Zainab Ahmed, Minister of Finance, has hinted on the possibility of Nigeria’s economy sliding into another recession.
At the opening of a five-day interactive session on the 2021-2023 Medium Term Expenditure Framework (MTEF), and Fiscal Strategy Paper (FSP) organised by the House of Representatives Committee on Finance in Abuja on Thursday, Ahmed said unless a very strong Q3 2020 economic performance, there is a likelihood of the nation going into another recession in four years “with significant adverse consequences”.
The Minister who was represented by Clement Agba, the Minister of State for Finance, said the COVID-19 pandemic resulting in crash of global oil prices among other economic factors had adversely affected the nation’s economy, with the Gross Domestic Product growth for Q2 most likely to be negative.
“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,” Agba said.
“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 Minister of State for Finance further stated that there had been some improvement in Company Income Tax (CIT) and VAT remittances, adding that with the new VAT rate of 7.5 per cent, signiﬁcant improvements in VAT collections is expected.
“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 GOEs, possibly up to N1tn per annum.
“Support of the national assembly, by ensuring coordinated oversight, will contribute to achieving targets.”