Despite the challenges faced by the Nigerian economy, and massive decline in economic revenue in the year 2020, high hope has been expressed for the year 2021 as future activities and events that can improve the nation’s economy are anticipated. Government, experts, and financial analysts have begun to deliberate on the sectors that could boost the economy. Plans and agreements to ensure the nation recovers from the huge decline of 2020 have commenced.
Mrs. Zainab Ahmed, the Minister of Finance, Budget and Management had earlier projected that Nigeria may exit recession during the first quarter of 2021. The Nigerian Government has also begun the execution of key regulatory reforms enshrined in the provisions of the 2020 Finance Bill. The bill proposes the amendment of 13 different laws with over seventy sections.
COVID-19 VACCINE: The success of the COVID-19 vaccine has been viewed as a huge breakthrough that will help stabilize the economy and counter the negative impact of the second wave of the virus. The Federal Government stated that 20 million doses of the vaccine will be procured. However, analysts have disclosed that the vaccine may take a longer period before it gets to the country. Mayowa Ige, Research Analyst stated that ‘the vaccine is a very welcome news as it spans hope for global economic recovery but then it is important to note that this vaccine will still not be readily available to a large percentage of the global population in the next one year’. She also added that ‘there’s most likely to be funding gaps and distribution challenges in emerging markets like Nigeria and Brazil where a sizable amount of commodities are produced.’
Olusegun Zacchaeus, Associate Director, Strategy and Economics, stated that the modest recovery anticipated in 2021 is threatened by the second wave of the covid-19 pandemic. He believes there would be more pressure from the global economy. Some economic experts have said that another wave of COVID-19 driven lockdown is a potential threat. According to Olatunde Dodondawa, Nigeria will need to give huge discounts to sell off its cargo following the low oil demand. That is if the lockdown persists in Europe till next year. This has revealed the need to tackle the COVID-19 pandemic to make room for stable economic activities.
KPMG has said that 47% of investors believe emerging market economic activities will be slow for the next 12 months. Another 37% believe there will be a boost and borrowing costs are on a high scale coupled with the persisting financial constraints.
‘WTO expects a significant downturn in global trade in 2020 between 13% and 32%, and some recovery in 2021 at 8%. Risks to the outlook include a second wave of COVID-19 with the results being very sensitive to the length of time that the Covid-19 threat remains in place or trade restrictions,’ KPMG revealed.
NEW US PRESIDENCY: The emergence of a democratic government in the United States will impact various economies including Nigeria. Biden has expressed the need to adjust U.S policy in response to Africa’s projected population growth. Some of his plans include strengthening trade relationships and boosting Foreign Commercial Service posts to increase more jobs and economic growth, creating an urbanization initiative to develop African cities through improved access to energy, climate change adaptation, transportation, and water management, among others.
Zacchaeus disclosed that ‘the emergence of a new democrat president will have implications on the global economy. The bigger fiscal stimulus package totaling US$2.5 trillion from 2021 to 2024 is expected to drive recovery’.
AFCFTA: A total of 54 countries of the 55 African Union (AU) has agreed to a multilateral agreement that would commence in January 2021. This is to help improve among African countries. This would be made possible by unlocking a market of 1.2 billion Africans with a combined GDP of $3 trillion through the AFCFTA (African Continental Free Trade Agreement). The AFCFTA is predicted to produce the largest market in Africa and boost intra-African trade bloc in the global economy since the establishment of WTO. The United Nations Economic Commission for Africa has estimated that cumulative GDP may rise to $29trillion by 2050.
BORDER REOPENING: With the re-opening of the borders and the commencement of the AFCFTA, Nigeria possesses the potentials to profit from the trade agreement especially in the agriculture and service exports. This can only be made possible through preparations to compete with other African countries.
Ijeoma Uju, Partner, Corporate & Commercial at Templars responded to the AFCTA initiative. She stated that ‘if you look at the ECOWAS treaty, Nigeria in terms of total trading volume does 76%. So, if you juxtapose that against an agreement with 56 countries, I think we will do quite well, as we are really doing so well within the ECOWAS territory where there are just 15 countries. So, I believe all these sectors will do well.’
However, KMPG Analysts have listed 20 macro trends that will determine the nation’s progress next year. Some of these are Global dynamics, fiscal sustainability, uncertain forex environment, stringent policy posture, constrained productivity, and accelerated credit penetration, among others.