The World Bank says the Nigerian economy is expected to enter its deepest recession since the 1980s.
The National Bureau of Statistics (NBS), in a report released on November 21, 2020, had disclosed that Nigeria’s gross domestic product (GDP) recorded a growth rate of –3.62% (year-on-year) in real terms in the third quarter of 2020.
Following a negative economic growth for the second consecutive quarter, the economy slipped into recession.
However, Minister of Finance, Zainab Ahmed, and Governor of the Central Bank of Nigeria (CBN) have expressed optimism that the economy will record a positive growth early 2021.
In the World Bank Nigeria Development Update (NDU) released on Thursday, the financial institution projected that, in the next three years, an average Nigerian could see a reversal of decades of economic growth.
The bank, however, argued that this path could be avoided if progress in the current reforms is sustained and the right mix of policy measures is implemented.
“Nigeria is at a critical historical juncture, with a choice to make” said Shubham Chaudhuri, World Bank Country Director for Nigeria.
“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.”
The latest World Bank NDU projected that the economy could shrink up to 4 percent in 2020 following the twin shocks of COVID-19 and low oil prices.
“The pace of recovery in 2021 and beyond remains highly uncertain and subject to the pace of reforms,” it said.
The bank also warned, in the absence of measures to mitigate the impact of the crisis, that the number of poor Nigerians could increase by 15 to 20 million by 2022.
“Food insecurity has increased substantially and economic precarity is on the rise because unemployed workers have migrated to the low-productivity agricultural sector.
“The NDU acknowledges measures taken by the government since April, including the efforts to harmonize exchange rates, introduce a market-based pricing mechanism for gasoline, adjust electricity tariffs to more cost-reflective levels, and reduce non-essential expenditures and redirect resources towards the COVID-19 response. It also highlights the greater transparency in the oil and gas sector and public debt as essential steps for a resilient recovery,” the institution said.
“Nigeria can build on its reform momentum to contain the spread of COVID-19, stimulate the economy, and enable the private sector to be the engine of growth and job creation,” said Marco Hernandez, World Bank Lead Economist for Nigeria and co-author of the report.
“It can also redirect public spending from subsidies that benefit the rich towards investments in Nigeria’s people and youth in particular, and lay foundations for a strong recovery to help make progress towards lifting 100 million people out of poverty.”
The NDU discussed policy options in five areas that would help mitigate the effects of the crisis and support Nigeria’s recovery: (1) managing the domestic spread of COVID-19 until a vaccine is available for distribution; (2) enhancing macroeconomic management to boost investor confidence; (3) safeguarding and mobilizing revenues; (4) reprioritizing public spending to protect critical development expenditures; and (5) supporting economic activity and access to basic services and providing relief for poor and vulnerable communities