Covid-19: new recession in Nigeria, Africa’s largest economy

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The COVID-19 pandemic has sent Nigeria into recession for the second time since 2016, threatening to push Africa’s 200 million people further into poverty.

• Read also: All developments in the COVID-19 pandemic

The GDP of Africa’s largest oil producer contracted 3.62% in the third quarter, after already declining 6% in the previous quarter.

“Before the pandemic, the government was already unable to maintain the purchasing power of Nigerians”, explains to AFP Dominique Fruchter, economist at the French Insurance Company for Foreign Trade (Coface).

The country is barely recovering from the oil shock which hit it very hard in 2016. And if growth picked up the following year, it remained too weak to meet the needs of an ever-growing population. The youth unemployment rate reaches 40%.

Thus “the pandemic has accentuated the previous difficulties and Nigeria must now face the most severe recession recorded in decades”, also notes Aurélien Mali, analyst for Africa at Moody’s.

At the end of March, the authorities decreed a five-week lockdown, a disaster for the majority of the population who depend on the informal economy for survival, but also for the middle class.

“I barely had enough to pay for my food and electricity”, testifies Joseph Olaniyan, French teacher in Abuja, whose activity resumed in October, but is slowing down.

Black gold addiction

In addition to confinement, “the fall in oil prices was added,” said Mali.

In April, crude prices fell below $ 20, and may have risen to around $ 40 since, the future remains bleak for a country that earns more than half of its income and 90% of its revenue. oil export.

In addition to the fall in prices, “Nigerian oil production is decreasing,” notes Benjamin Augé, a specialist in Nigeria at the French Institute of International Relations (Ifri). “Part of the deposits have reached maturity and they are not compensated by enough major projects”.

Thus, “when the government should support the economy, its revenues have dropped drastically,” said Mali.

To cope, the state immediately reacted by devaluing the currency. But “this depreciation has further impoverished the populations, the prices of essential goods often imported have increased, creating high inflation”, adds the economist.

“With inflation, we have been hit twice as hard,” confirms Professor Olaniyan, who says transport prices have almost doubled.

Even more, inflation was driven by a rise in food prices which rose 17.3% in October.

“The bag of rice that we bought 100 naira now costs 200 naira,” said Edna Anidi, a mother of six who recently lost her job in the oil sector in the southeast.

The rise in prices is not new, however, and has been observed for over a year.

In particular, the closure of borders with neighboring countries, decided in August 2019 by the authorities to stimulate local agricultural production.

Because since 2016, Abuja has been trying to diversify its economy, by imposing protectionist measures to develop more inclusive sectors of activity.

7 million more poor

But until then, “the country will remain extremely dependent on its oil revenue,” adds Mali. And unless we observe “a surge in prices, the country will take several years to come out of this recession”.

The government expects a return to growth by the end of the year or early 2021, according to Finance Minister Zainab Ahmed on Monday.

For analysts, this recession is a plague: the country already holds the sad world record for the largest number of people living in extreme poverty.

The crisis “is expected to push an additional five million Nigerians into poverty in 2020” predicts the World Bank. A figure in addition to the two million new poor already expected this year.

The recession “will further accentuate the frustrations of young people,” warns Mr. Mali.

In October, several thousand Nigerians demonstrated against police violence. The protest, which killed around 60 people according to Amnesty International, quickly turned into a larger movement against power.

The lack of future economic opportunity for these young people, aggravated by the recession, risks leading to further protests, analysts warn.

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