By Obinna Chima
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 predicted.
The Bank made the forecast in its latest Nigeria Development Update (NDU).
The report, “Nigeria in times of COVID-19: laying the foundations for a strong recovery,” released on Thursday, estimated that Nigeria's economy would likely contract by 3.2% in 2020.
This projection assumed that the spread of COVID-19 in Nigeria was contained in the third quarter of 2020.
If the spread of the virus becomes more serious, the economy could contract further.
“Before COVID-19, the Nigerian economy was expected to grow 2.1% in 2020, which means that the pandemic led to a reduction in growth by more than five percentage points.
“The macroeconomic impact of the COVID-19 pandemic is likely to be significant, even if Nigeria manages to contain the spread of the virus.
“Oil represents more than 80% of Nigeria's exports, 30% of its credit in the banking sector and 50% of general government revenue. With the drop in oil prices, government revenues are expected to fall from an already low 8% of GDP in 2019 to a projected 5% in 2020, ”he said.
According to the report, this occurs at a time when fiscal resources are urgently needed to contain the COVID-19 outbreak and stimulate the economy.
He noted that the pandemic also led to a drop in private investment due to greater uncertainty and it was expected to reduce remittances to Nigerian households, which in recent years have been greater than the combined amount of foreign direct investment and development assistance abroad.
“While the long-term economic impact of the global pandemic is uncertain, the effectiveness of the government's response is important in determining the speed, quality and sustainability of Nigeria's economic recovery.
"In addition to immediate efforts to curb the spread of COVID-19 and stimulate the economy, it will be even more urgent to deal with bottlenecks that hamper economic productivity and job creation," said Shubham Chaudhuri, World Bank country director in Nigeria .