In 2019, our analyst noted that Nigeria would be one of the African countries that would experience economic recession in 2020. Officially, the economy plunges into recession as the GDP in real terms declined by -3.62% YoY in Q3 2020, the second contraction in 2020. This is no longer news. What will continue to be the news or probably the issue in the future is a lack of strong proactiveness of the political leaders towards economic recession warning signals.
Before the emergence of Covid-19, which overwhelmed world economy, national and international economists and think tanks have warned the federal government of the possible economic recession. The World Bank projected that the country’s GDP will contract by more than 3% in 2020. This is not different from what the International Monetary Fund forecasted. According to the body, the GDP will contract by 4.3% this year, which would be the largest contraction in nearly 40 years.
In one of its presentations, the World Bank had earlier pointed out that the Nigerian government must address some critical issues in its macro and micro economic instruments due to the Covid-19 disruption. According to the presentation, the government needs to;
- Unify exchange rates into a single window, and increase exchange rate flexibility now, before foreign exchange reserves are further depleted and pressures mount for a much larger and disruptive devaluation that would hurt the poor.
- Ease foreign exchange restrictions to limit inflationary pressures and increase supply of food and key staples (e.g., health-related products).
- Refocus management of monetary policy toward the primary objective of price stability
- Phase-out land border closures to limit inflation and direct private sector development to more competitive ends.
- Continue making management of public debt more transparent.
- Review prudential requirements related to bank sales of non-performing loans to AMCON and similar companies to transparently streamline the process for efficient resolution of nonperforming loans.
Our check shows that the Central Bank of Nigeria introduced some measures during the disruption. Commercial banks and leading businesses in other sectors also contributed to the reduction of the impacts of the disease on the economy. In spite of this, the country slumps into recession. Our analyst had earlier noted the future of some sectors and industries, especially the real estate industry is at stake.