Finance Minister Says Another Recession Imminent
The Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed has said Nigeria may slide into another economic recession in the third quarter.
The mister, who spoke at a five-day interactive session on the 2021-2023 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) held on Thursday in Abuja, said unless the economy achieved a strong growth performance in the third quarter, Nigeria will slide into another recession.
“Nigeria is exposed to spikes in risk aversion in the global capital market, which will put further pressure on the foreign exchange market as foreign portfolio investors exit the Nigerian market,” the minister said.
“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 (CBN) adjusted the official exchange rate to N360, and more recently to N379.”
Ahmed further stated that the disruption in the global supply chain and logistics would also impact customs duty collections for the year.
She also explained that measures put in place to contain the spread of COVID-19 have impacted domestic economic activities, weighed 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,” she said.
“Customs revenue has generally performed close to target over the last few years, exceeding target in 2019.
“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.”
The minister noted that actual revenue grew at an average rate of 61.4 percent in the last five years, adding that some reforms yielded positive results between 2018 and 2019.
“I believe we can do more to improve revenues, especially remittances from government-owned enterprises, possibly up to N1 trillion annually,” she added.
“Support of the national assembly, by ensuring coordinated oversight, will contribute to achieving targets.”