Nigeria may hit a severe economic recession due to the collapse of oil which is as a result of COVID 19, according to the World Bank. This recession would be the worst since 1980.
World Bank revealed this in its latest Nigeria Development Update report released on Thursday, 25th of June, 2020.
The report, titled ‘Nigeria in times of COVID-19: Laying foundations for a strong recovery,’ predicted that Nigeria’s economy would likely contract by 3.2 percent in 2020.
it read, “This projection assumes that the spread of COVID-19 in Nigeria is contained by the third quarter of 2020.
“If the spread of the virus becomes more severe, the economy could contract further.”
COVID-19, the Nigerian economy was expected to grow by 2.1 percent in 2020, which meant that the pandemic had led to a reduction in growth by more than five percentage points, it read.
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The macroeconomic impact of the COVID-19 pandemic would likely be significant, even if Nigeria managed to contain the spread of the virus, it added.
It stated that oil represented more than 80 percent of Nigeria’s exports, 30 percent of its banking-sector credit, and 50 percent of the overall government revenue.
With the drop in oil prices, government revenues were expected to fall from an already low eight percent of Gross Domestic Product in 2019 to a projected five percent in 2020.
The bank stated, “This comes at a time when fiscal resources are urgently needed to contain the COVID-19 outbreak and stimulate the economy.”
It noted that the pandemic had also led to a fall in private investment due to greater uncertainty, and was expected to reduce remittances to Nigerian households.
The remittances in recent years had been larger than the combined amount of foreign direct investment and overseas development assistance.
World Bank Country Director for Nigeria, Shubham Chaudhuri, stated, “While the long-term economic impact of the global pandemic is uncertain, the effectiveness of the government’s response is important to determine the speed, quality, and sustainability of Nigeria’s economic recovery.
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“Besides 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.”