The Nigerian economy has plunged into a severe recession. According to the World Bank Nigeria Development Update (NDU), this is the worst since the 1980s. Gross Domestic Product has shrunk for the second consecutive quarter. The nation is experiencing another recession since the last one in 2016.
Authorities have decided to blame it on the covid-19 pandemic coupled with the low oil prices. The National Bureau of Statistics disclosed that the decline is a result of a huge drop in domestic and international economic activity during the nationwide lockdown.
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Kristalina Georgieva, Managing Director of the International Monetary Fund had predicted that Nigeria would experience ‘twin shocks’ from the pandemic and the oil price plunge. The highest decline in the economy is the oil sector at -13.9%. The average output for oil was two million barrels per day. However, the effects of the pandemic and low oil prices have led to shrinkage to 1.4 million barrels. The International Monetary Fund forecasted a 5.4-percent drop in Nigeria’s GDP this year. Nigeria as of May 2020 had applied for more than $7 billion in emergency funds from international lenders including the IMF, World Bank, and the African Development Bank. Unemployment and underemployment in the second quarter of 2020 are at a combined rate of 55.75%.
The country in 13 months has spent N148 billion on three refineries that processed below 40,000 metric tonnes of crude oil. This is despite a combined production capacity of 445,000 barrels per day. The government has compelled to turn to other sources of revenue like tax returns and the non-oil sector.
After observing Nigeria’s economic trajectory closely, Bala Zakka, Public Affairs Analysts disclosed that there is no way the consumption the index will grow because ‘the disposable income has been eroded.’ He added there was no possibility of a positive investment index because ‘the country has been experiencing business climate hostilities’.
However, Joe Femi-Dagunro, Chief Strategist and Economist stated that going into recession is not the issue. According to him, the government needs to do more to help the nation recover from the ‘multi-shocks’ affecting the people’s purchasing power.
Zainab Ahmed, the Minister of Finance, Budget, and National Planning has been disclosing measures being put in place by the Federal Government to restore the economy. She made this known at the 26th Nigerian Economic Summit in November. The minister stated that the government has developed a sustainability plan to minimize the effect of the covid-19 pandemic. These include providing liquidity to prevent business collapse, retaining and creating jobs through support to labor-intensive sectors such as agriculture and direct labor interventions, promoting manufacturing and local production at all levels, and advocating the use of made in Nigeria goods and services, among others. Zainab emphasized the need for self-sufficiency in critical sectors of the economy. She also stated the need to curtail unnecessary demand for foreign exchange. This, she believes, will help minimize pressure on the exchange rate.
Nigeria now more than ever needs good policies. The World Bank on Thursday, December 10 gave a report titled ‘Sustaining and deepening policy reforms is critical to mitigating the COVID-19 crisis in Nigeria’. The report stated that in the next three years, an average Nigerian could witness a turnaround following a decline in decades of economic growth. This could bring about the deepest recession since the 1980s. However, such a path could be avoided if progress in the current reform is sustained coupled with the implementation of the right policies.
Bode Abolade, an investment professional at Africa 50 stated that for the nation to exit recession, there is an urgent need for more incentives. These incentives should focus on key sectors of the economy. ‘There’s a need for incentives (like intervention funding and zero duty on essential raw material imports) to keep primary sectors like agriculture and manufacturing sectors running in Nigeria. Considering that these are the primary employers of labor, this will keep the labor force active, retain production and domestic demand’ he stated.
Thelma Ugonna, Financial Analyst, at a recent money market symposium in Nigeria disclosed that the government presently needs to boost the economy. This could be through relevant investment. She also stated that efforts should be geared towards diversifying the economy.
Her presentation partly reads: ‘In order to fend off recession post -COVID-19 pandemic, the Nigerian Government would need to stimulate the economy by investing strongly in relevant infrastructure development as this would increase employment in both the formal and informal sectors of the economy expectedly translating to increased spending and economic growth’.
Ugonna also emphasized the need for the Nigerian Government to urgently improve power supply and the energy sector. According to her ‘this would certainly lead to the growth of the production of goods and services.’ She added that ‘a stable power supply would reduce the cost of running business significantly, and lead to the development of the manufacturing and industrial sector in Nigeria’.
She added that ‘diversifying the Nigerian economy from its harmful dependence on Crude Oil is one topic that cannot be over-emphasized. Hence critical agencies/ministries such as the Agricultural, Science and Technology, Trade and investment, Education among others need to rise up to the challenge to develop and drive such diversification programs in the coming years’.
Shubham Chaudhuri, the World Bank Country Director for Nigeria stated that ‘Nigeria can choose to break decisively from business-as-usual, and rise to its considerable potential by sustaining the bold reforms that have been taken thus far and going even further and with an even greater sense of urgency to promote faster and more inclusive economic growth.’