Nigeria likely to plunge into second recession in four years – FG
THE Federal Government warns that the Nigerian economy may likely fall into another recession, unless there is a strong economic performance in the third quarter of 2020.
Clement Agba, the Minister of State for Finance, Budget and National Planning, disclosed this in Abuja on Thursday at the start of a five-day interactive session on the 2021-2023 Medium Term Expenditure Framework and Fiscal Strategy Paper.
The event was set up by the House of Representatives’ Joint Committee on Finance; Appropriation; National Planning and Economic Development; and Aids, Loans and Debt Management, Punch reports.
Agba noted that the drop in oil prices – a direct effect of the COVID-19 pandemic – alongside other economic components took a toll on the nation’s economy, causing the Gross Domestic Product (GDP) for the second quarter of 2020 to likely fall in the negative.
“Nigeria’s Q2 GDP growth is in all likelihood negative and unless we achieve a very strong Q3 2020 economic performance, the Nigerian economy is likely to lapse into a second recession in four years with significant adverse consequences,” he said.
According to the Nigerian Bureau of Statistics (NBC), Nigeria’s economy advanced 1.87 per cent year-on-year in the first quarter of 2020 compared to a 2.55% growth in the previous period, representing the lowest quarterly GDP growth rate since third quarter of 2018.
Describing the negative impact on the economy, the minister said the development is likely to birth a 65 percent drop in projected 2020 government revenue.
He further explained that the Customs Duty collections in 2020 stands to be affected by the disruptions in global trade.
“The COVID-19 containment measures, though necessary, have inhibited domestic economic activities, with consequential negative impact on taxation and other government revenues.
“Consequently, the projections for Customs duty, stamp duty, Value Added Tax, and Company Income Tax revenues were recently reviewed downwards in the revised 2020 budget,” Agba noted.
With the country still battling with the COVID-19 pandemic and oil prices at an all-time low and a rising debt profile, the future of the Nigerian economy faces a myriad of challenges.
“Nigeria faces signiﬁcant medium-term ﬁscal challenges, especially with respect to its revenues, which, if not addressed, could snowball into a debt sustainability crisis,” he said.
On fiscal interventions, the minister said: “The goal of ﬁscal interventions will be to keep the economy active through carefully calibrated regulatory/policy measures designed to boost domestic value addition, de-risk the enterprise environment, attract external investment and sources of funding.”
Meanwhile, Timipre Sylva, the Minister of State for Petroleum Resources, has said the country needs an oil price of $70 per barrel and a production of two million barrels per day to sustain its budget.
“I must tell you that it is very difficult for the country at this time. We cannot possibly carry on with all our activities.
“The president approved a 25 per cent cut in our budget. That’s 25 percent of everything that we plan to do for this year, out the window before we even started,” Sylvia said.
The oil price at the international market stands at $44.85 per barrel as of Thursday.