World Bank Projects pandemic may push 5m more Nigerians into poverty


No fewer than five million Nigerians will be pushed into the poverty bracket, due to the effects of COVID-19 pandemic, according to a forecast by the World Bank.

The multilateral organisation also warned that the disruptions caused by the pandemic poses serious risks to Nigeria’s banking sector and remains a threat to its stability.

The Washington-based multilateral institution stated this in its latest Nigeria Development Update (NDU) titled: “Nigeria in Times of COVID-19: Laying Foundations for a Strong Recovery,” that was released yesterday.

It stated that the economic downturn and the collapse of global oil prices could reverse the declining trend in banking sector’s non-performing loans (NPLs), starting with loans to the oil sector, which represent almost 30 per cent of private-sector credit, and progressing through the remaining sectors as demand weakens.

It anticipated that banks’ on-balance-sheet dollar-denominated exposures, which represented 38 per cent of the industry’s loan portfolio and 55 per cent of their liabilities at the end of 2019, would also be a source of strain.

“The credit to private sector has severely declined in April 2020 as effects of the lockdown and constrained economic activity as it sharply dropped by 65.7 per cent in April 2020.

“Meanwhile, credit to the government grew by 7.2 per cent, rebounding from a 53 per cent decline in January 2020. Pressures in the external sector and the stress COVID-19 caused in global financial markets could destabilise Nigeria’s financial sector,” it added.

However, the multilateral institution anticipated that the collapse in oil prices coupled with the pandemic will plunge the Nigerian economy into a severe recession, the worst since the 1980s.

It estimated that Nigeria’s economy would likely contract by 3.2 per cent in 2020.

This projection assumed that the spread of pandemic in the country is contained by the third quarter of 2020.

But it warned that if the spread of the virus becomes more severe, the economy could contract further.
“Before COVID-19, the Nigerian economy was expected to grow by 2.1 per cent in 2020, which means that the pandemic has led to a reduction in growth by more than five percentage points.

“The macroeconomic impact of the COVID-19 pandemic will likely be significant, even if Nigeria manages to contain the spread of the virus,” it stated.
Oil represents more than 80 per cent of Nigeria’s exports, 30 per cent of its banking-sector credit, and 50 per cent of the overall government revenue.

With the drop in oil prices, government revenues are expected to fall from an already low eight per cent of GDP in 2019 to a projected five per cent in 2020, the bank said.

“This comes at a time when fiscal resources are urgently needed to contain the COVID-19 outbreak and stimulate the economy. “Meanwhile, the pandemic has also led to a fall in private investment due to greater uncertainty, and is expected to reduce remittances to Nigerian households, which in recent years have been larger than the combined amount of foreign direct investment and overseas development assistance,” it added.

The report also showed that the human cost of the pandemic could be high. Beyond the loss of life, the COVID-19 shock alone is projected to push about five million more Nigerians into poverty in 2020.

“While before the pandemic, the number of poor Nigerians was expected to increase by about two million largely due to population growth, the number would now increase by seven million – with a poverty rate projected to rise from 40.1 per cent in 2019 to 42.5 per cent in 2020,” the report added.

It also noted that the pandemic was likely to disproportionately affect the poorest and most vulnerable, in particular women.
The World Bank added: “School closures have reduced the food intake of almost seven million children who are enrolled in the national school feeding programme. “Economic activities have been disrupted and women’s livelihoods have been particularly impacted.

“Over 40 per cent of Nigerians employed in non-farm enterprises reported a loss of income in April-May 2020. In addition, the fall in remittances is likely to affect household consumption because half of Nigerians live in remittance-receiving households, of which about a third are poor.

“The unprecedented crisis requires an equally unprecedented policy response from the entire Nigerian public sector, in collaboration with the private sector, to save lives, protect livelihoods, and lay the foundations for a strong economic recovery,”World Bank’s Lead Economist for Nigeria and Co-author of the report, Marco Hernandez, said.

However, the bank noted that the government of Nigeria has already taken important health, fiscal and monetary measures to contain the outbreak, moderate the recessionary pressures and start mitigating the effects of the economic shock.

But it said the pandemic offered an opportunity for Nigeria to identify and remove structural bottlenecks to economic productivity.
Doing so will help the country to recover faster while generating more jobs, the bank stated.

All these outcomes will be invaluable in helping Nigeria to realise its announced ambition of lifting 100 million people out of poverty in the next decade, it added.

Commenting on the report, World Bank Country Director for Nigeria, Shubham Chaudhuri, said: “While the long-term economic impact of the global pandemic is uncertain, the effectiveness of the government’s response is important to determine the speed, quality, and sustainability of Nigeria’s economic recovery.

“Besides immediate efforts to contain the spread of COVID-19 and stimulate the economy, it will be even more urgent to address bottlenecks that hinder the productivity of the economy and job creation.”

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