ABUJA, 15 JUNE 2021 Nigeria’s economy contracted by 1.8 percent in 2020, the most since 1983. The economic recession was triggered by the COVID-19 crisis; the external environment was characterized by capital withdrawals, increased risk aversion, low oil prices, and falling foreign remittances.
Nigeria’s Current Situation According to Resilience through Reforms, the Nigerian government’s reforms were crucial and timely in reducing the impact of the recession on the economy and creating additional fiscal headroom. Slippages in reform would jeopardize the recovery’s speed and hinder the government’s ability to solve human and physical capital shortages.
The paper addresses policy alternatives for lowering inflation, protecting the poor and vulnerable, and assisting the revival of the economy. To achieve these objectives, major efforts in exchange rate management, monetary policy, trade policy, fiscal policy, and social protection would be required. The following are some specific measures that should be taken:
- To decrease distortions in allocations in the private and public sectors, and to ensure that agents can access foreign exchange in a timely and orderly manner, at an agreed rate, exchange rate management rules should be made more transparent and predictable.
- Priorities and objectives for monetary policy that are well defined, with price stability as the primary goal. Resumption of naira-denominated open-market operations (OMOs) on a clear issuance schedule, as well as a signal to markets that OMOs will use short-maturity securities to maintain price stability.
- Reopening land borders to trade completely and effectively, as well as enhancing regional cooperation to combat smuggling.
- Imports of staple foods and pharmaceuticals will be made easier by eliminating them from the list of foreign exchange (FX) limitations and replacing them with tariffs that are aligned with the ECOWAS Common External Tariff.
- Creating tools to track and report the federal government’s stock of Central Bank overdrafts in order to keep the money supply under control.
- Full elimination of the gasoline subsidy; and the design of a series of reforms to raise non-oil revenue in a way that does not jeopardize the economy’s recovery, such as raising excise taxes on harmful consumer goods, rationalizing tax expenditures, closing tax loopholes, and improving tax compliance by strengthening revenue administration.
- Using the National Social Safety Nets Program (NASSP) to give more household payments and temporarily enhance transfers to current beneficiaries.
Nigeria’s GDP is predicted to increase by 1.8 percent in 2021, yet the prognosis is quite uncertain. The rebound would be fueled by an increase in oil exports as well as increased local consumption. Nigeria’s recovery, on the other hand, is predicted to lag behind that of other oil producers, and an unexpected drop in oil prices could jeopardize the moderate growth forecast. Furthermore, macroeconomic risks are exacerbated by rising inflation and unemployment, and tertiary sector activity will not fully stabilize unless COVID-19 is contained. Nigeria’s GDP is expected to approach 2010 levels by the end of 2021, reversing a decade of economic progress. Because the economy is expected to grow more slowly than the population, GDP per capita is expected to continue to decline.
Is Nigeria set to enter a recession in 2021?
In 2020, the Nigerian economy entered a new recession, reversing three years of progress following the 2016 recession.
Containment measures against COVID-19, which harmed aviation, tourism, hospitality, restaurants, manufacturing, and trade, and so disrupted the global economy, triggered the 2020 recession. The GDP shrank by 3.6 percent in the third quarter after contracting by 6.1 percent in the previous quarter.
The country had left recession once more by the end of the year. The Nigerian economy in 2021 was shaped by the confirmation of the end of the recession, as well as other significant happenings.
Is Nigeria currently experiencing a downturn?
According to the World Bank, the economy of Sub-Saharan Africa will contract by 2.1 percent in 2020, and by 5.1 percent in 2025. Nigeria’s economy, meanwhile, has officially entered a recession for the second time in the previous five years.
Is Nigeria’s economy in trouble?
George, like millions of other small and medium-sized business owners in Nigeria and throughout the world has had to persevere and adapt to the COVID-19 pandemic’s slings and arrows.
According to the International Monetary Fund, Nigeria’s GDP contracted by 1.8 percent in 2020, the biggest drop since 1983, and is predicted to increase only 2.5 percent this year.
Rising prices are a stumbling block to growth. As countries have lifted viral limitations, raw material supplies have not kept up with demand, forcing food, gasoline, and other raw materials costs to skyrocket.
According to the United Nations, global food prices reached a decade high last month.
Local factors in Nigeria are exacerbating the effects of global price pressures.
“Noneconomic factors like as insecurity have impacted the economy and contributed to inflation, because farmers, for example, are afraid to go to their farms,” said Sheriffdeen Tella, an economics professor at Olabisi Onabanjo University.
“The exchange rate is one of the economic factors. The Central Bank first depreciated the currency, resulting in a significant rate of inflation. And most items are exchange rate sensitive because they rely on imports,” he added.
All of this makes it particularly difficult for Nigeria’s small and medium-sized businesses, which account for 96 percent of all businesses and 84 percent of all jobs.
Furthermore, passing on greater raw material costs to clients has risks because it may force customers to either go elsewhere or do without.
“The issue is that if it’s items that people can live without, it’ll be difficult to pass on the costs to customers,” Tella explained.
He got a contract to supply monthly notebooks for a school at a predetermined price in June, when a ream of paper cost 5,100 naira ($12.4). The price of a ream of paper had risen to 7,000 naira ($17) by October, wiping out his profit.
Kareem explained that the school was sympathetic to his position and decided to suspend his contract until further notice. But that isn’t the only business he hasn’t been able to recover.
“I’ve squandered a lot of possibilities,” he admitted. “Did you notice me doing anything when you came in?” I was dozing off. “The folks for whom I labor are not prepared.”
What is the state of the Nigerian economy right now?
Nigeria’s Economic Development A possible sharper-than-expected decline in China, as well as a low immunization rate amid continuing Covid-19 uncertainty, darken the prognosis. GDP growth is expected to be 2.8 percent in 2022, up 0.1 percentage points from last month’s prediction, and 2.8 percent in 2023, according to FocusEconomics.
Is Nigeria’s economy doing well?
Nigeria’s economic freedom score is 54.4, ranking it 124th among the freest economies in the 2022 Index. Nigeria is placed 23rd out of 47 countries in Sub-Saharan Africa, with a score that is higher than the regional average but lower than the global average.
Why is Nigeria’s economy stagnant?
Many structural difficulties limit Nigeria’s economic potential, including insufficient infrastructure, tariff and non-tariff trade barriers, investment barriers, currency valuation uncertainty, and limited foreign exchange capacity.
Its economic stability depends on sustained broad-based economic growth and poverty reduction. The United States Agency for International Development (USAID) backs the government’s efforts to reduce poverty through increasing agricultural output and creating jobs in rural areas. It also seeks to promote market access, increase energy supply, remove trade barriers, and expand access to safe drinking water. We assist in the creation of a policy climate that is friendly to small enterprises, as well as expanding access to market-driven vocational and technical training that is related to private-sector job possibilities. Access to commercial financial services, particularly microfinance, is also a priority of US assistance.
When did Nigeria emerge from its economic slump?
According to the World Bank, Nigeria emerged from recession earlier than expected in its October 2020 Sub-Saharan Africa estimate (SSA).
Despite a rise in oil prices, Nigeria’s oil sector suffered in the fourth quarter of 2020, according to the bank’s newest Africa Pulse Report for April 2021, titled ‘COVID-19 and the Future of Work in Africa: Emerging Trends in Digital Technology Adoption.’
Nigeria emerged from its second recession in five years with a 0.11 percent growth in February 2021, according to the National Bureau of Statistics (NBS).
When did Nigeria emerge from its economic slump?
Nigeria’s economy emerged from recession in the fourth quarter of 2020, achieving its first gain in three quarters as the country’s coronavirus-related lockdown was lifted, according to a report released Thursday by the National Bureau of Statistics.
According to the data, GDP increased 0.11 percent from a year ago in the three months between October and December.
The economy dropped by 3.6 percent in the third quarter of 2020, after contracting by 6.1 percent in the second quarter, resulting in Nigeria’s second recession in five years.
The GDP contracted 1.92 percent in 2020, which was better than the International Monetary Fund’s forecast.
Although the growth was small, the NBS said Thursday that it represents the gradual restoration of economic activity following the relaxation of restricted movements and limited local and international business activities in previous quarters.
“As a result, while the Q4 2020 growth rate was 2.44 percent points lower than the previous year, it was 3.74 percent points better than Q3 2020,” according to the NBS.
Real GDP growth was 9.68 percent quarter over quarter in 2020, marking the second consecutive positive quarter over quarter growth rate following two negative quarters.
However, the annual growth rate of real GDP in 2020 is expected to be 1.92 percent, a drop of 4.20 percentage points from the 2.27 percent achieved in 2019.
Is Nigeria getting better?
Nigeria’s recovery from the 2016 recession is continuing, with growth expected to be about 2% in 2019. Global oil price collapses in 201416, along with decreasing domestic oil production, resulted in a sharp slowdown in economic activity. Nigeria’s yearly real GDP growth rate decreased to 2.7 percent in 2015 and -1.6 percent in 2016, after averaging 7% from 2000 to 2014. Growth picked up to 0.8 percent in 2017, 1.9 percent in 2018, and then 2 percent in the first half of this year, where it is forecast to stay for the rest of the year.
What makes Nigeria the best?
Nigeria has the continent’s largest economy. By 2050, it is expected to be among the top 10 economies on the planet. Nigeria is rich in natural resources, such as oil and gas. The country has the continent’s greatest natural gas reserves and is Africa’s leading oil and gas producer.