The collapse in crude oil prices, coupled with the COVID-19 pandemic, is expected to “plunge the Nigerian economy into a severe recession, the worst sincere the 1980s”, the World Bank said on Thursday.
The World Bank, in a new 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 this year.
“This projection assumes that the spread of COVID-19 in Nigeria is contained by the third quarter of 2020,” it said.
The bank said if the spread of the virus became more severe, the economy could contract further.
It said, “Before COVID-19, the Nigerian economy was expected to grow by 2.1 per cent in 2020, which means that the pandemic has led to a reduction in growth by more than five percentage points.
“The macroeconomic impact of the COVID-19 pandemic will likely be significant, even if Nigeria manages to contain the spread of the virus. Oil represents 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.”
According to the report, with the drop in oil prices, government revenues are expected to fall from an already low eight per cent of GDP in 2019 to a projected five per cent in 2020.
The Country Director for Nigeria, World Bank, Shubham Chaudhuri, said, “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.”