World Bank to Nigeria: Sustain reforms to avoid worse recession

TRACKING____The World Bank has encouraged Nigeria government to sustain current reforms, uphold right mix of policy measures or risk sliding into deep recession. The advice was contained in World Bank Nigeria Development Update (NDU) report issued yesterday titled, “Rising to the Challenge: Nigeria’s COVID response”.

The report warned that “in the next three years, an average Nigerian could see a reversal of decades of economic growth and the country could enter its deepest recession since the 1980s.” The bank said the worsening scenario could be avoided if progress in the current reforms is sustained and the right mix of policy measures is implemented.

The report takes stock on the recently implemented reforms and proposes policy options to mitigate the impact of COVID-19 and foster a resilient, sustainable and inclusive recovery. “Nigeria is at a critical historical juncture, with a choice to make,” said Shubham Chaudhuri, World Bank Country Director for Nigeria.

“Nigeria can choose to break decisively from business-as-usual and rise to its considerable potential by sustaining the bold reforms that have been taken thus far and going even further and with an even greater sense of urgency to promote faster and more inclusive economic growth,” the bank said. The report projects that the economy could shrink up to four per cent in 2020 following the twin shocks of COVID-19 and low oil prices. The pace of recovery in 2021 and beyond remains highly uncertain and subject to the pace of reforms.

The report notes that “the pandemic is disproportionately affecting the poor and most vulnerable, women in particular. In the absence of measures to mitigate the impact of the crisis, the number of poor could increase by 15 to 20 million by 2022. Food insecurity has increased substantially and economic precarity is on the rise because unemployed workers have migrated to the low-productivity agricultural sector.

The NDU acknowledges measures taken by government since April, including the efforts to harmonize exchange rates, introduce a market-based pricing mechanism for gasoline, adjust electricity tariffs to more cost-reflective levels and reduce non-essential expenditures and redirect resources towards the COVID- 19 response.

It also highlights the greater transparency in the oil and gas sector and public debt as essential steps for a resilient recovery. “Nigeria can build on its reform momentum to contain the spread of COVID-19, stimulate the economy and enable the private sector to be the engine of growth and job creation.

It can also redirect public spending from subsidies that benefit the rich towards investments in Nigeria’s people and youths in particular, and lay foundations for a strong recovery to help make progress towards lifting 100 million people out of poverty,” said Marco Hernandez, World Bank Lead Economist for Nigeria and co-author of the report. Looking ahead, the NDU discusses policy options in five areas that would help mitigate the effects of the crisis and support Nigeria’s recovery.

This include, managing the domestic spread of COVID-19 until a vaccine is available for distribution; enhancing macroeconomic management to boost investor confidence; safeguarding and mobilizing revenues; reprioritizing public spending to protect critical development expenditures; and supporting economic activity and access to basic services and providing relief for poor and vulnerable communities.

The Nigerian economy, in November, slipped into its second recession in five years as the Gross Domestic Product (GDP) contracted for the second consecutive quarter. The National Bureau of Statistics (NBS), in its report, said the nation’s GDP recorded a negative growth of 3.62 per cent in the third quarter of 2020. The country had earlier recorded a 6.10 per cent contraction in the second quarter. It is the nation’s second recession since 2016, and the worst economic decline in almost four decades.