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..