The collapse in oil prices resulting from COVID-19 pandemic is expected to plunge the Nigerian economy into a severe economic recession, the worst since the 1980s, the World Bank has said.
The bank stated this in its latest Nigeria Development Update report released on Thursday.
The report, titled ‘Nigeria in times of COVID-19: Laying foundations for a strong recovery,’ estimated that Nigeria’s economy would likely contract by 3.2 per cent in 2020.
It said, “This projection assumes that the spread of COVID-19 in Nigeria is contained by the third quarter of 2020.
“If the spread of the virus becomes more severe, the economy could contract further.”
It stated that before COVID-19, the Nigerian economy was expected to grow by 2.1 per cent in 2020, which meant that the pandemic had led to a reduction in growth by more than five percentage points.
The macroeconomic impact of the COVID-19 pandemic would likely be significant, even if Nigeria managed to contain the spread of the virus, it added.
It stated that oil represented more than 80 per cent of Nigeria’s exports, 30 per cent of its banking-sector credit, and 50 per cent of the overall government revenue.
With the drop in oil prices, government revenues were expected to fall from an already low eight per cent of Gross Domestic Product in 2019 to a projected five per cent in 2020.
The bank stated, “This comes at a time when fiscal resources are urgently needed to contain the COVID-19 outbreak and stimulate the economy.”
It noted that the pandemic had also led to a fall in private investment due to greater uncertainty, and was expected to reduce remittances to Nigerian households.
The remittances in recent years had been larger than the combined amount of foreign direct investment and overseas development assistance.
World Bank Country Director for Nigeria, Shubham Chaudhuri, stated, “While the long-term economic impact of the global pandemic is uncertain, the effectiveness of the government’s response is important to determine the speed, quality, and sustainability of Nigeria’s economic recovery.
“Besides 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 report showed that the human cost of COVID-19 could be high.
Beyond the loss of life, it added, the COVID-19 shock alone was projected to push about five million more Nigerians into poverty in 2020.