COVID 19: Nigeria Heading Back Towards Another Recession In Less Than Three Years

By Elizabeth Chukwuma

The Wuhan Town in Hebei Province of the Asian country of China, emerged coronavirus, popular, COVID 19,  which broke out  on December 31, 2019 which have adversely affected the global economy, appear to have  given signs that Nigeria is heading towards another round of Economic Crisis, an indication of worse days ahead.

The recession, according to business analysts, may not be  unconnected  to the basic  fact that the country is part of the global economy  which is  facing  its worst economic Crisis since the 1930s. The International Monetary Fund, IMF, under the close watch of Kristalina Geogieva, had dropped the hint of the recession in its 2020  forecast  because  of the cornavirus pandemic and lockdowns.

The multilateral Financial Institution  had predicted  a 3%   contraction   for the global economy this year, noting that it will be worse in the developing countries. She is right. This is because it has already started manifesting  in Nigeria, an  oil producing country, and a member of the Oil Producing and Exporting Countries, OPEC.    

Hajia Zainab, minister of Finance, Budget and National Planning, who had given an insight about the recession which she had  attributed  it   to the coronavirus pandemic.  The pandemic, she had said had resulted  in drop in oil revenue due to drop in oil  price in the International market and drop in no –oil revenue due low volume of cargo traffic at the nation’s  seaports.   

Hajia Ahmed: Minister Of Finance, Budget And National Planning

 The ministerial warning did not come to many as a surprise.  As at last March, Hajia Ahmed, had started drumming it into the ear of Nigerians  that the country  ‘’might go into another round of recession if the coronavirus pandemic continues  in the next six months when the IMF , reached out to member countries  ‘’to take swift  and sizable  action to support  their economic recovery as the disease has not shown any sign of declining.

 Given an insider information, about the situation in Nigeria, the minister had said there is every cause for people  to  worry because ‘’the daily  net  oil and gas revenue that flows into  the Federation account has dropped. The minister cited the total amount  from  crude oil sales that was paid into the Consolidated account   in the first quarter  of this year, 2020, by the Nigerian National Petroleum Corporation, NNPC, which was very discouraging.

According to her, N940.91 billion , was paid into the account  from oil sales by the Oil Conglomerate, NNPC. Note that President Muhammadu Buhari, in his 2020, budget  speech  which was presented to the National Assembly  late last year for consideration and approval  had put the oil benchmark  at $57 per barrel on a daily production output and  sales of 2.1 million.

He got it wrong.  The global outbreak of the COVID 19, may have   shattered  the budgetary plan , forcing the Hajia Ahmed  and he ministry of Finance, Budget and National planning  officials to review the budget  at the instance of the Katsina state born Nigerian President.

  The ministry officials were said t have  reviewed  downwards  the  oil benchmark  to $30 per barrel on a daily production output and export of 1.7 million  which, according to the ministry sources was  the prevailing   price at the International Oil market. Indeed, the continued drop in  oil  price in the International  market as a result of the pandemic  may have forced the government to adopt $20 as the country’s benchmark for oil..

 An aggrieved minister of Finance, Budget and National Planning confirmed a shortfall of N125.52 billion or 31 percent  of the prorated  amount  that was projected to have  been realised from the sales of crude oil on the first quarter alone. The situation in the Oil sector was not different from what is happening in the NiGerian Customs Service, NCS, under the close watch of Hameed Ali, a retired Army Colonel aand Comptroller General, NCS.  From  a  target of N2 trillion  from  non oil imports based on the country’s Fiscal policy, it was reviewed down wards to N1.5 trillion as a  result of low economic activities  at the seaports caused by the COVID  19.

She noted that the drop in oil price in the International market and low volume of cargo traffic at the ports , will  contract  the country’s Gross Domestic Product, GDP ,by  9.4 percent this year if the disease persists. But she is optimistic that going by the economic Sustainability measures that had been put in place by the  government the Contraction will still drop  to  4.4 as ‘’ we are working on the premise that there will a Fiscal surplus in the months ahead’’.  This should gladden the heart of Nigerians  as the Fiscal stimulus plans , which she had confirmed that  the government is working  on  would further  mitigate the GDP contraction  with a negative  0.59 percent.

The drop in oil and non oil revenue in the first quarter of 2020, may have encouraged the government to seek for alternative sources of Funding the N10.33 trillion  budget  to  boost the economy in this trying and difficult times. It was not surprising why the government was said to have  approached  the  Georgieva led  International Monetary Fund, IMF, for a $3.4billion loan. The Multi-lateral Financial Institution, did not hesitate in approving the $3.4 million facility , under its Rapid Financing Instrument, RFI,  which is expected to be repaid in the next  3 – five years .

 Note that if the country should slip back into another recession, as hinted by  Hajia Ahmed,  it would  be second time the country’s economy had entered into recession had  entered into  recession  under theBuhari  Administration in less than four years. Godwin Efiele, the governor of Central Bank, had attributed the 2018 , recession to the late implementation of the budget, weakening Demand and consumer spending,, rising contractor debts and low minimum wage.

Emefiele also attributed the cause of the 2018 , recession to the flooding of the Nigerian markets , with foreign agricultural products, particular, foreign par boiled rice, pineapple,  continued insecurity in the north east geo-political regions and growing level of Foreign debts. But the current recession knocking on the nation’s door  has nothing to  do with some of these risks  to output growth  but related to a global pandemic.

As a prelude to solving the economic problem, , members of the National Economic Council, NEC, Headed by Yemi Osinbajo, a Professor and the country’s Vice President  at it its recent meeting  were said to have resolved  ‘’to ensure  a more effective  synergy  between the Federal , state and local governments  especially  in matters  related to  fallouts  of the COVID 19 pandemic and how to effectively and efficiently  reopen the economy after the lockdowns and hut-downs  across the country.  The Osinbajo led NEC, were said to have also set up a seven –man Committee  headed Ifeanyi Okowa,  the governor of Delta state to work closely  with Boss Mustapha , the Chairman of the Presidential Task Force , PTF,  on COVID 19, and Secretary of the Fedration, to address the country’s economic Challenges in this COVID  era.

Moreso, the Council members were said to have  also agreed  to Cooperate and Collaborate with the Economic Sustainability Committee inaugurated  by Osinbajo, the Vice President at the instance of the Katsina state born Nigerian President  for the development  of  a national  economic sustainability  Plan.

Such a plan,  the Vice President had said  is expected’’ to introduce  a substantial  stimulus package  , that will run into trillions of naira to ensure that the country gets  through the global Pandemic economic Challenes and chart a ‘’path for growth and development for the nation’s economy by ensuring massive productivity in several sectors  such as the agriculture, power, infrastructural development, technology and mining, Manufacturing, Computer among others’’.       

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