Second Recession In Four Years Looms, Says FG
The Federal Government has said the likelihood of Nigeria sliding into another recession in the Third Quarter of 2020.
Making the Recession the second time within four years.
The government said the COVID-19 pandemic resulting in the crash of global oil prices among other economic factors had adversely affected the nation’s economy, with the Gross Domestic Product growth for Q2 most likely to be negative.
The Minister of State for Finance, Budget, and National Planning, Clement Agba, said this in Abuja on Thursday. At the beginning of a five-day interactive session on the 2021-2023 Medium Term Expenditure Framework and Fiscal Strategy Paper.
The event was organized by the House of Representatives’ Joint Committee on Finance; Appropriation; National Planning and Economic Development; and Aids, Loans, and Debt Management.
The World Bank had in July warned that the collapse in oil prices resulting from the COVID-19 pandemic was expected to plunge the Nigerian economy into a severe economic recession, the worst since the 1980s.
The global bank had stated this in its latest Nigeria Development Update.
Agba had read out a written presentation by the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, titled ‘Draft 2021-2023 MTEF/FSP: Presentation to the House Finance Committee.’
The minister said the Nigerian economy faced serious challenges in the first half of 2020 with the microeconomic environment significantly disrupted by the pandemic.
“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 the second recession in four years, with significant adverse consequences.
“In response to the developments affecting the supply of foreign exchange to the economy, the Central Bank of Nigeria adjusted the official exchange rate to N360/USD1, and more recently to N379/USD.
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“The disruptions in global trade and logistics would negatively affect Customs duty collections in 2020.
“The COVID-19 containment measures, though necessary, have inhibited domestic economic activities, with a 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.
“Customs revenue has generally performed close to target over the last few years, exceeding the target in 2019.”
The minister said the Federal Government expected significant improvements in VAT collections with the new VAT rate of 7.5 percent.
The minister said, “Over the past five years, actual revenue performance averaged 61.4 percent.
“Some of our reforms are yielding positive results, with significant improvements between 2018 and 2019. We believe we can do more to improve revenues, especially remittances from GOEs, possibly up to N1tn per annum.”
“However, The goal of fiscal interventions will be to keep the economy active through carefully calibrated regulatory/policy measures.
This designed to boost domestic value addition, de-risk the enterprise environment, attract external investment and sources of funding, etc.,” the minister stated.
The document further read, “The medium-term outlook for Nigeria suggests that fiscal risks are somewhat elevated, largely due to COVID-19 related disruptions, which have exacerbated structural weaknesses in the economy.
“Nigeria faces significant medium-term fiscal challenges, especially with respect to its revenues, which, if not addressed, could snowball into a debt sustainability crisis.”
Additionally, Nigerians are becoming agitated by the rising debt profile of the country.
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