Nigeria Faces Worst Recession In 40 Years – World Bank

The World Bank Group on Thursday said that the Nigerian economy would record it’s worst recession in 40 years.

The global financial institution said this in a new report, titled ‘Nigeria in times of COVID-19: Laying foundations for a strong recovery.’

Specifically, the World Bank estimated that Nigeria’s economy would likely contract by 3.2 per cent this year.

The World Bank prediction is however, lower than the 5.4 per cent contraction which the International Monetary Fund had estimated for the country in its global outlook released on Wednesday.

In its report, the World Bank said the collapse in crude oil prices, coupled with the COVID-19 pandemic, is expected to plunge the “Nigerian economy into a severe recession, the worst since the 1980s”

The report added, “This projection assumes that the spread of COVID-19 in Nigeria is contained by the third quarter of 2020.

“Before COVID-19, the Nigerian economy was expected to grow by 2.1 per cent in 2020, which means that the pandemic has 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.”

The World Bank said if the spread of the virus became more severe, the economy could contract further.

It said with the drop in crude oil prices, government revenues are expected to fall from eight per cent of Gross Domestic Product in 2019 to a projected five per cent in 2020.

The Country Director for Nigeria, World Bank, Shubham Chaudhuri, said that 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.

He said it had become even more urgent to address bottlenecks that hinder the productivity of the economy and job creation as the country battles the impact of the Coronavirus pandemic.

Speaking on the projection, the President, Association of Capital Market Academics of Nigeria, Prof Uche Uwaleke said the report is only a forecast based on some assumptions which may or may not crystallize.

He said, ” All things considered, I do not think the Nigerian economy will contract by as much as -5.4 per cent this year as this revised forecast indicates given that Q1 of 2020 was able to eke out a positive growth of 1.87 per centnn.

“Also, the government and the CBN have pumped and are still pumping money into the economy to contain the negative impact of Covid-19 on the economy.

“By the same token, much of the external loans already secured for either Balance of Payment support or for infrastructure have moratorium periods effectively postponing repayment obligations.

“Moreover, oil price is beginning to climb following OPECs compliance to production cut agreement with OPEC+ coupled with the fact that the economy is gradually being restarted.”

The university don said he expect the tempo of economic activities to pick up as soon as flight operations resume and the ban on inter-state travel is lifted.

All these factors, he noted, would combine to ensure that any economic recession recorded will not be as severe as being projected.

ENDS