A combination of collapse in oil prices and the COVID-19 pandemic is expected to plunge the country’s economy into a severe recession, the worst since the 1980s, according to the latest World Bank Nigeria Development Update.
The World Bank in statement, titled “Nigeria In Times of COVID-19: Laying Foundations for a Strong Recovery,’’ estimated that Nigeria’s economy would likely contract by 3.2% in 2020.
The International Monetary Fund had on Wednesday projected a -5.4 percent growth for Nigeria in 2020 due to the pandemic. The projection in the World Bank report assumed that the spread of COVID-19 in Nigeria would be contained by the third quarter of 2020.
The report said: “If the spread of the virus becomes more severe, the economy could contract further. Before COVID-19, the Nigerian economy was expected to grow by 2.1% in 2020, which means that the pandemic has led to a reduction in growth by more than five percentage points.
“The macro-economic impact of the COVID-19 pandemic will likely be significant, even if Nigeria manages to contain the spread of the virus. Oil represents more than 80% of Nigeria’s exports, 30% of its banking-sector credit, and 50% of the overall government revenue. “With the drop in oil prices, government revenues are expected to fall from an already low 8% of GDP in 2019 to a projected 5% in 2020.
This comes at a time when fiscal resources are urgently needed to contain the COVID-19 outbreak and stimulate the economy.” 7m people to fall into poverty The report showed that the human cost of COVID-19 could be high and that beyond the loss of lives, the COVID-19 shock alone was projected to push about five million more Nigerians into poverty in 2020.
The bank said: “While before the pandemic, the number of poor Nigerians was expected to increase by about two million, largely due to population growth, the number would now increase by seven million, with a poverty rate projected to rise from 40.1% in 2019 to 42.5% in 2020. “The pandemic is likely to disproportionately affect the poorest and most vulnerable, in particular women.
School closures have reduced the food intake of almost seven million children who are enrolled in the national school feeding program. “Economic activities have been disrupted and women’s livelihoods have been particularly impacted. Over 40% of Nigerians employed in non-farm enterprises reported a loss of income in April-May 2020. ‘’In addition, the fall in remittances is likely to affect household consumption because half of Nigerians live in remittance-receiving households, of which about a third are poor.”
The report discussed policy options in five critical areas that could help Nigeria recover from the COVID-19 crisis. ‘’They were: containing the outbreak and preparing for a more severe outbreak; enhancing macroeconomic management to boost investor confidence; safeguarding and mobilizing revenues; reprioritizing public spending to protect critical development expenditures and stimulate economic activity; and protecting poor and vulnerable communities.’’
Commenting on the report, the World Bank Country Director for Nigeria, Shubham Chaudhuri, said: “While the long-term economic impact of the global pandemic is uncertain, the effectiveness of the government’s response is important to determine the speed, quality, and sustainability of Nigeria’s economic recovery.
“Besides immediate efforts to contain the spread of COVID-19 and stimulate the economy, it will be even more urgent to address bottlenecks that hinder the productivity of the economy and job creation.”
Similarly, the World Bank Lead Economist for Nigeria and co-author of the report, Marco Hernandez, said: “The unprecedented crisis requires an equally unprecedented policy response from the entire Nigerian public sector, in collaboration with the private sector, to save lives, protect livelihoods, and lay the foundations for a strong economic recovery.”
The bank noted however, that the government of Nigeria had already taken important health, fiscal and monetary measures to contain the outbreak, moderate the recessionary pressures and start mitigating the effects of the economic shock.