Given the lull and uncertainty in the global oil market at the moment, the World Bank Group has forecast the emergence of another recession in Nigeria. It said the country could enter recession if crude oil prices plunged by as much as 25 per cent to $50 a barrel. As of Monday, the international oil benchmark for Brent crude was $61 per barrel.
Shubham Chauduri, Country Director, disclosed this Monday in Abuja at the Nigeria Economic Update for the second half of 2019 titled “Jumpstarting Inclusive Growth: Unlocking the Productive Potential of Nigeria’s People and Resource Endowments” and organised by the bank.
The Economic Update reads: “For instance, a decline in oil prices to the levels seen in 2016 would significantly reduce growth, potentially leading to another recession. This time, however, Nigeria’s fiscal and external positions are more fragile because the fiscal buffers in the excess crude account are depleted, and international reserves mask considerable amounts of foreign-held short-term government and central bank securities.
“In this context, a negative shift in investor confidence could lead to a drop in international reserves and put pressure on the exchange rate and the exchange debt stock.
“Conversely, growth could be accelerated through reforms that boost tax revenue to allow for higher investment in human and physical capital, as well as efforts to improve the quality of spending and reduce barriers to trade and private sector development.”
Chauduri equally recommended keeping the country’s external financing sources under surveillance. He asserted that Foreign Portfolio Investment (FPI) flows were often vulnerable to factors including oil price movements, unpredictable global policy adjustments and domestic monetary policy decisions.
According to him, sudden outflows are capable of diminishing Nigeria’s already threatened external reserves and consequently frustrating the Central Bank of Nigeria’s efforts at maintaining the Investors and Exporters Foreign Exchange (IEFX) at around N360 per dollar.
The international financial institution gave a timely caution regarding Nigeria’s sobering poverty level, projecting it could explode by more than 30 million people come 2030. This prediction, if come true, will make Nigeria home to one quarter of the world’s destitute population except intensive economic growth and job creation plans are pursued, it said.
“With population growth (estimated at 2.6%) outpacing economic growth in a context of weak job creation, per capita income is failing. Today, an estimated 100 million Nigerians live on less than $1.90 per day.
“Close to 80% of poor households are in northern Nigeria, while employment creation and income gains have been concentrated on central and southern Nigeria,” the report stated.
The World Bank said roughly 50% of Nigeria’s population lived in poverty. Nigeria became the country with the largest number of people living in extreme poverty last year, outpacing India.
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