Many economies across the globe are desperately struggling to wriggle out of the slump they have fallen in 2020 consequent upon the COVID-19 pandemic. Indeed many economies are lying prostrate as a direct impact of the Coronavirus pandemic.
In Nigeria, following months of lockdown, the country’s economy encountered many challenges that created dislocations to virtually all sectors of the economy in 2020 which are now impeding the speed of achieving accelerated development and meeting set targets of the year.
The collapse in global crude oil prices as a result of the pandemic, with its related complications and disruptions, plunged the Nigerian economy into the worst downturn since the 1980s.
The recent World Bank report on the impact of the pandemic indicates that Nigeria’s economy contracted by 3.2 per cent in 2020 after the spread of the virus to the country. The economy contracted further with Gross Domestic Products (GDP) contraction by about 4 per cent. This will lead to anticipated modest growth of 1.1 per cent in 2021.
The crude oil sales represent more than 80 per cent of Nigeria’s exports, 30 per cent for the banking sector and 50 per cent represents the overall government revenue accruals in a year. Despite all these projections, the drop in oil prices in the second quarter led to an all-time fall in government revenues from eight per cent GDP ratio in 2019 to a projected five per cent in 2020. This came at a time when fiscal resources were needed to contain the spread of COVID-19 and stimulate economic growth.
The pandemic also led to a fall in private sector investments due to uncertainties that affected remittances to Nigerian households from the Diaspora and low flow of Foreign Direct Investments (FDIs).
The remittances from Nigerians in the Diaspora which recently increased above IDIs’ flow also affected overseas development assistance by donor agencies to Nigeria.
The report shows that the human cost of COVID-19 had gone beyond the loss of lives because the COVID-19 shock alone pushed more Nigerians into poverty in 2020.
Economic activities have been disrupted and women’s livelihoods significantly impacted. Over 40% of Nigerians employed in non-farm enterprises reported a loss of income between April-May 2020.
The National Bureau of Statistics’ third-quarter report of 2020 shows a drop of 3.62 per cent in real GDP for Nigeria which confirmed that the Nigerian economy fell into a second recession in five years.
The non-oil sector contributed a huge chunk of the GDP with 91.27 per cent, higher than its share of 90.23 per cent in the third quarter of 2019 and 91.07 per cent in the second quarter of 2020, while the oil sector contributed 8.73 per cent, a decrease from its contribution of 9.97 per cent in the third quarter of 2019 and 8.93 per cent in the second quarter of 2020.
The government introduced various interventions through the Central Bank of Nigeria (CBN) to tackle the impact of the Coronavirus, with support fund of 50 billion Naira as survival fund targeted at households and Micro, Small and Medium Enterprises (MSMEs) as obtained in many countries of the world.
Other measures included cut in interest rates, a long moratorium on principal repayments of most loans and sustained awareness on the initiatives to ensure that those who the programmes are targeted at were reached and the impact felt by everyone in Nigeria.
While announcing that the economy had slipped into recession in November, the government outlined strategies to stabilize the economy and assured Nigerians and the international community that Nigeria will be out of recession by the first quarter of 2021.
The Governor of the CBN, Mr Godwin Emefiele also raised hopes of Nigerians recently when he disclosed that Nigeria will emerge from the recession by March 2021 with projected GDP growth of two per cent by the first quarter as against the 1.1 per cent growth projection by the Nigeria Development update report for next year.
While the government and some experts see the CBN Governor’s prediction of overcoming the slump in the first quarter of 2021 as realistic, a lot needs to be done to achieve such an ambitious projection.
Nigeria must sustain and deepen policy reforms to mitigate the COVID-19 challenges in the country. These reform areas should include managing the spread of COVID-19 and utilization of the 20 per cent of the nation’s total requirement of vaccines donated by the World Health Organization (WHO) and the budgeting of fund for the purchase of more vaccines to meet the expected dosages for Nigeria.
Nigeria should also enhance macroeconomic management to boost investors’ confidence, safeguard and increase mobilization of revenue, prioritize spending and support economic activities aimed at providing relief to the poor and vulnerable communities most affected by the COVID-19 pandemic in the country.
Nigeria can win the war against the COVID-19 unseen enemy and exit recession in record time, as well as plan for the desired development with the implementation of realistic reform measures in the post-pandemic era and beyond.
