Nigeria’s economy is expected to resume at 1.1 per cent in 2021 from the estimated 4.1 contractions in 2020 and would further grow to 1.8 per cent in 2022, the World Bank said in its January 2021 Global Economic Prospects, released on Tuesday.
The rebound is chiefly underpinned by positive news on vaccine development and rollout as well as new rounds of fiscal stimulus.
The projection is feasible but a lot depends on how much economic disruption will be triggered by the second and possibly third waves of the Covid-19 pandemic as well as the price of crude oil and production volume allocated to Nigeria,” said Taiwo Oyedele, head of Tax and Corporate Advisory Services at PwC.
In addition to these external factors, he said the policy environment will also play a key role. If these factors move in the right direction then a rebound to positive GDP growth territory will be achievable in 2021.
However, the World Bank said economic activity is anticipated to be dampened by low oil prices, OPEC quotas, falling public investment due to weak government revenues, constrained private investment due to firm failures, and subdued foreign investor confidence.
Ayodeji Ebo, senior economist/head, research & strategy, Greenwich Merchant Bank, said the improvement in the World Bank projection is based on improve in oil prices and the covid-19 vaccine.
“So they believe that with the improvement in oil prices, Nigeria could rebound and it is positive trajectory from Q2. Also they will be hoping that government could come up with deliberate policies that would drive economic growth,” he said.
Nigeria’s economy “officially” entered a recession after contracting 3.62 percent in the third quarter of year, caused majorly by the impact of the pandemic and a lack of reforms by both the fiscal to boost confidence and attract private investment in an economy that depends largely on the oil sector to grow.
“We expect GDP growth to remain subdued in 2021, at only 2.5%,” Razia Khan, managing director, Chief Economist, Africa and Middle East Global Research, Standard Chartered Bank told BusinessDay on Tuesday.
Growth in the Sub-Saharan African region is forecast to rebound moderately to 2.7% in 2021. While the recovery in private consumption and investment is forecast to be slower than previously envisioned, export growth is expected to accelerate gradually, in line with the rebound in activity among major trading partners.
Read also: AFC secures $250 million loan to bridge Africa’s infrastructure deficit
“If Nigeria can resolve security challenges in the country, put in place polices that will encourage private investment in agriculture, manufacturing, real estate sectors, while government continues her investments in transportation, infrastructure, the country can record over 5% GDP growth rate in the short term,” Ayodele Akinwunmi, relationship manager, corporate banking at FSDH Merchant Bank Limited said.
Apart from the fact that the 1.1% forecast growth rate is lower than the population growth rate in the country, the level of the GDP will be lower than the Pre -COVID-19 GDP level. “So Nigeria needs accelerated growth level,” he said.
Expectations of a sluggish recovery in Sub-Saharan Africa reflect persistent COVID-19 outbreaks in several economies that have inhibited the resumption of economic activity. The pandemic is projected to cause per capita incomes to decline by 0.2% this year, setting Sustainable Development Goals (SDGs) further out of reach in many countries in the region. This reversal is expected to push tens of millions more people into extreme poverty over last year and this year.
In South Africa, growth is expected to rebound to 3.3% in 2021. An expectation of weak growth momentum reflects the lingering effects of the pandemic and the likelihood that some mitigation measures will need to remain in place.
Olalekan Aworinde, Senior Lecturer, department of economics, Pan-Atlantic University, Lagos, said the rationale for the World Bank projection could be that close to the Nigerian government investments in human capacity development, adoption of new technologies and healthy government institutions.
These three indicators are drivers of growth in any country, he said. Proper investment in human capacity development, technology and innovation and proper institutions will surely accelerate the level of growth. In addition, he said with good enabling environment, it will bring about an increase in the level of investment, which later translates to growth.
The global economy is expected to expand 4% in 2021, assuming an initial COVID-19 vaccine rollout becomes widespread throughout the year. A recovery, however, will likely be subdued, unless policy makers move decisively to tame the pandemic and implement investment-enhancing reforms
Although the global economy is growing again after a 4.3% contraction in 2020, the pandemic has caused a heavy toll of deaths and illness, plunged millions into poverty, and may depress economic activity and incomes for a prolonged period. Top near-term policy priorities are controlling the spread of COVID-19 and ensuring rapid and widespread vaccine deployment. To support economic recovery, authorities also need to facilitate a re-investment cycle aimed at sustainable growth that is less dependent on government debt.
“While the global economy appears to have entered a subdued recovery, policymakers face formidable challenges—in public health, debt management, budget policies, central banking and structural reforms—as they try to ensure that this still fragile global recovery gains traction and sets a foundation for robust growth,” said World Bank Group President David Malpass. “To overcome the impacts of the pandemic and counter the investment headwind, there needs to be a major push to improve business environments, increase labor and product market flexibility, and strengthen transparency and governance.”
