PETROLEUM economist Professor Chijioke Nwaozuzu has warned that Nigeria needs to generate about $40bn this year if the government is serious about reviving the economy and avoiding a deep recession as a result of the coronavirus pandemic.
Due to the global economic shutdown as a result of the Cofid-19 pandemic, Nigeria has found herself in a financial crisis unable to fund her 2020 budget of $28.8bn. With 95% of government coming from crude oil receipts, Nigeria is finding it difficult to survive has not only the price of petroleum collapsed but demand is also extremely weak, with nobody buying crude, which is currently stockpiling at the country’s export terminals.
In a desperate bid to fund the 2020 budget, the government has resorted to borrowing, securing loans of almost $5bn from the International Monetary Fund and the World Bank. However, even with this cash, Nigeria still faces a severe economic crisis as crude oil prices and demand are unlikely to pick up soon and being a mono-economy, the country will struggle to find other revenue sources.
According to Professor Nwaozuzu, an expert of petroleum economics, management and policy, the federal government needs to significantly increase its expenditure and mobilise about $40bn to stimulate the Nigerian economy and bailout small and big businesses. He added that it was crucial the federal government increases its expenditure during this period, adding that the main focus of intervention should be on micro, small and medium scale enterprises.
Pointing out that stimulating the economy is the way out of this crisis, Professor Nwaozuzu, who is also a director of the Emerald Energy Institute of the University of Port Harcourt, said most medium and small scale enterprises would have consumed their capital by now due to the prolonged lockdown. He identified the other sectors that would need a bailout to include banks, telecommunication companies, power distribution companies and airlines.
Professor Nwaozuzu said: “To address the issues of achievable level of recession and stimulus measures that could help reduce the Covid-19 induced recession, we have to examine some fundamental macro-economic relationships.”
He noted that Nigeria’s situation is worsened by the absence of a stabilisation fund and the fact that it failed to save during the period of high crude oil prices. Professor Nwaozuzu warned that due to this, Nigeria’s gross domestic product growth rate would hit below zero and result in a recession.