INTERNATIONAL Monetary Fund (IMF) officials have downgraded Nigeria’s 2020 growth projections predicting that the economy will shrink by 5.4% during the course of this year as a result of the effects of the coronavirus pandemic.
Between 1999 and 2015, Nigeria’s economy grew by about 6% annually but after then it went into recession as a result of investors pulling out and a collapse in global crude oil prices. Over the last two years, the economy has recovered a bit, growing by between 1% and 2% annually but with the Covid-19 crisis, this has been derailed.
With the spread of the pandemic, there has been a global economic shutdown and crude oil has suffered from a collapse in both prices and demand. Bering a mono-economy in which over 90% of government revenue comes from the sale of petroleum, Nigeria has been hit hard by the lockdown.
In April, the IMF had projected that Nigeria’s economy would contract by 3.4% this year but a recent report has predicted that the damage will now be worse. In its World Economic Outlook for June, titled A Crisis Like no Other, an Uncertain Recovery, the IMF forecast that global growth is projected at minus 4.9% in 2020, 1.9 percentage points below the April 2020 World Economic Outlook forecast.
It read: “The Covid-19 pandemic has had a more negative impact on activity in the first half of 2020 than anticipated, and the recovery is projected to be more gradual than previously forecast.” In addition, the report said that for the first time, all regions in the world were projected to experience negative growth in 2020.
It said there were, however, substantial differences across individual economies, reflecting the evolution of the pandemic and the effectiveness of containment strategies. Other differences included the variation in economic structure, reliance on external financial flows including remittances and pre-crisis growth trends.
Part of the report read, “In China, where the recovery from the sharp contraction in the first quarter is underway, growth is projected at 1% in 2020, supported in part by policy stimulus. India’s economy is projected to contract by 4.5% following a longer period of lockdown and slower recovery than anticipated in April.”
According to the report, in Latin America, where most countries are still struggling to contain infections, the two largest economies, Brazil and Mexico, are projected to contract by 9.1% and 10.5%, respectively, in 2020. However, the IMF, increased its projection for 2021 to 2.6% from the initial projection of 0.2%.
Its report added: “The disruptions due to the pandemic, as well as significantly lower disposable income for oil exporters after the dramatic fuel price decline, imply sharp recessions in Russia (-6.6% ), Saudi Arabia (-6.8%) and Nigeria (-5.4%). South Africa’s performance (–8%) will be severely affected by the health crisis.”