The World Bank has stated that the collapse in oil prices
and the COVID-19 pandemic could plunge the Nigerian economy into the worst
economic recession since the 1980s.
The institution raised the alarm in a statement in Abuja on
Thursday as part of its latest Nigeria Development Update (NDU).
The World Bank said before the pandemic, the number of poor
Nigerians were expected to increase by about two million largely due to
population growth.
“The number would now increase by seven million – with a
poverty rate projected to rise from 40.1 percent in 2019 to 42.5 percent in
2020.”
The organisation’s projection assumed that the spread of
COVID-19 in Nigeria would be contained by the third quarter of 2020.
But if the spread of the virus became more severe, the
economy could suffer further.
The World Bank said before the pandemic, the Nigerian
economy was expected to grow by 2.1 per cent in 2020. Now, the crisis has
caused a reduction in growth by more than 5%.
It noted that the macroeconomic impact of the COVID-19
pandemic will likely be significant, even if Nigeria manages to contain the
spread of the virus.
Noting that oil represents more than 80% of Nigeria’s
exports, 30% of banking-sector credit, and 50% of the overall government
revenue.
The World Bank predicted that the drop in oil prices may
cause fall from an already low 8% of the GDP in 2019 to a projected 5% in 2020.
“This comes at a time when fiscal resources are urgently
needed to contain the COVID-19 outbreak and stimulate the economy.”
The statement said the pandemic has also led to a fall in
private investment due to greater uncertainty.
This 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 statement quoted Shubham Chaudhuri, World Bank Country
Director for Nigeria, as saying while the long-term economic impact of the
pandemic is uncertain, the effectiveness of the government’s response is
important to determine the speed, quality, and sustainability of Nigeria’s
recovery.
“Besides the 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”.
The bank noted that the report showed that the human cost of
COVID-19 could be high, adding that beyond the loss of life, the COVID-19 shock
alone was projected to push about five million more Nigerians into poverty in
2020.
It added that school closures have reduced the food intake
of almost seven million children who are enrolled in the national school
feeding programme.
The statement noted that over 40% of Nigerians employed in
non-farm enterprises reported a loss of income in April-May 2020.
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, World Bank stated.
“The unprecedented crisis requires an equally unprecedented
policy response from the entire Nigerian public sector, in collaboration with
the private sector, to save lives, protect livelihoods, and lay the foundations
for a strong economic recovery,” said Marco Hernandez, World Bank Lead
Economist for Nigeria.
The report listed policy options in five critical areas that
can help Nigeria recover from the COVID-19 crisis, contain the outbreak,
prepare for a more severe outbreak and enhance macroeconomic management to
boost investor confidence.
Others are safeguarding and mobilizing revenues,
reprioritizing public spending to protect critical development expenditures and
stimulate economic activity; and protecting poor and vulnerable communities..
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