A statement by the World Bank penultimate week in Abuja to the effect that collapse in oil prices coupled with the Covid-19 pandemic is expected to plunge the Nigerian economy into a severe economic recession, the worst since the 1980s, should serve as a clarion call on managers of the nation’s economy, to take appropriate actions and adopt desperate strategies to forestall the imminent catastrophe.
The World Bank said the report entitled, Nigeria in Times of Covid-19: Laying Foundations for a Strong Recovery, which is part of its latest Nigeria Development Update (NDU), estimated that the country’s economy would likely contract by 3.2 per cent in 2020. The World Bank stated that this projection assumed that the spread of Covid-19 in Nigeria would be contained by the third quarter of 2020.
It, however, noted that if the spread of the virus became more severe, the economy could contract further, adding that before Covid-19, the Nigerian economy was expected to grow by 2.1 per cent in 2020, which means that the pandemic had led to a reduction in growth by more than five percentage points.
“The macroeconomic 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 per cent of Nigeria’s exports, 30 per cent of its banking-sector credit, and 50 per cent of the overall government revenue. With the drop in oil prices, government revenues are expected to fall from an already low eight per cent of GDP in 2019 to a projected five per cent in 2020.
“This comes at a time when fiscal resources are urgently needed to contain the Covid-19 outbreak and stimulate the economy. Meanwhile, the pandemic has also led to a fall in private investment due to greater uncertainty, and is expected to reduce remittances to Nigerian households, which in recent years have been larger than the combined amount of foreign direct investment and overseas development assistance,” it explained.
The statement quoted Shubham Chaudhuri, World Bank Country Director for Nigeria, as saying “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.”
The bank noted that the report showed the human cost of Covid-19 could be high, adding that beyond the loss of life, the Covid-19 shock alone was projected to push about five million more Nigerians into poverty in 2020. It stated that 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 per cent in 2019 to 42.5 per cent in 2020.
“School closures have reduced the food intake of almost seven million children who are enrolled in the national school feeding programme. Economic activities have been disrupted and women’s livelihoods have been particularly impacted. Over 40 per cent 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 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,” said Marco Hernandez, World Bank Lead Economist for Nigeria and co-author of the report.
“Looking ahead, the report discusses policy options in five critical areas that can help Nigeria recover from the Covid-19 crisis, containing the outbreak and preparing for a more severe outbreak, enhancing macroeconomic management to boost investor confidence. Others are safeguarding and mobilizing revenues, reprioritising public spending to protect critical development expenditures and stimulate economic activity; and protecting poor and vulnerable communities.
“Besides the assessment of the economic situation, this edition of the Nigeria Development Update discusses the impacts of the 2019 land border closure; the opportunity to promote agribusiness for food security and job creation; and options to leverage emigration, remittances, and the diaspora for development,” the bank stated.
The bank said 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.
Although, the federal government has taken certain proactive measures including the appropriation of N2.3 trillion for Nigeria Economic Sustainability Plan (NESP) as recommended by the Vice President Yemi Osinbajo committee, we advise that the red alert by the World Bank should not be treated with levity.
Government must vigorously pursue the full and religious implementation of all the measures it has outlined to forestall the looming economic doom. A second recession in three years and the worst in four decades is one Nigeria cannot afford. Therefore, nothing, not even the oft intrusive Nigerian factor that had for long militated against laudable government’s policies and programmes, should be spared, to avert it.