ecosystem has a place that they all hinge unto.”

Commenting as well, Head of Credit, Umuchinemere Pro-credit Micro Finance Bank (UPMFB), Mr. Charles Udeani, said that economic recession affected the bank’s credit activities between January and September. He said that the bank exercised more caution while lending in the present circumstance.

Micro entrepreneurs

Micro entrepreneurs in the country are not left out, they said hike in petrochemical products have impacted negatively on production outputs.

President, Association of Micro Entrepreneurs of Nigeria (AMEN) Prince Saviour Iche, said SMEs are challenged to make tough decisions on how to cut costs without damaging product and service standards. Companies are struggling to save costs following high cost of raw material sourcing and increasing manufacturing assets. Small business owners are spending heavily on alternative sources of energy which is not helping to bring down costs.

“Recession is a big blow to the manufacturing sector whether micro or large coupled with inability to access forex, it has been tough running any business in Nigeria especially import dependent manufacturing businesses”

A micro business operator, Mrs. Bola Akinyemi, added: things have been tough for us this year, we buy products for sale at a very high cost and to sell becomes problem. We even find it difficult to pay back loans we collected due to this recession. We believe that next year will be better, she said.