It may take till 2023 before the Nigerian economy grows at the modest 2 percent rate recorded before the COVID-19 pandemic struck, according to Jesmin Rahman, International Monetary Fund’s (IMF) mission chief to Nigeria.
“In our baseline projection for GDP levels, it will take three years for the Nigerian economy to come back to the 2019 level,” Rahman says at a webinar hosted by the American Business Council and Citi Bank.
“This is in line with what happened during the last crisis,” Rahman states, referring to how it took Nigeria until 2019 to recover to 2015 level of 2 percent following an economic contraction in 2016.
The dim projection means “we are going to see the contraction in real Per capita GDP to even pick up in the next five years,” Rahman says.
Per capita GDP, which is a measure of the living standards in a country, breaks down economic output per person and is calculated by dividing the GDP of a country by its population. Per capita GDP growth is positive when economic growth is higher than population growth and negative when the population is growing faster than the economy.
A high per capita GDP indicates a high standard of living while a low one indicates that a country is struggling to supply its inhabitants with everything they need. Luxembourg, a small European country surrounded by Belgium, France and Germany, has the highest GDP per capita globally with $113,196 as at 2019, according to IMF data.
Switzerland ($83,716) and Norway ($77,975) make up the top three countries with the highest GDP per capita.
On the flip side, war-torn South Sudan ($275), Burundi ($309) and Eritrea ($342) make up countries with the lowest per capita GDP in the world. Nigeria ranks 138th with $2,222, behind Ghana with $2223.
Nigeria has recorded five straight years of real GDP per capita contraction, the longest run since the turn of democratic rule in the country in 1999.
Nigeria had reported 42,208 cases of the coronavirus as at July 29, 4.7 percent of the total 896,202 cases in Africa, but the country’s low testing rate could be masking a higher infection rate.
Prior to the outbreak of COVID-19, which has worsened Nigeria’s economic prospects, the IMF had forecast the trend of negative per capita GDP growth to last eight years.
The last time Nigeria had a positive per capita GDP was in 2014, as the economy has struggled since then to shake-off a lengthy collapse in global oil prices that started mid-2014 and bottomed in 2016.
When not contracting, the economy has grown at a tepid 2 percent rate compared to average population growth rate of 2.6 percent.
The economy grew 2.5 percent in 2015 before contracting by 1.6 percent in 2016. The economy turned the corner on its first recession in a quarter of a century by growing 0.8 percent in 2017 and a 1.9 percent growth in 2018. In 2019, the economy grew 2.27 percent, capping five years of an economy that didn’t grow fast enough to create new opportunities for a rapidly growing population.
With the COVID-19 pandemic set to take a toll on an economy that was already on slippery ground, the IMF expects the economy to contract 5.4 percent this year, the worst contraction since 1987. That prediction means per capita GDP will contract even further, a painful squeeze for a country with per capita GDP of around $2,222.
It means Nigerians will get even poorer than they are now for another five years, as their incomes continue to shrink and the economy bleeds.
It also means more Nigerians will fall into a poverty pit that has already swallowed some 87 million people, and fewer people will be able to afford quality education and healthcare.
It could also expose more companies, especially small businesses, to the risk of failing, as falling consumer purchasing power fuels a reduction in sales and profitability.
Economists say Nigeria needs to grow its economy by between 4 percent and 6 percent annually to reverse the tide of negative per capita GDP.
But Nigeria cannot match the 4-6 percent per capita GDP growth of industrialising countries because adult literacy at 60 percent is too low and electricity consumption is under half the minimum required level for sustained industrialisation, according to Charles Robertson, the chief economist at Rennaisance Capital.
“To push headline GDP growth to 6.5-8.5 percent would require an adult literacy campaign, a trebling of electricity consumption and a doubling of investment to GDP,” Roberston says.
