When a single product economy like Nigeria enforces a 24-hour curfew in many income-generating states over a number of weeks, amid a crash in the price of the commodity, it is only natural that the economy would be threatened with a long-term recession and the collapse of many businesses.
As oil prices crashed below zero for the first time in history, Nigerian phones pinged with text messages and tweets questioning what the implications would likely be for both employments and businesses.
The slump in the oil markets around the world is turning back the economic clock for Nigeria and bringing it on track for the deepest contraction in many years.
Channels Television reports that Nigeria’s Finance Minister, Zainab Ahmed, says the coronavirus pandemic and falling oil prices are set to push the Nigerian economy into a negative growth.
Ms. Ahmed made the comments after the National Economic Summit in Abuja on Thursday. She said COVID-19 pandemic coincides with the crash of global oil prices and the impact is already being felt in the federation’s revenues and on Nigeria’s foreign exchange earnings.
She said net oil and gas revenue to the federation account in the first quarter of 2020 was N940.91 billion. This represents a shortfall of N125.52 billion or 31% of the prorated amount that should have been realized at the close of the first quarter.
She added that the economic crunch would increase the poverty of the masses and that the economic growth in Nigeria could contract by as much as –8.94% in 2020, in the worst case scenario.
But with the fiscal stimulus plan adopted, this predicted contraction could be controlled and we might end up with a negative of about –0.59%.
In a related development, Premium Times reports Ms. Zainab as saying that an assessment by the Nigeria Bureau of Statistics indicates Nigeria’s economy would go into a recession at an average of -4.4 per cent.
But with the Economic Accessibility Committee offering stimulus packages, it is believed we could minimize the impact of the recession.
Ms. Zainab said if Nigeria applied all the propositions, she may end up with a recession that is about -0.4 per cent. But matter what is done, Nigeria will experience recession. So, the ongoing campaign is to minimize its effects and devise ways to quickly come out of recession in 2021.
Also, the New Telegraph reports that the Finance Minister further explained that a country experiences recession when its Gross Domestic Product (GDP) decreases for two consecutive quarters.
Although the GDP details for the first quarter is not yet public, Ms. Ahmed’s explanation suggests the figures for the first quarter of 2020 fell below and further decreased in the second quarter.
A large portion of Nigeria’s current budget is funded by oil revenue and this makes up more than 90 percent of its export.
Also, Nigeria’s lockdown of a large part of her economy as a containment strategy to prevent the spread of the coronavirus means that all her airports are only available for only essential flights, while other businesses are allowed skeletal operation.
According to the Guardian, Mrs Ahmed also explained that businesses are gradually re-opening despite a daily spike in coronavirus cases because the challenges Nigeria has have doubled.
There is health and there is the economic challenge. Even as Nigeria is addressing the coronavirus pandemic, efforts still have to be made to support the economy and prevent a depression.
Nigeria has to feed her people and this is only possible if people go out to farm.
New York Times reported that Finance Minister Zainab Ahmed said the Nigerian economy could shrink as much as 8.9% in 2020 in a worst-case scenario without stimulus.
The coronavirus epidemic which has led to the death of 200 people in Nigeria and the global oil price crash have not only hindered economic growth but also messed up the major source of revenue and weakening the naira.
Ahmed reminded the council in a virtual meeting on Thursday that 40% of Nigerians live in poverty and that the crisis could worsen the situation.
She said Nigeria has over 6,000 confirmed cases of the covid-19, and that the incidence could rise to about 300,000 within a few months.
The Cable also reports that, a World Bank director who participated in the virtual meeting hinted that the bank was preparing a package for the immediate fiscal relief for Nigeria.
Ahmed said the so-called proposal would be worth $1.5 billion and it is designed to provide relief at states and national level. She said the fund could be disbursed by September 2020.