Nigeria’s economy faces worst recession in 40 years, says World Bank

The 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, the World Bank has said.

The World Bank estimated that the country’s economy would likely contract by 3.2 percent this year.

“This projection assumes that the spread of COVID-19 in Nigeria is contained by the third quarter of 2020,” it said in a new report, titled ‘Nigeria in times of COVID-19: Laying foundations for a strong recovery’.

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

It said, “Before COVID-19, the Nigerian economy was expected to grow by 2.1 percent 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 percent of Nigeria’s exports, 30 percent of its banking-sector credit, and 50 percent of the overall government revenue.”

According to the report, 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 percent in 2020.

It said, “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.”

The Country Director, World Bank, Shubham Chaudhuri, said while the long-term economic impact of the global pandemic was uncertain, the effectiveness of the government’s response was 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,” said Chaudhuri added.

The report showed that the human cost of COVID-19 could be high, saying, “Beyond the loss of life, the COVID-19 shock alone is projected to push about 5 million more Nigerians into poverty in 2020.

“While 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 percent in 2019 to 42.5 percent in 2020.”

According to the report, the pandemic is likely to disproportionately affect the poorest and most vulnerable, in particular women.

It noted that school closures had reduced the food intake of almost 7 million children who were enrolled in the national school feeding programme.

The World Bank said, “Economic activities have been disrupted and women’s livelihoods have been particularly impacted. Over 40 percent 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.”