The weight of the pandemic outbreak on the Nigerian economy will send personal incomes back to the levels they were forty years ago, Washington-based World Bank has said.
While COVID-19 is on track to create millions of “new poor” in middle-income nations, Africa’s biggest economy is particularly susceptible by reason of its fragile pre-pandemic economic condition – marked by acute unemployment and high inflation alongside depleting incomes – and its reliance on crude oil and remittances, the Bretton Woods organisation said.
Nigeria’s coronavirus fatalities are 1,184 and the informal economy has taken a battering from a lockdown spanning four weeks.
With over 50 percent of the country’s population unemployed or underemployed, inflation has been galloping for the past 12 months, foreign investment has nosedived and the economy is projected to taper by nearly 4 percent this year.
Nigeria will need to forge a raft of possibly politically unpopular reforms to avert an enduring recession, the World Bank said.
“This is not just any crisis for Nigeria . . . how it responds will set the course for the next few decades. There’s . . . an opportunity to not return to business as usual, but the risk of (the economy) unravelling is real,” Shubham Chaudhuri, head of the World Bank’s mission in Nigeria, told the Financial Times.
He lauded moves by the government to abolish the fuel subsidy policy that costs Nigeria billions of dollars annually, hike electricity tariffs, and adopt a market-driven rate of exchange.
“For the first time in many years, in the last nine months, the government has made some pretty politically courageous decisions but the key is to keep the momentum on those,” said Chaudhuri.
Yet, Nigeria “risks repeating the experience of the 1980s shocks, which set back Nigeria’s development progress by decades” according to the World Bank brief.
The country is likely to have a bumpy ride due to a wider global economic crisis unlike the recession of 2015-2016, which also came after a plunge in oil prices.
Chaudhuri’s remarks came on the heels of the World Bank’s issuing of annual Nigeria development report, which recommended measures like embracing a market-oriented exchange rate, land border reopening, overhauling tumbledown power infrastructure, easing forex curbs as well as offering direct cash transfers to the indigent and vulnerable.
“It’s not entirely a doomsday scenario . . . because there is a choice” to devise such reforms, Chaudhuri said.
The multilateral lender envisages that 15 million to 20 million Nigerians, around one-tenth of the populace, will descend into penury – living on below $1.90 a day – by 2022 principally due to the pandemic.
The country will lose 14 years per capita income in the next two to three years owing to the coronavirus crisis, retrogressing to 2010 levels, which is the equivalent in real terms of 1980, World Bank stated. The average income loss of fellow middle-income economies is seven years.
Reactions have trailed the latest warning on the economy, with some Nigerians quick to point out that the country was already experiencing most of what the World Bank is warning against.
Define risk please, because at this point, this economy has unraveled several times over. Only living through it can show you the real state, not through some analysts in a room. We have passed the ''risk stage'' a long time ago.
— Tayo (@t_enabler) December 10, 2020
Lol.. something wey don unravel 🤣🤣
— ™ (@choclateprinc) December 10, 2020
Meanwhile, the World Bank has reportedly asked Nigeria to strengthen reforms of the naira before it can approve its longstanding request for a $1.5 billion loan needed to survive low oil prices and make it through the economic shock of the pandemic.
The news this week is contrary to a recent claim by finance minister Zainab Ahmed that the government was in the closing stages of a deal to get the loan package.