NIGERIA – The raging COVID-19 pandemic coupled with a sharp fall in oil prices has adversely affected Nigeria’s Economy that the Federal Government has issued a warning that Africa’s largest economy could be heading for another recession in the fourth quarter of this year.
According to the Nigerian government, its findings showed that the country’s Gross Domestic Product for the second and third quarters of 2020 were projected to be negative and this implied that the country would slide into a second recession in four years.
The Minister of Finance, Budget and National Planning, Zainab Ahmed, said the country’s real GDP had been projected by the National Bureau of Statistics to contract by 4.2 per cent in 2020, as against the previous projected growth of 2.9 per cent.
Zainab Ahmed also revealed that the Federal Government’s earnings dropped by about 65 per cent following the cuts in oil production.
Zainab spoke during a virtual consultative public forum in Abuja where she presented the Draft 2021-2023 Medium Term Expenditure Framework/Fiscal Strategy Paper.
She noted that Nigeria’s economy faced serious challenges in the first half of the year as the macroeconomic environment was significantly disrupted by COVID-19.
According to her, crude price dropped from $72 per barrel in January to below $20 in April 2020, making the $57 crude oil benchmark of the 2020 budget to be no longer tenable.
“The massive output cut by OPEC and its allies to stabilise global oil market, with Nigeria contributing about 300,000 barrels per day of production cuts, resulted in about 65 per cent decline in projected net 2020 government revenues,” Zainab added.
She said the revenue reduction was from the oil and gas sector and had adverse consequences on foreign exchange inflows into the economy.
“Unless we achieve a very strong Q3 2020 economic performance, the Nigerian economy is likely to lapse into a second recession in four years, with significant adverse consequences,” Ahmed said.
Nigeria’s report follows a similar report by the The African Development Bank which noted that the effects of the COVID-19 pandemic may push the West Africa’s economies to contract by as much as 4.3% in 2020.
AfDB while releasing its report noted that countries that depend on oil and tourism for foreign exchange and fiscal revenues will especially face reduced fiscal space and heightened external account imbalances, stoking a build-up of public debt.
This projection were affirmed by Nigeria’s Minister for Finance and Planning who said Nigeria’s monetary fortunes would suffer a deficit of N5.16tn because of the government’s projected ability to generate only N6.98tn revenue all in 2021.
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