The Federal Government has said the Nigerian economy may slide into another recession by the third quarter of 2020.
This was disclosed by Zainab Ahmed, Minister of Finance, at the opening of a five-day interactive session on the 2021-2023 Medium Term Expenditure Framework (MTEF), and Fiscal Strategy Paper (FSP), held in Abuja on Thursday.
The event was organised by the House of Representatives’ Joint Committee on Finance; Appropriation; National Planning and Economic Development; and Aids, Loans and Debt Management.
Ahmed, who was represented by Clement Agba, the Minister of State for Finance, said the Nigerian economy faced serious challenges in the first half of 2020, noting that the microeconomic environment was heavily disrupted by the novel coronavirus (COVID-19) pandemic.
She explained that the resultant effects of the pandemic such as the crash of global oil prices and other economic factors had adversely affected the nation’s economy, forecasting that the country’s Gross Domestic Product growth for the second quarter of 2020 most likely to be negative.
The minister said: “The impact of these developments is about 65 per cent decline in projected net 2020 government revenues from the oil and gas sector, with adverse consequences for foreign exchange inﬂows into the economy.
“Nigeria is exposed to spikes in risk aversion in the global capital markets, which will put further pressure on the foreign exchange market as foreign portfolio investors exit the Nigerian market.
“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 a 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.
“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 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 were recently reviewed downwards in the revised 2020 budget.
“Customs revenue has generally performed close to target over the last few years, exceeding target in 2019.”
The Finance Minister also disclosed that there had been an improvement in the remittance of some taxes, adding that the Federal Government expects signiﬁcant improvements in Value Added Tax (CAT) collections with the new rate of 7.5 per cent.
She said: “There has been some improvement in company income tax and VAT remittances; we expect significant improvements in VAT collections with the new VAT rate of 7.5 per cent.
“Over the past five years, actual revenue performance averaged 61.4 per cent.
“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 government-owned enterprises, possibly up to N1 trillion per annum.”
If Nigeria does slide into an economic recession, it would be the second time in four years that such a crisis will occur.