COVID-19: Nigeria Economy Heads Towards Recession – Says Finance Minister

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Nigerian Finance minister, Zainab Ahmed has said that the coronavirus pandemic and the falling oil prices are set to force the economy into a recession.

The minister made the comments after the National Economic Summit meeting in Abuja on Thursday.

“On the economy, COVID-19 has resulted in the collapse in oil prices,” she said. “This will impact negatively, and the impact has already started showing on the federation’s revenues and on the foreign exchange earnings.

“Net oil and gas revenue and influx to the federation account in the first quarter of 2020 amounted to N940.91billion. This represented a shortfall of N125. 52billion or 31% of the prorated amount that is supposed to have been realized by the end of that first quarter.”

Ms Ahmed added that the economic contraction will multiply the misery of the poor.

“The crisis will only multiply this misery,” she said. “The economic growth in Nigeria, that is the GDP, could in the worst-case scenario, contract by as much as –8.94% in 2020. But in the best case, which is the case we are working on, it could be a contraction of –4.4%, if there is no fiscal stimulus. But with the fiscal stimulus plan that we are working on, this contraction can be mitigated and we might end up with a negative –0.59%.”

World Bank predicting recession for Nigeria

She said: “ The World Bank maintains that the impact of the COVID-19 on Nigeria will lead to severe amplified human and economic cost, which will move the country into a recession. “ The World Bank planned a proposed package for immediate fiscal relief for the Federal Government. This will also involve policy-based policy budget support for the Federal Government, focusing on measures to maintain macro-financial stability and create fiscal space for proposed stimulus.

“The World Bank package has also got a proposal of $1.5 billion for the states and this package will be dedicated to the states. And it will be a programme for results which the states are already used to implementing.

“So, the immediate fiscal relief for the states, as stated in the presentation, will include the acceleration of an existing programme to enable disbursement by end of September. “So, the proposed $1.5 billion plan will by end of September it would have been disbursed to the states. We are looking at an average of between N150billion to N200billion based on the plan to the 36 states. These are states that have already made some particular commitments and achievements so that they will be able to get immediate disbursements of parts of these funds.”

The minister, who noted that her ministry reported to Council the funds in three special accounts, said: “So, in the Excess Crude Account, we reported the balance as of May 21, 2020, the balance of US$72.04 million. We also reported to Council that in the Stabilization Account, we have as at today a balance of N39.337 billion.

‘’In the Natural Resource Development Fund Account, we have a balance as at today, N125.19 billion. Also today (yesterday) at the NEC, we made a presentation to the Council on the structures that the Federal Government is looking at and putting in place, or has already put in place to tackle the challenges of COVID-19 in our country.

“The global economy is also facing the sharpest reversals since the great depression and this has both health as well as economic consequences. On health, there is a rising rate of infections as reported by the NCDC. ‘

’We have today over 6,000 cases and this is projected to rise to almost 300,000 by the end of August. Resources required to combat COVID-19 such as ICU beds, isolation centres, ventilators, reagents, test kits, masks, gloves are also very expensive.

“On the economy, COVID-19 has resulted in the collapse in oil prices. This will impact negatively, and the impact has already started showing on the federation’s revenues and on the foreign exchange earnings.

“Net oil and gas revenue and influx to the federation account in the first quarter of 2020 amounted to N940.91 billion. This represented a shortfall of N125. 52 billion or 31% of the prorated amount that is supposed to have been realized by the end of that first quarter.

“40% of the population in Nigeria, today, are classified as poor. The crisis will only multiply this misery. The economic growth in Nigeria, that is the GDP, could in the worst-case scenario, contract by as much as –8.94% in 2020.

“But in the best case, which is the case we are working on, it could be a contraction of –4.4%, if there is no fiscal stimulus. But with the fiscal stimulus plan that we are working on, this contraction can be mitigated and we might end up with a negative –0.59%.

“As a result of that, the president set up the Presidential Economic Sustainability Committee in addition to the COVID-19 Response Committee that has been set up, the Presidential Task Force that is chaired by the SGF as well as the Crisis Management Committee that I chair.

“The Federal Government is committed to supporting the financial viability of states, including the suspension of payments in respect of commitments, debts that have been secured with ISPOs by the states at the federal levels.

“So, we have already implemented suspension of deductions of a number of loans that have been taken by the states from April and also in May.

“We also had discussions with the World Bank. The World Bank Country Director was invited into the meeting and he spoke to the meeting in respect of their assessment of the impact of COVID-19 on the economy and also their review of the measures that government has taken.”

 

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