Concerns Escalate As Nigeria Heads Into Recession Over COVID 19, Revenue Crisis

*Oil Savings Dip to $72m from $325m in 6 Months

• $1.5BN World Bank Financial Relief Being Sought, Says Minister

As global oil prices plunge occasioned by the COVID 19 pandemic continues to spawn a huge upset on Nigeria’s main source of income, creating large financing needs amidst  weakening national currency, Minister of Finance, Budget and National Planning, Zainab Ahmed has declared that the country is certainly heading into a recession.

She delivered this bombshell while addressing Nigeria’s highest economic advisory body, the National Economic Council, NEC on Thursday. “We will go into recession – but what we are trying to do is to make sure that it is shallow so that we will quickly come out of it, come 2021. This will impact negatively, and the impact has already started showing on the federation’s revenues and on the foreign exchange earnings,” Ahmed told the council during meeting conducted via digital method.

Recall that the Nigerian economy is heavily dependent on crude oil earnings which, account for over 97 percent of export earnings and about 40 percent of government revenues.

Figures available to The New Diplomat reveal that Net oil and gas revenue and influx into the federation account in the first quarter of 2020 amounted to  about N940.91billion ($2.6b). 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.

Furthermore, as of November 2019, the country had $325 million in its oil savings account.  However, by May 21, 2020, less than six months after, the country has a paltry $72.04 million in its oil savings account. Ahmed  further disclosed that barring any stimulus package, Nigeria’s economy could shrink as much as 8.9% in 2020 in a worst-case scenario.

“The crisis will only multiply this misery. The economic growth in Nigeria, that is the Gross Domestic Product, 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%”, she said.

Recall that the International Monetary Fund (IMF) had projected last month that the Nigerian economy would shrink by 3.4 percent this year, falling into its second recession in five years.

However, a World Bank director who took part in the meeting said the Bank was planning a package for immediate financial relief for Nigeria. Ahmed said the proposal was worth $1.5 billion and intended for Nigeria’s states to provide relief at the sub-national level. She said it could be disbursed by September.