Nigeria Economic Update: Resilience through Reforms


Monday, June 21, 2021 09:10 AM / by World Bank/ Header Image Credit: World Bank

Story Highlights

  1. The latest Nigeria Development Update report says that Nigeria has exited from its deepest recession in four decades as COVID-19 restrictions were eased
  2. Oil prices recovered, and the authorities implemented sensible and timely policies to counter the economic shock on Nigerian's welfare and to create new fiscal space
  3. With poverty increasing in 2020 due to the combined effects of COVID-19 and rising prices, the report recommends policy options that can help reduce inflation and protect poor households from its impacts

In 2020 the Nigerian economy shrank by 1.8%, its deepest decline since 1983. The COVID-19 crisis drove the economic slowdown; the external context was marked by capital outflows, intensified risk aversion, low oil prices, and shrinking foreign remittances.

The Nigeria Development Update Resilience through Reforms states that reforms implemented by the Nigerian government were critical and timely to alleviate the impact of the recession on the economy and to create additional fiscal space. Reform slippages would threaten the pace of recovery and limit the government's ability to address gaps in human and physical capital.

The report discusses policy options to reduce inflation, protect the poor and vulnerable and support economic recovery. Accomplishing these goals will require a big push in exchange-rate management, monetary policy, trade policy, fiscal policy, and social protection. Some specific measures recommendations are the following:

  • Increasing the transparency and predictability of exchange rate management policies to reduce distortions in allocations in the private and public sector; and to ensure that agents can access foreign exchange in a timely and orderly manner, at an agreed rate.
  • Clearly defined monetary-policy priorities and objectives, with price stability as the primary goal. The resumption of naira-denominated open-market operations (OMOs) based on a transparent issuance schedule, and signal to markets that OMOs will use short-maturity securities to achieve price stability.
  • Full and effective reopening of land borders for trade and strengthening regional cooperation to combat smuggling.
  • Facilitation of imports for staple foods and medicines by removing them from the list of foreign exchange (FX) restrictions and replacing import bans and with tariffs that align with the ECOWAS Common External Tariff.
  • Establishing mechanisms to monitor and report the federal government's stock of Central Bank overdrafts to control the growth of the money supply.
  • Full elimination of the petrol subsidy; and design of sequenced reforms to mobilize domestic nonoil revenue in a way that does not affect the economic recovery, including increasing excise taxes on harmful consumption goods, rationalizing tax expenditures, removing loopholes in tax laws, and improving tax compliance by strengthening revenue administration.
  • Leveraging the National Social Safety Nets Program (NASSP) to provide transfers to additional households, and temporarily increase transfers to current beneficiaries
  • Complementing the NASSP with the National Home-Grown School Feeding Program (NHGSFP) to strengthen the food security of vulnerable households in 26 States: and rapidly implement the World Bank-supported CARES project to support households, farmers, and firms.

Recent Economic Developments

The Nigerian economy is expected to grow by 1.8% in 2021, though there is high uncertainty about the outlook. The recovery would be driven by rise in oil exports and in domestic demand. However, Nigeria's recovery is expected to underperform those of other oil producers, and an unexpected shock to oil prices could threaten the modest growth projected. Moreover, high inflation and high unemployment exacerbate macroeconomic risks, and activity in the tertiary sector will not fully normalize unless COVID-19 is contained. By the end of 2021, Nigeria's GDP is likely to approach its 2010 level, thus reversing a full decade of economic growth. GDP per capita is projected to continue declining because the economy is forecast to grow more slowly than the population.

Kindly share and stay connected with us on our platforms HERE


You can also subscribe to our NEWSLETTER  

Download Full PDF Report Here

 Proshare Nigeria Pvt. Ltd.

Related News

  1. IMF Staff Concludes Virtual Visit with Nigeria
  2. World Bank: 7m Nigerians Pushed Below Poverty Line in 2020
  3. New World Bank Report: Critical Reforms Needed to Reduce Inflation and Accelerate the Recovery
  4. Government of Japan Gives UNICEF $39m for Vaccine Cold Chains in Nigeria, Others
  5. World Bank Expects Global Economy to Grow by 5.6% in 2021
  6. GDP is No Longer an Accurate Measure of Growth. So What Can Take Its Place?
  7. World Bank Approves $700m Loan to Improve Water Supply, Sanitation and Hygiene Services in Nigeria
  8. Fall in Nigeria's Remittances Drag SSA Total Remittances in 2020
  9. The Policymaker's Trilemma
  10. Defying Predictions, Remittance Flows Remain Strong During COVID-19 Crisis
  11. Transcript of April 2021 Sub-Saharan Africa Press Briefing
  12. Sub-Saharan Africa 2021 Regional Economic Outlook: Navigating a Long Pandemic
  13. IMF to Provide Support for Nigeria and Other Low-Income Countries
  14. IMF Launches Climate Change Indicators Dashboard
  15. Fostering a Fair Recovery
  16. IMF Revised Growth Projection: A Tale of Vaccinated Optimism
  17. WEO: IMF Revises 2021 Global Economic Growth to 6% from 5.5%
  18. IMF Executive Board Extends Debt Service Relief for 28 Eligible Low-Income Countries
  19. IMF Executive Board Approves Temporary Extensions and Modification of Access Limits
  20. AfDB Group Launches Second Phase of WACMI Project Backed by $850,000 Grant

 Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.




Related News