Nigeria’s economy is expected to plunge into severe economic recession, the worst the country has experienced in four decades, the latest World Bank Nigeria Development Update (NDU), has posited.
According to the report titled ‘Nigeria In Times of COVID-19: Laying Foundations for a Strong Recovery,’ the collapse in oil prices as well as the COVID-19 pandemic are two attributable factors of the impending crisis.
The report estimates that Nigeria’s economy would likely contract by 3.2 percent in 2020, based on projections that COVID-19 would be contained by the third quarter of 2020.
It stated that Nigerian economy could contract further in a case where the virus isn’t contained and its spread becomes more severe.
The report also highlights that if the country manages to contain the spread of COVID-19, its dependence on oil already spells doom, projecting that the Gross Domestic Product (GDP) of Nigeria could fall to as low as five percent in 2020.
“Even if Nigeria manages to contain the spread of the virus. Oil represents more than 80 percent of Nigeria’s exports, 30 percent of its banking-sector credit, and 50 percent of the overall government revenue,” it said.
“With the drop in oil prices, government revenues are expected to fall from an already low 8 percent of GDP in 2019 to a projected 5 percent in 2020.”
As an human development indicator, the report shows that the human cost of COVID-19 could be high, noting that the COVID-19 shock could push about 5 million more Nigerians into poverty in 2020.
This, it described as an alarm bell for a country which has 40 percent of its estimated 200 million population living below $1 per day, according to the National Bureau of Statistics.
“The COVID-19 shock alone is projected to push about 5 million more Nigerians into poverty in 2020.
“Before the pandemic, the number of poor Nigerians was expected to increase by about 2 million largely due to population growth, the number would now increase by 7 million – with a poverty rate projected to rise from 40.1% in 2019 to 42.5% in 2020,” the report states.
In proffering a solution, the report shares policy options in five critical areas that can help Nigeria recover from the COVID-19 crisis, including, 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.
Meanwhile, the World Bank has approved a $750 million loan credit for Nigeria’s Power Sector Recovery Operation in a bid to improve electricity supply in the country.