In a defying acknowledgement on Thursday, the Finance Minister, Mrs. Zainab Ahmed told journalists that Nigeria’s economy will definitely fall into recession. She made the statement based on Nigeria’s Bureau of Statistics (NBS)’ assessment that the economy will go into recession at an average of -4.4 percent.
Mrs. Ahmed who addressed the press after the National Executive Council (NEC) meeting said there is hope though that the impact could be reduced through stimulus packages.
“The National Bureau of Statistics has made an assessment. So, it is the NBS assessment that Nigeria will go into recession measuring at an average of -4.4%. But with the work that the Economic Accessibility Committee is doing bringing stimulus packages, we believe that we can reduce the impact of that recession.
“And if we applied all that have been proposed and we are able to implement it, we may end up with a recession that is -0.4 percent. In any case, we will go into recession, but what we are trying to do is to make sure that it is shallow so that we will quickly come out of it come 2021,” she said.
In late 2019, the Nigerian government was struggling to maintain stable growth after it recovered from a severe recession that threatened its budget funding and sent the country on a borrowing spree. As Nigeria set on the path of recovery early this year, the COVID-19 pandemic came with a sweeping force that collapsed the gains derived from the little surge in crude oil price.
The oil based GDP plummeted following the global crash of crude oil as the coronavirus crisis shut commercial activities around the world.
Nigeria depends on crude oil for 90 percent of its Gross Domestic Product (GDP). The remaining 10 percent comes from businesses that were shut down in a bid to contain the spread of coronavirus pandemic. So, it’s been an economy on standstill, whilst there’s a lot of financial responsibility to shoulder.
As other nations around the world inject billions of dollars in stimulus packages into their economies to save it from recession or total crumble, Nigeria was hoping to borrow. The Excess Crude Account (ECA) has been depleted before the global health crisis, leaving Nigeria broke with borrowing as the only choice to upset the deficiencies emanating from the health crisis.
Though the Central Bank has rolled out a couple of stimulus packages like the Credit Targeted Facility, it is not enough to alleviate the impact of the scourge on businesses. Many businesses like (aviation) are still on lockdown and interstate activities remain restricted, aggravating the country’s economic turmoil.
With the only hope of sustainability lying in the ability of other countries around the world opening their economies to spur demand for oil, Nigeria appears to be standing on a cliff.
To make things worse, the number of coronavirus cases is increasing in Nigeria and the rest of the world, creating economic and health battles the country is not fit to wage. The partial reopening of the economy is deemed premature by health professionals, but the government seemed to have been forced to choose it as a lesser evil.
“This is a very difficult time because the challenges we have now are double. There is health challenge, there is an economic challenge,” said Mrs. Ahmed. “Even as are addressing the current health challenge, we still have to look at how we can support the economy so that the economy does not fall into a depression.”
Government’s continuous promises to support the economy would have offered hope of sustainability if not that there is no fund to implement efficient stimulus packages.
Former vice president Atiku Abubakar, alongside others has advocated cutting the cost of governance as one of the ways Nigeria can get out of her COVID-19 ordeal. He advised that the presidential fleet should be sold while others have urged the lawmakers to slash their bonuses which are regarded as the most expensive in the world. But the federal appears unwilling to tread that path.
The borrowed $3.4 billion from the International Monetary Fund (IMF) is apparently insignificant to the size of the economic and health challenge facing Nigeria right now. The federal government is counting on COVID-19 donations and special funds to implement the amended budget, and provide the needed stimulus packages to boost the economy. With the rebound of the oil market uncertain, Nigeria will not only go into recession, it may go into depression.