COVID-19 Lockdown, Slump in Global Oil price, and Policy Recovery Options: The Nigerian Experience

The interplay of covid-19 lockdown and a slump in the global oil price is a recipe for a lengthy and costly global recession. The previous recession in Nigeria is deeply rooted in the global slump in global oil prices, a supply-side shock effect. The new phenomenon of demand-shock effect alongside a supply-side shock effect implies that the length and cost of the recession could significantly inflict a colossal economic downturn on the economic outlook in emerging and developing economies. This begs the question, what are the policy recovery options for Nigeria? The paper examined economic recessions in Nigeria from 1981 to 2016. The study adopted a historical-normative approach to study the interplay of factors deepening the impact of the recession. Data collected from the Central Bank of Nigeria (CBN) and the National Bureau of Statistics (NBS) was analyzed. The study identified among other factors such as weak productive base, inconsistencies of macroeconomic policies, the problem of poor policy coordination, heavy dependency on petro-dollar system, insensitivity of the political class to the realities in the economy, wide disconnect between the financial system and the real-informal sectors are factors that would expose Nigeria to the impact of global covid-19 and slump in the global oil price hence a lengthy and costly recession is inevitable in Nigeria. The recession would lead to social insecurity, instability in the currency structure of the country, balance of payment disequilibrium, high debt problem, fragile stock market, financial distress in the banking sector, inescapable stagflation incidence, liquidity problem and capital formation, a decline in capital inflow due to problems in global reinvested earnings losses in MNEs, a decline in general economic activities, and fall in social welfare. Thus, to spur, stimulate and re-diversify the productive base of the nation to reduce the geometry and structure of recession. The government should rethink the cost of governance, drive research base innovation, and develop skill and capacity to improve the sustainability and resilience of the economy to structural and systemic shocks. Keynesian and monetary policy prescriptions must be pursued through the expansionary fiscal approach and manufacturing-informal sector investment financing to jumpstart the economy. These recommendations revolve around coordinated fiscal, monetary and commercial policies required to sustain the post-recession economy. Such policies must be directed strictly on the provision of infrastructure, strengthening the security architecture and reduction of cost of doing business.