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 since the 1980s,” the world Bank said on Thursday.
The world Bank, in its new report entitled “Nigeria in the time of COVID-19: laying the foundations for a strong recovery,” estimates that Nigeria’s economy is likely to shrink by 3.2 percent this year.
“This forecast assumes that the spread of COVID-19 in Nigeria will be contained by the third quarter of 2020,” it said.
The Bank said that if the spread of the virus becomes more serious, the economy could shrink even further.
It said: “before COVID-19, the Nigerian economy was expected to grow by 2.1 percent in 2020, meaning that the pandemic has reduced the growth rate by more than five percentage points.
“The macroeconomic consequences of the COVID-19 pandemic are likely to be significant, even if Nigeria manages to contain the spread of the virus. Oil accounts for more than 80 percent of Nigeria’s exports, 30 percent of banking sector loans, and 50 percent of total government revenue.”
With oil prices falling, government revenues are expected to fall from an already low eight percent of GDP in 2019 to a projected five percent in 2020, according to the report.
World Bank country Director for Nigeria Shubham Chaudhuri said: “while the long-term economic impact of the global pandemic is uncertain, the effectiveness of the government’s response is important in determining the speed, quality and sustainability of Nigeria’s economic recovery.
“In addition to immediate efforts to curb the spread of COVID-19 and boost the economy, it will be even more urgent to address the bottlenecks that hinder economic productivity and job creation.”