NIGERIA DEVELOPMENT UPDATE  |  DECEMBER 2020 Rising to the Challenge: Nigeria's COVID Response Nigeria Development Update December 2020 Rising to the Challenge: Nigeria's COVID Response © 2020 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Any queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. Acknowledgements The Nigeria Development Update (NDU) is a World Bank report series produced twice a year (Spring and Fall). The NDU assesses recent economic and social developments and prospects in Nigeria, and places these in a longer-term and global context. The NDU also provides an in-depth examination of selected economic and policy issues and an analysis of Nigeria’s medium-term development challenges. It is intended for a wide audience, including policy makers, business leaders, financial market participants, and the community of analysts and professionals engaged in Nigeria’s evolving economy. The report was prepared by a World Bank team led by Gloria Joseph-Raji (Senior Economist), Miguel Angel Saldarriaga (Economist), and Marco Antonio Hernandez Ore (Lead Economist). The team included: Emilija Timmis, Joseph Ogebe, Ahmed Rostom, Mariano Cortes, Masami Kojima, Cedric Okou (Recent Economic Developments and Outlook), Christina Jenq, Jonathan Lain, Tara Vishwanath (Employment), Samik Adhikari, Jonathan Lain, Muderis Mohammed, Foluso Okunmadewa, Dhushyanth Raju, Tara Vishwanath (Social Protection), Tekabe Belay, Noel Chisaka, Elina Pradhan, Michael Olugbile, Ayodeji Ajiboye, Onoriode Ezire, Olumide Okunola (Health), Martin De Simone, Thanh Thi Mai, Yevgeniya Savchenko, Aisha Garba Mohammed, Olatunde Adetoyese Adekola, Mahesh Dahal (Education), Julia Vaillant, Andrew Brudevold-Newman, Amy Copley, Ayodele Fashogbon, Abhilasha Sahay (Gender), and Samik Adhikari (Migration). The team is grateful for valuable discussions with the Ministry of Finance, Budget and National Planning, the Central Bank of Nigeria, and the National Bureau of Statistics. The team would like to thank the International Monetary Fund’s Mission Chief, Jesmin Rahman, and her team for invitations to participate in macro-monitoring missions and for their continual dialogue and collaboration. Ifeoma Ikenye assisted the team. Budy Wirasmo aided in designing. The dissemination of the report and external and media relations are managed by Mansir Nasir. The report was prepared under the overall supervision of Shubham Chaudhuri (Country Director for Nigeria), Abebe Adugna (Regional Director for Equitable Growth, Finance, and Institutions), and Francisco Carneiro (Practice Manager for Macroeconomics, Trade, and Investment). The findings, interpretations, and conclusions expressed in this report do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of the World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. For questions about this report please email marcohernandez@worldbank.org For information about the World Bank and its activities in Nigeria, please visit: www.worldbank.org/ng NIGERIA DEVELOPMENT UPDATE DECEMBER 2020 Contents Acknowledgementsiii Abbreviations and Acronyms viii Overview1 Part 1: Recent Economic Developments and Outlook for Nigeria 7 Economic Growth: Nigeria has plunged into a recession 8 Prices: Higher inflation is driven by food price spikes 13 The External Sector: The COVID-19 shocks have put Nigeria's external sector to the test 15 Monetary and Exchange Rate Policies: Continuing with the policy adjustments sparked by COVID-19 is critical18 The Financial Sector: Safeguarding financial sector stability is paramount to sustain the recovery 22 Fiscal Policy: The government has accelerated the pace of reforms to create fiscal space 24 Economic Outlook 28 Part 2: Taking a Closer Look 39 Work and COVID-19 in Nigeria 40 Nigeria’s social protection system during COVID-19 and beyond 44 Nigeria’s health response to the COVID-19 pandemic 49 Education and COVID-19: Policies to mitigate the impact and accelerate progress 54 Part 3: Spotlights on Nigeria’s Development Agenda 57 Spotlight 1: Opening development opportunities in Nigeria by closing gender gaps 58 Spotlight 2: Making the most of young Nigerians’ economic potential: The case for more and better managed international labor migration from Nigeria 68 Nigeria: Key Economic Indicators 80 iv RISING TO THE CHALLENGE: NIGERIA’S COVID RESPONSE List of Figures Figure O.1. Nigeria is at a critical historical juncture, with a choice to make. 2 Figure O.2. N igerian authorities can build on recent actions to deepen the reform agenda and lay foundations for a robust, inclusive, and sustainable recovery. 4  igeria’s quarterly GDP decline in the second quarter is the worst ever recorded. Figure 1.1. N 9  ervices chiefly responsible for Q1–Q3 2020 contraction. Figure 1.2. S 9  ockdown measures imposed by the government were effective in reducing mobility. Figure 1.3. L 9  “heat map” of high-frequency indicators suggests that Nigeria’s economy could continue Figure 1.4. A experiencing negative growth in the fourth quarter. 11  e decline in services and the non-oil industry is driving the reduction in GDP growth. Figure 1.5. Th 11  e contraction of exports is equivalent to almost three times the fall in GDP growth. Figure 1.6. Th 11  igeria’s GDP Growth in 2021 is expected to be one of the lowest among oil producers. Figure 1.7. N 12  DP per capita is expected to continue declining beyond 2021. Figure 1.8. G 12  rojected levels of inflation in Nigeria for 2020 are among the highest in Sub-Saharan Africa. Figure 1.9. P 14 Figure 1.10. H eadline inflation hit levels not seen since February 2018. 14 Figure 1.11. P rices are rising faster in the northern states. 14 Figure 1.12. A negative trade balance and declining remittances are contributing to a negative CAB. 15 Figure 1.13. N igeria’s negative CAB in 2020 will be less severe than that of structural peer countries. 15 Figure 1.14. N egative net portfolio outflows and low foreign direct investment will lead to a negative financial account balance in 2020. 16  e CBN has maintained tight controls to preserve its FX reserves. Figure 1.15. Th 16 Figure 1.16. I EFX turnover remains very low and there is a sizeable premium between the IEFX rate and the BDC (parallel) rate. 19  e CBN continues to adapt monetary policy in response to the COVID-19 crisis. Figure 1.17. Th 19 Figure 1.18. N igeria’s financial sector development is lagging behind its peers. 23 Figure 1.19. C redit growth has declined due to COVID-19 shocks. 23  e shock to oil prices has reduced the government’s stream of revenues. Figure 1.20. Th 25 Figure 1.21. U nrealistic revenue forecasting has resulted in underestimated deficits and financing needs. 25  e Global Economy is Expected to Contract in 2020. Figure 1.22. Th 29 Figure 1.23. O il Prices Are Likely to Remain Lower than pre-pandemic levels in 2020–21. 29  any Nigerian household heads returned to work after initial lockdown measures eased. Figure 2.1. M 41  any more Nigerian workers now work in agriculture compared to the outset of COVID-19 Figure 2.2. M crisis.41  ouseholds report reduced income between August 2019 and August 2020. Figure 2.3. H 42  ood insecurity increased sharply after COVID-19. Figure 2.4. F 42  oorer households are more likely to report worsening food security. Figure 2.5. P 43  t 0.3 percent of GDP, Nigeria spends less on social safety net programs than most of its regional, Figure 2.6. A aspirational, and structural peers. 46  e coverage of government social safety net programs is generally low. Figure 2.7. Th 46  overnment social safety net program beneficiaries have similar household characteristics to those Figure 2.8. G in the bottom-60 percent of the consumption distribution. 46  e number of new daily cases reached its peak in June. Figure 2.9. Th 49  e percentage of people who are not able to access care decreased once the movement Figure 2.10. Th restrictions were eased. 51 Figure 2.11. E ven moderate disruptions in essential care services could take a high toll on Nigerians’ health. 52 v NIGERIA DEVELOPMENT UPDATE DECEMBER 2020 Nigerian women are less likely to work than their male counterparts, and when they work, they Figure 3.1.  are likely to work fewer hours. 59 Economic participation for women drops around the transition to secondary school despite girls Figure 3.2.  having similar attendance rates to boys at primary school. 59 Throughout Nigeria, women farmers produce significantly less per hectare than men. Figure 3.3.  60 Women entrepreneurs obtain significantly lower profits than men. Figure 3.4.  61 Women in the labor market earn lower wages than men. Figure 3.5.  61 The strength of the evidence base in support of different interventions to target the key priority Figure 3.6.  policy constraints varies considerably. 65 Unemployment rates among Nigeria’s youth have been rising steeply. Figure 3.7.  69 Unemployment rates among educated Nigerians have accelerated since 2015. Figure 3.8.  69 The desire of Nigerians to migrate internationally has grown in recent years (Gallup). Figure 3.9.  69 Figure 3.10. Those Nigerians who are keenest to migrate tend to be young, well educated, and urban (Afro Barometer).69 Figure 3.11. Nigerians are more likely to want to migrate internationally than almost all their peers in the sub- Saharan Africa region. 69 Figure 3.12. The share of Nigerian migrants in Europe and North America has increased considerably since 1990.70 Figure 3.13. Nigerian international migrants are most numerous in the United Kingdom, the United States, and Cameroon. 70 Figure 3.14. Asylum seekers from sub-Saharan Africa and Nigeria to Europe peaked in 2016 and 2017 before subsiding.71 Figure 3.15. Nigerian migrants pay up to US$10,000 to migrate to Europe through irregular means. 71 Figure 3.16. Share of households receiving international remittances is higher in States with lower poverty rates.72 Figure 3.17. Share of Nigerians actively preparing to emigrate is higher in the richer quintiles of the income distribution.72 Figure 3.18. Nigeria has a much higher ratio of working age people to those aged 65 and older than high- income OECD countries. 73 Figure 3.19. Most Europeans favor a degree of immigration, especially for skilled professionals who can plug key skills shortages. 73 Figure 3.20. A diverse range of institutions and stakeholders participate in policy-making processes throughout the migration lifecycle. 75 List of Tables Table 1.1. Nigeria’s economic outlook under three scenarios. 30 Table 1.2. Nigeria’s Macroeconomic Scenarios. 31 Recent policy measures mitigating the impacts of COVID-19 and laying the foundations for a Table 1.3.  strong recovery. 33 Policy priorities to support a stronger recovery for Nigeria. Table 1.4.  34 Table 2.1. COVID-19 has largely impacted outpatient attendance in Nigeria. 51 Estimated impact (percentage drop from expected) of COVID-19 on essential services in Nigeria. Table 3.1.  75 vi RISING TO THE CHALLENGE: NIGERIA’S COVID RESPONSE List of Boxes Box 1.1. A single, market-driven exchange rate would promote growth in Nigeria. 20  e CBN has taken important steps to harmonizing exchange rates; greater exchange Figure B1.1.1. Th rate flexibility would boost investor confidence. 21 Box 1.2. The Federal Government’s 2021 Budget Proposal. 27 The 2021 budget proposal envisages a recovery in oil and non-oil revenues. Table B1.1.1.  27 Box 3.1. The cost of gender gaps to the Nigerian economy. 62 A number of innovative migration approaches for Nigerians are now in place, led by various Box 3.2.  European countries in partnership with private companies and international organizations. 73 vii NIGERIA DEVELOPMENT UPDATE DECEMBER 2020 Abbreviations and Acronyms bbl Barrels CAB Current Account Balance CBN Central Bank of Nigeria EU European Union FX Foreign Exchange GDP Gross Domestic Product GHS General Household Survey IEFX Investors & Exporters Foreign Exchange NBS National Bureau of Statistics NDU Nigeria Development Update NLPS National Longitudinal Phone Survey NNPC Nigerian National Petroleum Corporation NPL Non-Performing Loans SME Small and Medium Enterprise US$ United States Dollars VAT Value Added Tax y-o-y Year-on-Year viii RISING TO THE CHALLENGE: NIGERIA’S COVID RESPONSE Overview In 2020, Nigeria’s economy is expected to experience • Remittances: H  alf of Nigerians live in a household its deepest recession since the 1980s due to the that receives remittances, which contributed about COVID-19-related disruptions, notably lower oil 5 percent of GDP in 2019. Nigeria’s diaspora is prices and remittances, enhanced risk aversion in concentrated in North America and Europe, where global capital markets, and mobility restrictions. incomes have fallen, and unemployment is rising, and In our baseline scenario—which assumes further the decline in remittances has slowed consumption macroeconomic reforms and a gradual recovery in and weakened aggregate demand. oil prices—Nigeria’s gross domestic product (GDP) is projected to contract by about 4 percent in 2020, • Capital flows: Increased risk aversion among global growing modestly by 1.1 percent in 2021, and then investors has led to a decline in foreign portfolio recovering gradually towards the estimated population investments, which until recently was the main growth rate of 2.6 percent. With the rate of economic financing source for Nigeria’s balance of payments. growth remaining below the population growth rate, Investors redirected some of their funds away from per-capita incomes would continue declining and better Nigeria in search of safer investment options, putting full-time jobs will be much harder to find. Below, we pressure on Nigeria’s external reserves and exchange provide highlights on how the COVID-19 crisis has rates. impacted Nigeria’s economy. • Mobility restrictions: P ublic-health measures • Oil and government revenues: N  igeria’s oil sector helped slow the spread of COVID-19, but mobility represents over 80 percent of exports, 30 percent restrictions combined with precautionary behavior of banking-sector credit, and about 50 percent of among consumers adversely affected employment consolidated government revenues. Also, the non- and reduced household labor income. oil industrial and services sectors rely heavily on the economic activity and fiscal revenue generated • Prices: B  efore COVID-19, rising food prices were by the oil industry. Thus, the performance of the already putting pressure on inflation due to insecurity oil sector has a direct effect on economic activity, in the north, conflicts between farmers and herders in jobs, government revenues, investment, and credit the middle belt, and Nigeria’s closure of land borders growth, all of which have been affected by the since August 2019. Then, on top of these, pandemic- pandemic. Importantly, consolidated government related disruptions in value chains and production revenues are projected to drop by US$10 billion or processes further increased inflation. more in 2020 (over 2 percent of GDP) at a time when fiscal resources are urgently needed to contain • Jobs:  Workers have resorted to more tenuous, less the COVID-19 outbreak, intensify countercyclical productive economic activities, causing measures of stimulus policies to support the economic recovery, economic precarity to spike. Data on a sample of and implement pro-poor interventions to protect the household heads collected by the National Bureau lives and livelihoods of the over 80 million Nigerians of Statistics (NBS) through a high-frequency in extreme poverty and millions of urban dwellers household telephone survey reveal that, between who depend on the informal economy. March and August, unemployed workers shifted Overview 1 NIGERIA DEVELOPMENT UPDATE DECEMBER 2020 to the agricultural sector, which has long served as response. Realizing the government’s ambition of lifting Nigeria’s employer of last resort. While employment 100 million Nigerians out of poverty by 2030 would be levels have now rebounded to near pre-pandemic challenging even under normal circumstances. The onset levels, many households in Nigeria have reported of the COVID-19 crisis has made the task much more declines in income, consistent with evidence of rising challenging and urgent because of the severity of the economic precarity, and household food insecurity economic downturn and the decline in fiscal resources. has significantly increased. Growth projections help illustrate this point. By 2023, in our baseline scenario, Nigeria’s GDP per capita is • Poverty: Th e extreme poverty rate is expected to rise, expected to be roughly similar to that of 2010. This with the number of poor likely to increase by 15 to means that Nigeria would lose 14 years in per capita 20 million by 2022. The human and economic costs incomes. By contrast, if we compare Nigeria with the would be amplified if the global economic recovery is average of middle-income economies worldwide, we find less robust or takes longer than hoped and if Nigeria that other countries are expected to lose around 7 years. fails to take the needed policy and fiscal measures to In other words, while COVID-19 will hit incomes across free up the space of a rapid private sector-led recovery. all countries, Nigeria is expected to suffer twice as much. But that is not all. In fact, because Nigeria’s growth has Nigeria is at a critical historical juncture. While been uneven and volatile, once we adjust for inflation, there is a lot of uncertainty about when the pandemic we find that for Nigeria going back to 2010 is equivalent will end, it is clear that Nigeria faces an unprecedented to going back to the 1980s. crisis that requires an equally unprecedented policy Figure O.1. Nigeria is at a critical historical juncture, with a choice to make. Historical and potential trajectories or per capita GDP, oil prices, and number of poor left axis right axis 5,000 – – 120 4,500 – – 108 4,000 – NGA: rising to – 96 potential (IDN: 2002–12) 3,500 – Number of poor, less than scenario – 84 PPD 1.90 per day, in millions (rhs) 3,000 – – 72 Nigeria (NGA) real GDP per capita, constant 2010 US$ 2,500 – – 60 NGA: business as usual – 48 2,000 – (2016–19) scenario 1,500 – – 36 1,000 – – 24 NGA: 1980s redux (1980–90) scenario 500 – – 12 Indonesia (IDN) real GDP per capita, Crude oil (Brent) price per barrel, constant 2010 US$ constant 2010 US$ (rhs) 0– –0 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 20 22 24 26 28 30 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 Source: World Development Indicators (WDI) for GDP and oil prices. World Bank estimates from PovcalNet, 2018–2019 Nigerian Living Standards Survey (NLSS), and WDI for the number of poor. 2 Overview RISING TO THE CHALLENGE: NIGERIA’S COVID RESPONSE The crisis has served as a wake-up call; since April, not adjust would further prolong Nigeria’s recession until Nigeria has undertaken long-awaited reforms to 2022. Such a scenario would see levels of public spending enhance economic resilience. The government has fall, gaps in human and physical capital widen, and moved, often in the face of vocal opposition, to: service delivery deteriorate. Collectively, these conditions could lead to social tensions becoming exacerbated. A • harmonize its two main exchange rates, ensuring deeper recession would also further strain the financial that billions of additional naira will flow into the sector, already weakened by a 14 percent increase in federation account, nonperforming loans (NPLs) and over 33 percent of • introduce a market-based pricing mechanism for banking sector loans in need of restructuring in the first gasoline and eliminating subsidies, half of 2020. • adjust electricity tariffs towards more cost- reflective levels, This edition of the Nigeria Development Update • cut back on non-essential expenditures and direct takes stock of the recently implemented reforms and resources towards the COVID-19 response (at proposes policy options to both mitigate the impact both federal and state levels), and of COVID-19 and foster a resilient, sustainable, and • increase the transparency of its debt and of its oil inclusive recovery. Managing the current crisis while and gas sector. strengthening the institutional and policy framework will require carefully sequenced reforms implemented Yet, much more remains to be done, and so Nigeria over the immediate- and near-term. Robust mitigation has a choice to make. Unprecedented times require and recovery policies would be based on five pillars unprecedented measures, and thus it is paramount that (Figure O.2): the pace of reforms in Nigeria is not only sustained but also deepened. Even if oil prices recover, a return to 1. Managing the domestic spread of COVID-19 business-as-usual will mean that economic growth will until a vaccine is distributed; continue to lag population growth, per-capita GDP 2. Enhancing macroeconomic management to boost will continue to fall, the number of poor will continue investor confidence; to rise, and Nigeria’s aspirations will fail to be realized. 3. Safeguarding and mobilizing revenues; Alternatively, if Nigeria can sustain the momentum of 4. Reprioritizing public spending to protect critical these reforms, the next few years could see the country development expenditures; and rise to its potential and make progress towards lifting 5. Supporting economic activity and access to 100 million Nigerians out of poverty. services and providing relief for poor and vulnerable communities. The cost of not advancing the reforms and deepening the measures already taken will weigh on Nigeria’s Within these pillars, our analysis has identified a set growth prospects. Slowing the current pace of reforms of 8 critical policy options for the short term. These implementation or abandoning them will be detrimental measures are expected to have a significant impact to achieve Nigeria’s development goals. In a downside on Nigeria’s growth prospects while alleviating the scenario where oil prices recover gradually but reforms disproportionate income loss of poor and vulnerable stall, the GDP growth rate would barely recover in 2021 households: and would rise to just 0.3 percent in a context of high inflation, slow job creation, and rising levels of poverty • Allowing the exchange rate to reflect market and inequality. A high-risk scenario marked by an fundamentals, which will preserve reserves, increase adverse global context where macroeconomic policies do the naira value of external financing and dollar- Overview 3 NIGERIA DEVELOPMENT UPDATE DECEMBER 2020  igerian authorities can build on recent actions to deepen the reform agenda and lay foundations Figure O.2. N for a robust, inclusive, and sustainable recovery. Pillars of robust mitigation and recovery policies 5. Supporting economic activity 1. Managing the outbreak until a and access to services and vaccine is distributed providing relief for poor and vulnerable communities 4. Reprioritizing public 2. Enhancing macroeconomic spending to protect critical management to boost development expenditures investor confidence 3. Safeguarding and mobilizing revenues Source: World Bank. denominated revenue proceeds, and help boost • Continuing power sector reforms, i ncluding  investor confidence and reduce inflation. bringing electricity tariffs from an 80 to 100 percent cost-reflective level, and implementing regulations • Reopening land borders and easing foreign- to stop arbitrary estimated billing, accelerate mass exchange restrictions to limit inflationary pressures metering, and enforce payment discipline of the and increase the supply of food and staple goods. distribution companies, all aimed at improving the financial sustainability of the sector while ensuring • Mobilizing tax revenuesin a way that does not that the increases in average tariffs do not adversely negatively affect investment and growth, including a impact low-income households. review of tax concessions, excise taxes, and measures to enhance tax administration. • Consolidating the gasoline subsidy reform  by publishing detailed guidelines for the market-based • Strengthen the management of monetary policy gasoline price adjustment mechanism approved in toward the primary objective of price stability, March 2020. with more transparent targets and liquidity management mechanisms (e.g., by reducing the use • Extending the reach of social safety nets,including of discretionary Cash Reserve Ratio); and ensuring targeted cash transfers and livelihoods grants a clear distinction between public borrowing and for households, and expanding the provision of liquidity management. healthcare and other essential services for the poor and vulnerable. 4 Overview RISING TO THE CHALLENGE: NIGERIA’S COVID RESPONSE • Reducing food insecurity f or poor rural households the government has launched important new initiatives through the distribution of seeds and fertilizers, the through the National Social Investment Programs, provision of agricultural extension services, the use but critical financing gaps and institutional challenges of block grants for purchasing assets and equipment, continue to undermine the effectiveness of the social the upgrading of sanitary infrastructure in markets, protection system. Most safety nets are limited in scope, and the expanded availability of equipment for small- and social-protection programs cover only a small scale processing and packaging. fraction of their target populations. While technological innovations can improve the effectiveness of social protection programs and enhance their ability to reach poor and vulnerable households, the government must Taking a closer look at employment establish a fiscally sustainable social protection system conditions, social protection, public that integrates the disparate programs implemented at health and education in Nigeria the federal, state, and local levels. under COVID-19 Nigeria’s Health Response to the COVID-19 Work and COVID-19 in Nigeria. Findings from a Pandemic. Nigeria ranks among the top ten countries sample of household heads interviewed in successive heavily affected by COVID-19 in Africa. Nigeria’s rounds of the Nigeria COVID-19 National Longitudinal COVID-19 response focuses on strengthening Phone Survey (NLPS) since March 2020 indicate laboratory systems and enhancing risk communication that employment contracted sharply and job turnover and surveillance. The available indicators—such as the increased significantly in April, but both appear to have total number of deaths, the case fatality rate, and the stabilized by the end of August. Even though many total number of confirmed cases—show that Nigeria has Nigerians returned to work after the easing of strict fared reasonably well in responding to the COVID-19 lockdown measures in the early phase of the COVID-19 pandemic despite a significant decline in the delivery crisis, most households remain in an economically of essential health services. Yet, COVID-19 has had precarious situation. More than two in three households a substantial negative impact on service delivery for report lower incomes now than one year ago. Nigerian both disease control programs and essential health care households are facing increased economic precarity: services. unemployed workers have migrated back to the low- productivity agricultural sector, and reports of food The Impact of COVID-19 on Education. In response insecurity have increased substantially from the previous to the pandemic, the government implemented multiple year. Additionally, it appears that women’s working measures, both at the federal and state levels, including situation has been disrupted more than men’s as the the adoption of a Contingency Plan to ensure that the crisis has evolved. school community was protected. The plan aimed to ensure the continuation of education, provide safe Nigeria’s Social Protection System During COVID-19 water and hygiene facilities in schools, and train and and Beyond. Before COVID-19, about 40 percent sensitize the school community on preventive measures. of Nigerians were living below the national poverty During the school closures, Nigeria strived for learning line, and millions more were vulnerable to falling into continuity despite the abrupt closure, with distance poverty. Simulations suggest that the crisis could push learning reaching approximately 60 percent of school more than 10 million Nigerians below the poverty line children, a strong performance compared to other unless adequate mitigation measures are implemented. countries in the region. Nigeria will have to build on Recognizing the extraordinary scope of this challenge, its efforts to mitigate the effects of COVID-19 on Overview 5 NIGERIA DEVELOPMENT UPDATE DECEMBER 2020 education and accelerate progress. States need to ensure Making the most of young Nigerians’ economic that all kids go back to school under safe conditions. This potential: The case for more and better managed will entail a rigorous identification of children that, after international labor migration from Nigeria. schools reopened, did not go back to school, and the Travel restrictions and border closures caused by development of targeted policies to bring them back and COVID-19 have reduced international migration, reduce dropout rates. Resources such as administrative including migration from Nigeria. However, economic data, the available phone surveys, and effective social and demographic pressures will continue to drive mobilization would be important to identify not only international migration over the medium term. Given children who did not return to school but also those at the overwhelming evidence of the economic benefits risk of dropping out. of economic migration in the global context, Nigeria stands to benefit from creating new migration corridors as well as harnessing additional returns from existing corridors. Opening new, safe, and orderly channels for Spotlights: Closing gender gaps international labor migration could unlock unrealized and managing labor migration gains for Nigeria’s economy and help facilitate its recovery. Opening Development Opportunities in Nigeria by Closing Gender Gaps. Gender disparities in economic opportunities and earnings limit inclusive development and constrain growth. Data from the 2018–19 Nigerian household survey indicate that women earn significantly less than men for performing the same economic activities. For example, female plot managers produce 30 percent less per hectare than their male counterparts; female entrepreneurs earn 66 percent less in profit, and women who hold salaried positions received 22 percent less in wages. Further analysis of the household survey data reveals seven key constraints that could be driving lower earnings for women, including: choice of low- value crops, limited access to farm inputs, and access to less productive labor for women farmers; low levels of growth capital and subordinate position in the value chain for women entrepreneurs; sectoral segregation for female wage earners; and multiple non-work pressures on women’s time. These constraints could reinforce one another, further limiting women from reaching their full potential. Closing gender gaps in key economic sectors could yield between US$9.3 and US$22.9 billion in additional GDP in Nigeria. 6 Overview Part 1: Recent Economic Developments and Outlook for Nigeria NIGERIA DEVELOPMENT UPDATE DECEMBER 2020 Economic Growth: Nigeria has plunged into a recession Almost a year on and the economic shock of in crop production (90 percent of the sector). COVID-19 continues to take a high toll on the Agriculture activity proved to be more resilient than Nigerian economy. Following the twin shocks of the other sectors and is expected to recover in the third COVID-19 outbreak and related containment measures, quarter as farmers have returned to work in July and plus the subsequent global oil price shock, economic August. Other sub-sectors have performed poorly, activity in Nigeria shrunk by 6 percent in the second however. According to a recent survey, for example, quarter of 2020 and by 3.1 percent in the third quarter livestock sales have been significantly impacted. of 2020, with a cumulative contraction of 2.5 during the first three quarters of 2020. As with almost all countries • The oil industry c  ontracted by 6.5 percent in Q1– around the world, Nigeria has faced a barrage of daunting Q3 2020. Nigeria’s economy is highly dependent external factors. Chief among these is the lower foreign on sales of crude oil. While it only represents about demand arising from the global recession, which, among 10 percent of total GDP, the oil industry attracts other impacts, has led to a slump in oil exports. Private around 50 percent of total foreign exchange and investors have also become more risk-averse, resulting in comprises more than 80 percent of exports. Its falling investment growth rates. Consumption figures performance has a direct effect on the creation of are also down due to the pandemic’s toll on private jobs and revenues in related sectors through sectoral employment and government revenues, which have complementarity. It also impacts unrelated sectors, collectively hit people’s disposable income hard. The mainly through an income effect. Lower oil prices depth of impact is seen in the performance figure for and lower production have translated into lower the second quarter. When adjusted seasonally, never revenues for both the public and private sectors. This, before has Nigeria registered a quarterly collapse of such in turn, has accelerated the decline in services output, magnitude (Figure 1.1). Third-quarter data confirm investment, and credit growth. that Nigeria is in a deep recession. Due to the recession, 67 percent of Nigerian households reported a decrease • The non-oil industry,including manufacturing and in income (see the section on Work and COVID-19 in construction, declined by 4.6 percent in Q1–Q3 Nigeria). As in other countries in the region with high 2020, driven by a contraction in all the sub-industries levels of informality, lockdown measures have proved (except for pharmaceutical products, motor vehicles, hard to sustain in Nigeria, and the knock-on effects of and water supply) as a result of lockdown measures COVID-19 have disproportionately hit Nigeria’s poorest (see Figure 1.3) and the subsequent contraction in and most vulnerable communities. domestic demand, which halted the industrial output between March and May. Every week that the non-oil • Agriculture  grew by 1.7 percent in Q1–Q3 2020, industry was completely paralyzed was equivalent to below the growth of 2.4 percent in the same period a loss of GDP growth of 0.3 percent. Once industrial of 2019. The production of grains for domestic activity could resume operations, most of the sub- consumption such as millets, rice, and corn, and industries faced lower demand and excess inventories, other produce as beans and cassava, drove the growth which translated into lower utilization of installed 8 Part 1: Recent Economic Developments and Outlook for Nigeria RISING TO THE CHALLENGE: NIGERIA’S COVID RESPONSE  igeria’s quarterly GDP decline in the Figure 1.1. N  ervices chiefly responsible for Q1–Q3 Figure 1.2. S second quarter is the worst ever recorded. 2020 contraction. Quarterly real GDP growth Contribution to GDP growth Percent Percent 20 – 4– 15 – 13.9 3– 10 – 2– 5– 1– 0– -3.1 0– -5 – -2.4 -2.8 -1 – -6.0 -10 – -2 – -15 – -3 – -20 – -4 – -25 – -30 – -26.4 -5 – H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 H1 Q3 11 12 13 14 15 16 17 18 19 f 20 20 20 20 20 20 20 20 20 20 2015 2016 2017 2018 2019 2020 20 ▬ GDP growth y-o-y ▬ GDP growth, Seasonally Adjusted Annualized Rate (SAAR) J Agriculture J Oil industry J Non-oil industry J Services Q Real GDP, percent y-o-y, market prices Source: NBS and World Bank estimates. Source: NBS and World Bank estimates.  ockdown measures imposed by the government were effective in reducing mobility. Figure 1.3. L Google mobility index for Nigeria Index r r r r r r r r r r ay y t t t t t t t t Ma Ma Ma Ma Ma Ma Ma Ma Ap Ap Ma Oc Oc Oc Oc Oc Oc Oc Oc 18 20 23 24 25 26 28 29 13 23 4M 18 19 20 21 23 24 25 28 31 10 – 0– -10 – -20 – -30 – -40 – -50 – -60 – -70 – (i) FG (i) FG asked (i) Federal (i) FG (i) All governors (i) The Lagos (i) Lagos (i) FG (i) Lagos state suspended all non-essential government announced announced the state eased the reviewedmaintained announced the economic workers on orders closure lockdown in ban of interstate position on 24-hour curfew curfew earlier imposition of a activities in Grade Level 12 of all schools. Lagos and movement. which was eased of imposed, to 24-hour curfew Ogun, Lagos and below to Abuja. lockdown. earlier imposed, start at 8pm in all parts of and FCT for work from to now run from and ends at the state, with two weeks. home. 6pm to 8am. 6am daily. effect from (i) FG extended the ongoing 4pm, but later (ii) Ekiti state lockdown for two weeks. (ii) Edo state banned (i) FCT ordered workers at limited the (i) Osun state reviewed to gathering of Grade level 1 to 12 to stay at curfew to announced a 9pm more than 20 home as part of measures to commence from 24-hour curfew. persons. curb the spread of coronavirus. (i) Edo State Government 4pm to 6am (i) FG eased lockdown. announced the imposition of daily. (i) Osun relaxed (i) Ekiti state encouraged (i) Imo state banned Selected businesses and a 24-hour curfew across the curfew, to start from non-essential workers to weddings, burial offices can open from 9am state with effect from 4pm 8pm to 6am. work from home. ceremonies as well as to 6pm. open religious activities. (ii) Mass gathering of more (i) Lagos State Government (i) Lagos state (i) Ogun state announced the than 20 people outside of a suspended all government activities government fully closure of all establishments with workplace was prohibited. and declared lockdown for 72 hours in relaxed the curfew more than 50 people at a time. view of growing violence in the state. earlier imposed. ▬ Retail and recreation ▬ Grocery and pharmacy ▬ Transit ▬ Workplaces Source: Nigerian authorities, various news sources. capacity and production levels below those observed • Services declined by 3.6 percent in Q1–Q3 2020, in the second quarter and third quarters of 2019. but this figure masks significant disparities across Only construction experienced a moderate recovery subsectors. Information and communication services in the third quarter of 2020. grew by 12.5 percent due to the consumption of Part 1: Recent Economic Developments and Outlook for Nigeria 9 NIGERIA DEVELOPMENT UPDATE DECEMBER 2020 more data and broadcasting services, as both sectors National Petroleum Corporation (NNPC), the largest benefited from the curfew measures imposed by the oil corporation in Africa. This marks a first for NNPC government. Financial services grew by 14.7 percent, since its inception. driven by the expansion of credit to the private sector as the result of the financing stimulus led High-frequency indicators suggest a reduction in the by the Central Bank of Nigeria. Health services pace of decline in the second half of the year, albeit grew by 1.9 percent due to higher demand related with expected growth remaining negative overall. to COVID-19. In contrast, all the other services High-frequency indicators strongly correlated with fell—trade by 10.5 percent, accommodation, GDP growth show that economic activity continues and food services by 18.9 percent, transportation to underperform (Figure 1.4) but is slowly recovering and storage by 28.0 percent, and real estate by in the second half of the year. While GDP growth is 13.9 percent. These sectors concentrate a large share expected to be negative in the fourth quarter of 2020, of employment, mainly informal and urban, which this could indicate a moderate contraction relative to the was severely affected by the lockdown measures second and third quarters of 2020. Nigeria Purchasing imposed by the government. Manager’s Index (PMI) is deemed by the private sector as a leading indicator of a potential rebound in the Nigeria’s economy was vulnerable when COVID-19 second half of the year. Although in November it has hit. Before the pandemic, the economy was still moved into positive territory and the gap has closed recovering from the 2016 recession, and Nigeria’s relative to the second quarter, the recovery has been business environment had deteriorated due to the slow and only for the manufacturing sector. Moreover, presence of multiple foreign exchange rates, trade the Business Expectation Survey Report in October and restrictions, and financing of the public deficit by the the Q3 Consumer Expectations Survey conducted by Central Bank of Nigeria (CBN), on top of long-standing the Central Bank of Nigeria both reveal a high level of development challenges including low public revenues, uncertainty and risk aversion on the part of consumers slow human capital accumulation, infrastructure gaps, and firms. Most firms continue to see the state of the and weak governance. economy through a pessimistic lens, particularly when it comes to access to credit. The majority of consumers, The government proved agile and ambitious in on the other hand, say they will wait before investing or response to COVID-19, undertaking bold reforms purchasing durable goods this year or next. to improve the business environment and increase the economy’s resilience. Reforms in times of crisis The Nigerian economy is expected to shrink by are not uncommon in Nigeria, with business-enabling about 4 percent in 2020. All sectors are expected to reforms and low oil prices typically going hand in hand contribute to this result, with services showing the in the recent past. Yet, this time the authorities saw an largest contribution to the difference between GDP opportunity to address several long unresolved issues. A growth in 2019 and 2020—half of the 6.4 percentage cap on pump prices was removed and a market-based points of contraction in this period. One outcome of the mechanism was established, for instance, allowing low oil price is the tighter ceiling on Nigeria’s production prices to adjust and reach a record price in November. imposed by the Organization of Petroleum Exporting Electricity tariffs are also in the process of being adjusted. Countries (OPEC), and oil production is expected Moreover, the government achieved a major milestone to remain subdued and average 1.8 million barrels per by harmonizing key exchange rates. It also took a major day, below the average of 1.9 million barrels per day step towards improving transparency in the oil sector by observed between 2016 and 2019. Thus, lower exports publishing audited financial statements for the Nigerian explain a significant expected decline in GDP, reflecting 10 Part 1: Recent Economic Developments and Outlook for Nigeria RISING TO THE CHALLENGE: NIGERIA’S COVID RESPONSE the dependence of Nigeria on the oil industry, followed A modest recovery is projected for 2021, but Nigeria’s by public and private consumption. Even supposing outlook is subject to a high degree of uncertainty. private consumption, public consumption, and imports The pace of economic recovery next year is expected to could escape the impacts of the pandemic, the decline be slow. Indeed, among global oil-producer economies, in exports alone would drag GDP growth below Nigeria is among the three least likely to post positive -4.1 percent (Figure 1.6). GDP growth in 2021. GDP per capita is also projected to continue declining with productivity’s contribution to growth negative throughout this period. By the end  “heat map” of high-frequency indicators suggests that Nigeria’s economy could continue Figure 1.4. A experiencing negative growth in the fourth quarter. Heatmap of high-frequency indicators in Nigeria 2019 2020 Indicators Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Headline Inflation Food Inflation Crude Oil Price Manufacturing PMI Non-Manufacturing PMI Business Outlook on the Economy External Reserves (end of Period) Exchange Rate Premium Turnover - IEFX (NAFEX) - (end of period) FAAC MPR 91 Day T-Bill Rate Prime Lending Rate Money Supply (M3) Credit to Private Sector Currency in Circulation Source: CBN, NBS, Financial Markets Dealers Quotation (FMDQ), Aboki FX, and World Bank estimates. Notes: Color coding is based on the deviations of standardized values of each indicator relative to a 5-years mean. Red represents growth above the mean (the indicator is heating), with darker shades of red representing stronger potential for recovery. Blue represents the opposite.  he decline in services and the non-oil Figure 1.5. T  he contraction of exports is equivalent to Figure 1.6. T industry is driving the reduction in GDP almost three times the fall in GDP growth. growth. Contribution to GDP growth, sectoral components Contribution to GDP growth, expenditure components 3– Total contribution to change in GDP 8– Total contribution to change in GDP 2.2 between 2020 and 2019: -6.4 pp between 2020 and 2019: -6.4 pp 6.5 2– 6– 4– 1– 2.2 2– 0.4 0– 0– -0.3 -0.3 -0.8 -1 – -2 – -1.2 -4 – -2 – -1.5 -4.1 -6 – -3 – -8 – -3.3 -4 – -10 – -4.1 -5 – -12 – Private Public Gross -12.1 Oil Non-oil consump- consump- fixed capital 2019 Agriculture industry industry Services 2020f 2019 tion tion formation Exports Imports 2020f Source: NBS and World Bank estimates. Source: NBS and World Bank estimates. Part 1: Recent Economic Developments and Outlook for Nigeria 11 NIGERIA DEVELOPMENT UPDATE DECEMBER 2020  igeria’s GDP Growth in 2021 is expected Figure 1.7. N  DP per capita is expected to continue Figure 1.8. G to be one of the lowest among oil declining beyond 2021. producers. Real GDP growth in oil-producer countries GDP and Population Growth 2021f Percent 7– 9– 8– MYS 6– MMR 7– 6– 5– ALB 5– ECU BOL COL 4– 4– DZA 3– 2– 3– TLS AGO QAT 1– CMR SDN KAZ TCD 0– BHR 2– IRQ SAU AZE GAB -1 – IRN GHA -2 – 1– ARE NGA -3 – KWT OMN -4 – 0– -5 – 20 09 20 10 20 11 20 12 20 13 14 2015 2016 017 018 2019 020f 021f -12 -10 -8 -6 -4 -2 0 2 20 2 2 2 2 2020f J Real GDP growth ▬ Population growth Source: Source: NBS and World Bank estimates. Source: NBS and World Bank estimates. of 2021, it is likely to have reached similar levels to those of 2009, thus reversing a decade of growth (Figure 1.8). Nigeria requires strong measures to attract private investment, diversify its economy, and create adequate jobs. Failure on these fronts could see the country becoming trapped in an extended cycle of low growth (see the Economic Outlook section). 12 Part 1: Recent Economic Developments and Outlook for Nigeria RISING TO THE CHALLENGE: NIGERIA’S COVID RESPONSE Prices: Higher inflation is driven by food price spikes Inflation was already increasing since mid-2019, services, pharmaceutical products, passenger transport and it is projected to rise further in 2020. This by air and by road, and motor cars. year, inflationary pressures related to the COVID-19 pandemic, such as disruptions in value chains and The government has implemented important and production processes, exacerbated the double-digit much-needed policy reforms that in the short term are increase in prices that has been chronic in the Nigerian expected to contribute to inflation, albeit moderately. economy since 2016. Inflation was already high in 2019 Since the last quarter of 2019, the authorities have (11.4 percent) due to insecurity and conflict issues in the implemented a series of bold reforms that were expected Middle Belt area and because of Nigeria’s border closure to mobilize additional revenues, support business policy. These problems have continued to fuel inflation growth, and reduce pressures on public finances. While throughout 2020. Monetization by the CBN of the fiscal these measures have translated into higher prices for deficit, a key driver of inflation in the past, has decreased some products, their impact on headline inflation has significantly and has not contributed to the acceleration been moderate: of inflation this year. This is partly due to a significant decline in Open Market Operations (OMO) bills sales • Increase in the Value Added Tax (VAT) rate: and partly due to the Central Bank’s ongoing practice Nigeria’s 2019 Finance Bill, passed in November of mopping up excess liquidity through additional cash 2019, aimed at raising additional revenues for the reserve requirements. Federal Government of Nigeria to meet is 2020 budget targets and to align them with international The surge in food prices has been the key driver standard practices, support small businesses and of inflation. In October, the Consumer’s Price encourage investments in infrastructure. As part Index increased by 14.2 percent y-o-y, and both of this package of reforms, the rate for VAT was urban inflation (14.8 percent) and rural inflation increased from 5 percent (a remarkably low rate) (13.7 percent) accelerated. The composite food index to 7.5 percent. As of October 2020, this has had a reached 17.4 percent, a 30-month high, due to increases limited impact on prices as most of the goods in the in prices of bread and cereals, potatoes, yam, and consumer’s basket were exempt from VAT and there other tubers, meat, fish, fruits, and oils and fats. The is a new threshold for Small and Medium Enterprise hike in the cost of staple food was driven by supply (SMEs) that reduces their tax burden. and distribution constraints. These include low yields associated with restrictions that prevented seasonal • Adjustment of electricity tariffs towards more migration during harvest season, security issues in the cost-reflective levels and introduction of a country, border closures, and limited access to markets. market-based gasoline pricing mechanism: But inflation was not exclusively supply-led. In October, Since November, an adjustment of electricity tariffs  for instance, core inflation stood at 11.1 percent, driven towards more cost-reflective levels has reduced the by increases in prices of medical services, hospital expensive subsidy that characterized the sector for the last years and that failed to increase access to Part 1: Recent Economic Developments and Outlook for Nigeria 13 NIGERIA DEVELOPMENT UPDATE DECEMBER 2020  rojected levels of inflation in Nigeria Figure 1.9. P  eadline inflation hit levels not seen Figure 1.10. H for 2020 are among the highest in Sub- since February 2018. Saharan Africa. Average annual inflation in SSA Consumer price index, y-o-y percent change 2020f Percent 25 – 25 – Land Border Closure Feb-18 20 – ETH 20 – 17.6 17.4 15 – COD SLE 15 – 14.3 14.2 NGA 11.1 GHA 10 – GIN 10 – MWI BDI STP KEN NER GMB 5– 5– MDG BFA TCD LSO 0– MLI GNB CPV 0– 7 7 7 7 18 -18 l-18 -18 -19 -19 l-19 -19 -20 -20 l-20 -20 n-1 r-1 l-1 t-1 n- r t n r t n r t -4 1 6 11 16 Ja Ap Ju Oc Ja Ap Ju Oc Ja Ap Ju Oc Ja Ap Ju Oc 2019 ▬ Food inflation ▬ Headline inflation ▬ Core inflation Source: World Bank estimates. Source: NBS and World Bank estimates.  rices are rising faster in the northern Figure 1.11. P electricity. Electricity tariffs have been adjusted states. based on different bands, and while this is expected Inflation rate across Nigerian states to contribute to higher inflation in the short-term, October headline inflation, percent the full effect will be observed in the first quarter Sokoto of 2021. The steep decline in oil prices offered an Katsina Jigawa Yobe Kebbi Zamfara opportunity to eliminate gasoline subsidies and to Kano Borno adjust gasoline pricing to reflect international prices. Kaduna Bauchi Gombe In the next few months, the gasoline market-pricing Niger Plateau Adamawa reform is not expected to have a significant impact FCT Kwara Oyo Nasarawa Taraba on inflation given the current oil price outlook, but it Osun Ekiti Kogi Benue Ogun Ondo is expected to contribute to higher inflation once oil Lagos Edo Ebonyi Enugu prices rise. Nonetheless, it is worth mentioning that Anambra Delta Imo Cross River Abia even with the elimination of the gasoline subsidy, Bayelsa Akwa Ibom Rivers ‡ 11.5–13.5 J 13.6–15.0 J 15.1–17.7 Nigeria continues to have one of the lowest gasoline Source: NBS and World Bank estimates. prices in the world. High inflation could dampen growth in 2020–21. inflation will constrain attempts to improve business CBN’s expansionary monetary policy in a context of sentiment (and thus consumption and investment). It is limited capital inflows and exchange rate control could also likely to diminish real purchasing power amid low fail to control inflation. Expectations of inflation are not productivity and high unemployment. anchored, with firms and consumers both anticipating it to rise in the next 12 months. This reduces the effectiveness of monetary policy even under a monetary- targeting framework. Further fueling inflation during 2021 are import restrictions, on the one hand, and the ongoing conflict in the Middle Belt, on the other. High 14 Part 1: Recent Economic Developments and Outlook for Nigeria RISING TO THE CHALLENGE: NIGERIA’S COVID RESPONSE The External Sector: The COVID-19 shocks have put Nigeria's external sector to the test Nigeria’s current account is expected to remain in Imports are projected to decline by around deficit in 2020 due to the sharp drop in oil exports 36 percent this year, softening the pressures on the and remittances caused by COVID-19. The external current account. The value of oil exports is projected position had weakened since 2019, when the current to decline by 41 percent due to lower exported volume account balance (CAB) recorded a deficit for the first arising from shrinking oil production, as well as lower since 2015. In 2020, the CAB deficit is expected to oil prices. At the same time, Nigeria’s imports have be 1.8 percent of GDP, albeit lower than the deficit fallen because of disruptions with its trade partners of 3.8 percent of 2019. The country’s trade balance is (China being the largest) arising from COVID-19- predicted to reach -5.6 percent of GDP in 2020, a drop linked lockdown measures and a decline in domestic largely explained by the significant decline in oil exports. demand for consumption and capital goods. Moreover, Net transfers are expected to fall from 5.9 percent of even after lockdown measures were lifted and trade GDP in 2019 to an estimated 5.2 percent in 2020 due relations normalized, businesses still struggled to place to the fall in diaspora remittances (over 80 percent of orders for required imports. This was partly the result of all current transfers). However, Nigeria’s CAB deficit is foreign exchange supply shortages, occasioned by limited not expected to be as severe as that of other oil-exporting supply to the IEFX window by the CBN, which is the countries such as Libya, Iraq, Kuwait, and Sudan due to main supplier of FX to the economy. The trade balance Nigeria greater contraction in imports (Figure 1.13). is projected to deteriorate further in 2021 and 2022 as imports are expected to pick up faster than oil exports.  negative trade balance and declining Figure 1.12. A  igeria’s negative CAB in 2020 will be Figure 1.13. N remittances are contributing to a less severe than that of structural peer negative CAB. countries.1 Composition of the Current Account Balance Nigeria’s CAB in Comparison with Structural Peer Countries Percent of GDP Percent of GDP 8– 10 – 6– 4– 5– 2– 0– 0– -2 – -5 – -4 – -6 – -10 – -8 – -10 – -15 – 2016 2017 2018 2019 2020f 2021f 2022f 2016 2017 2018 2019 2020f 2021f 2022f J Net income J Net transfers J Trade (G&S) ▬ Current account balance J Structural peers J Nigeria Source: CBN and World Bank estimates Source: CBN and World Bank estimates. 1 The structural peer countries in this context are countries that are similar to Nigeria in terms of composition of exports—predominantly crude oil; exceeding 85 percent of total merchandise exports. These countries include Azerbaijan, Iraq, Kuwait, Libya, Qatar and Sudan. Part 1: Recent Economic Developments and Outlook for Nigeria 15 NIGERIA DEVELOPMENT UPDATE DECEMBER 2020 Remittances to Nigeria dropped sharply in 2020 additional driver of this reversal in migration trends is due to rising unemployment in advanced economies currency values in remittance-source countries, which where the Nigerian diaspora resides. Most of are expected to depreciate against the US dollar. Nigeria’s diaspora populations are located in advanced economies, most notably the United States and the Nigeria’s external position has faced additional United Kingdom. The pandemic has led to increased pressures in 2020 due to the triple hit on capital unemployment in these countries, causing remittances inflows caused by high levels of global risk aversion, to contract. As of June 2020, when international uncertainty around foreign exchange policies, and lockdowns were widespread, remittances had declined a prevailing low-interest rate regime. The financial by 42 percent year-on-year. Historically, remittances account balance shifted into negative territory in the had proven less volatile than other international capital second quarter of the year, as a result of significant net flows. When oil prices crashed in 2015, for example, portfolio outflows. Net Foreign Portfolio Investment remittances remained largely unaffected. As highlighted (FPI) is projected to hit -2.1 percent of GDP in 2020. in the June 2020 edition of the Nigeria Development As highlighted in earlier NDU editions, persistently Update, COVID-19’s shock to oil prices and remittances low levels of Foreign Direct Investment (FDI) have put comprises a unique feature of the pandemic. The global Nigeria at risk of relying unduly on portfolio capital outlook for remittances is uncertain and will depend (“hot money”) to keep the financial account afloat. This on COVID-19’s impact on global growth, which, in risk materialized in 2020 with Nigeria now experiencing turn, depends on success at containing the pandemic. a negative financial account balance. Going forward, remittances to low and middle-income countries (LMICs) are expected to stay low, dropping The CBN’s exchange rate management strategy has by an estimated 7.5 percent in 2021. This is due to the tempered the decline in external reserves. Faced with continuation of a trend witnessed after the COVID-19 lower external reserves, the CBN cut off FX supply to outbreak when migrants began returning to LMICs the country’s bureau de change (BDCs) in March and in large numbers (especially as lockdowns eased) and subsequently to some of the other market windows fewer workers in these countries looked to migrate. An (e.g. the SME window and the window for “invisibles”,  egative net portfolio outflows and low Figure 1.14. N  he CBN has maintained tight controls to Figure 1.15. T foreign direct investment will lead to a preserve its FX reserves. negative financial account balance in 2020. Composition of the Capital Account Balance Movement in Nigeria’s Gross Reserves Percent of GDP US$ billion Months of imports 4– 50 – – 10 3– –9 2– 40 – –8 –7 1– 30 – –6 0– –5 -1 – 20 – –4 -2 – –3 -3 – 10 – –2 -4 – –1 -5 – 0– –0 2016 2017 2018 2019 2020f 2016 2017 2018 2019 2020f J Foreign direct investment J Foreign portfolio investment (excl. Eurobonds) ▬ Gross external reserves (end period) ▬ Equivalent months of imports, rhs J Other investment J Government borrowing (net) Q Financial account balance Source: CBN and World Bank estimates. Source: CBN and World Bank estimates. 16 Part 1: Recent Economic Developments and Outlook for Nigeria RISING TO THE CHALLENGE: NIGERIA’S COVID RESPONSE such as foreign school fees). It also significantly reduced its supply to the IEFX window. Even when it resumed sales on the IEFX window, it barred commercial banks from processing FX purchases for transactions routed through buying agents or other third parties. This inevitably prevented many importers from accessing FX through the IEFX window as few of them purchase their merchandise directly from the ultimate producers or suppliers. Gross external reserves declined from US$39 billion at the end of 2019 (4.6 months of import cover) to US$35.7 billion at the end of October 2020, covering an equivalent of about 5 months of imports. Part 1: Recent Economic Developments and Outlook for Nigeria 17 NIGERIA DEVELOPMENT UPDATE DECEMBER 2020 Monetary and Exchange Rate Policies: Continuing with the policy adjustments sparked by COVID-19 is critical Following the economic contraction caused by the It is critical to continue working towards full yet COVID-19 shock, the CBN’s monetary policy focused managed and sequenced exchange rate adjustments more on promoting economic growth than stabilizing with options available to mitigate the associated prices. Despite an acceleration in inflation throughout costs. This plan will achieve its goal if it is carried out the year (led by food prices), the CBN lowered the in line with a credible communicated plan on not Monetary Policy Rate (MPR) in May and September. only maintaining the unified exchange rates, ideally On each occasion, it cited the need to support a return merged in a single window, but also showcasing more to economic growth.2 CBN also deepened and expanded flexibility—still with monetary authorities’ oversight and its development policy interventions to mitigate interventions. Moreover, the potential adverse impacts COVID-19 impacts on households and businesses. of any exchange rate adjustment can be mitigated This included moves to lower interest rates on all its through social protection measures targeted to poor and subsidized interventions, as well as the introduction of low-income Nigerians. The government’s Economic a moratorium on interest payments for these facilities. Sustainability Plan (ESP), which was developed in Presented below is a timeline of the monetary and other response to the COVID-19 crisis and which was policy actions by the CBN between June and October finalized for implementation in June 2020 highlights 2020 (Figure 1.16), updating the timeline presented in monetary policy reforms aimed at: (i) unifying exchange the previous edition of this report for March and May rates to maximize naira returns to the federation account 2020. from FX inflows; and (ii) managing the exchange rate “in a sustainable manner”. This highlights the importance The CBN simultaneously continued to moderate for Nigeria to institute a unified and flexible exchange banking sector liquidity. The CBN imposes an rate regime, operating in a more market-determined additional Cash Reserve Requirement (CRR) on banks manner with the ability to respond to shocks, with that do not comply with a minimum loans-to-deposit CBN’s oversight and power to intervene to smooth large ratio (LDR) of 65 percent since 2019. While the CBN and disruptive FX fluctuations as necessary. has relaxed the compliance of this indicators based on a case basis, a more symmetric application of the CRR, with liquidity released back to the banks once they comply with CBN requirements, could help banks to mobilize additional deposits. This in turn could increase the effectiveness of monetary policy and boost private sector credit growth. 2 In May, the MPR was reduced from 13.5 percent to 12.5 percent and it retained the spread of +200/-500 basis points around the MPR, effectively reducing the rate charged to banks for borrowing from CBN from 15.5 percent to 14.5 percent. In September, it further reduced the MPR to 11.5 percent, but adjusted the spread of +200/-500 basis points around the MPR to +100/-700 basis points; effectively reducing the rate at which CBN lends to banks from 14.5 percent to 12.5 percent. 18 Part 1: Recent Economic Developments and Outlook for Nigeria RISING TO THE CHALLENGE: NIGERIA’S COVID RESPONSE EFX turnover remains very low and there is a sizeable premium between the IEFX rate and the Figure 1.16. I BDC (parallel) rate. FX Market in Nigeria Exchange rate (Naira/US$) IEFX turnover (US$ billion) 550 – – 2.0 500 – – 1.8 – 1.6 450 – – 1.4 400 – – 1.2 350 – – 1.0 300 – – 0.8 – 0.6 250 – – 0.4 200 – – 0.2 150 – –0 4-Jan 2-Jun 1-Jul 26-Jan 23-Jun 5-Jul 23-Jun 1-Aug 30-Aug 8-Jan 6-Jun 5-Aug 28-Jan 2-Feb 28-Sep 24-Feb 6-Feb 22-Jul 3-Sep 26-Feb 25-Nov 3-May 27-Oct 27-Dec 25-May 31-Oct 29-Nov 19-Oct 5-Apr 2-Oct 30-Dec 20-May 3-Mar 4-Apr 27-Mar 26-Apr 7-Mar 7-May 20-Aug 18-Sep 26-Mar 20-Apr 2016 2017 2018 2019 2019 2020 J IEFX Window (NAFEX) - Turnover ▬ IEFX Window (NAFEX) - Closing ▬ Official (inter-bank) ▬ Parallel market rate Source: CBN, FMDQ, Aboki FX.  he CBN continues to adapt monetary policy in response to the COVID-19 crisis. Figure 1.17. T Timeline of government actions from June to October 2020 to mitigate COVID-19 impacts (i) NNPC developed (i) The Nigerian Government (i) The CBN unveiled guidelines for Non-Interest (i) FG announced the re- (i) The CBN issued guidelines for accessing the contact tracing software released the Economic Financial Institutions under its Agri-Business, Small opening of 14 airports Healthcare Sector Research and Development application to check the Sustainability Plan (ESP) and Medium Enterprise Investment Scheme across the nation for full Intervention Scheme (HSRDIS) grant. spread of COVID-19 designed to address the (AGSMEIS) and Micro, Small and Medium domestic operations. pandemic. economic challenges of the Enterprises Development Fund (MSMEDF). (i) CBN reduced (i) CBN amended the COVID-19 pandemic. MPR by 100 bps to Health Sector 11.5 percent, Research and (i) CBN announced that (i) The CBN and the i) The CBN reserved (i) MPR unchanged at 12.5 asymmetric corridor Development households and SMEs Bankers’ Committee 60 percent of its N220 percent. CRR at 27.5 percent adjusted from Intervention Scheme applying for the N50 billion outlined how to get the billion MSMEs and Liquidity ratio at 30 percent. +200/-500 bps to (HSRDIS) guideline to COVID-19 Targeted Credit creative sector loans. The Development Fund for +100/-700 bps help strengthen the (ii) CBN announced it has around the MPR. public healthcare Facility would not be required initiative is based on four women entrepreneurs. disbursed over N300 billion to to provide guarantors before pillars - Fashion, (ii) Retained the system with innovative operators in the SMEs space to CRR at 27.5 financing of research accessing the credit facility. Information Technology, cushion the effects of the Movie and Music. percent; Liquidity and development as a Coronavirus pandemic on their Ratio at 30 percent. response to the businesses. COVID-19 pandemic. 4-Jun 8-Jun 9-Jun 11-Jun 15-Jun 26-Jun 12-Jul 15-Jul 17-Jul 19-Jul 20-Jul 22-Jul 25-Jul 26-Jul 4-Aug 15-Sep 22-Sep 29-Sep 28-Oct (i) CBN’s disbursement from the (i) CBN announced the COVID-19 Intervention Funds disbursement of over N49 (i) The Federal (i) FG insists that (i) CBN released a (i) The CBN amounted to N107.45 billion. billion (out of N50 billion Executive Council states’ selection framework to introduced the (ii) N10.15 billion disbursed from targeted facility for households (i) The FG plans to roll out approved the committees of the implement the family Nigerian Youth the Healthcare Sector fund; and small businesses) to over N2.3trillion stimulus for MSMEs establishment of a Special Works home financing Employment N93.2 billion from the Real 80,000 families and to cushion the effect of COVID- N75 billion Nigerian Programme (SPW) initiative to fast track Action Plan to Sector Support Fund. households. 19 pandemic. Youth Investment must consider all the deployment of tackle the youth Fund (NYIF) to residents and not only 300,000 homes in employment (i) NNPC announced that it would invest 53 (ii) The CBN issued a guideline support enterprise indigenes of the state the 36 states and challenge in percent of the N21 billion COVID-19 donations to access its Non-Oil Export among 68 million in their selection for the FCT; and to Nigeria. from the oil and Gas sector in the construction Stimulation Facility. Nigerian youths the 774,000 jobs. create up to 1.5 of medical infrastructure across the six geo- (iii) The CBN plans to support between ages 18 million jobs in 5 political zones. local maize farmers. and 35. years. Source: CBN and Nairametrics. Part 1: Recent Economic Developments and Outlook for Nigeria 19 NIGERIA DEVELOPMENT UPDATE DECEMBER 2020 Box 1.1. A single, market-driven exchange rate would promote growth in Nigeria. One positive development to have emerged from the current economic crisis is the opportunity to harmonize Nigeria’s exchange rates. The previous system of differentiated rates was highly inefficient and jeopardized CBN’s balance sheet, and the overall performance of firms linked to the external sector through exports, investment, or debt. COVID-19’s negative effect on foreign portfolio inflows, a key driver of International Reserves, exacerbated pressures on the external sector. In April, the official exchange rate was devalued from N305/US$ to N360/$. Also, foreign exchange windows were converged into the Investors and Exporters Foreign Exchange (IEFX) window at a single rate (Nigeria Autonomous Foreign Exchange Rate, NAFEX) different from the official rate. At the time of the harmonization, CBN promised to allow this rate to reflect market forces. Later, in August, the official rate was further depreciated to N380/US$, within 2 percent of the NAFEX. Fully unifying exchange rates into a single, market-driven window would boost investor confidence. One of the key components of the exchange rate reform was to let market forces determine the optimal price, i.e., a price that adjusts to reflect the relative scarcity or abundance of foreign currency (FX). Yet, the prevailing exchange rate in the IEFX window has remained stable since April, a development unlikely to occur in a well-functioning FX market. As in any market where the price is fixed, the result has been a shortage of FX, with purchase orders accumulating (the so-called FX backlog). While a share of these orders corresponds to Foreign Portfolio Inflows (estimated at around US$ 2 billion), the total demand also includes purchases to service foreign debt and finance Capital Expenditure (CAPEX), to import raw materials and capital goods, and the maintenance component of Foreign Direct Investment (FDI). Moreover, this excess of demand has contributed to the increase in the premium with the parallel market. Had the NAFEX moved according to force markets, the purchasers’ opportunity cost would have been adequately reflected in the price of foreign currency, thus clearing the outstanding demand. The current exchange rate regime and its convertibility restrictions have aggravated the management of reserves and have significantly deteriorated the appetite to invest in the country. The exchange rate management reform remains incomplete and the unparalleled steps that CBN took toward the unification of exchange rates are not enough. In September, CBN resumed its supply of foreign exchange through spot and forward transactions to clear the backlog in an orderly manner. In reality, firms of all sizes and sectors continue to face difficulties when trying to access foreign currency and it is not clear when the backlog will be completely cleared. In practice, the current currency regime has become a capital controls regime. This is having a detrimental effect on investor’s confidence and is limiting the opportunity to bring FDI, which has been chronically low relative to regional comparators. This is further complicated by a ban on purchasing FX to import 45 goods—it constrains FDI in sectors where investment is most needed. A prime opportunity for Nigeria to accelerate its recovery would be to strengthen the efficiency of its FX market. While the CBN is rightly concerned about the potential impact of full flexibility and a sharp depreciation of the naira on living costs, an incomplete exchange rate adjustment also carries risks. Investment is needed to speed up the recovery of the economy in 2021 and beyond. Completing the exchange rate 20 Part 1: Recent Economic Developments and Outlook for Nigeria RISING TO THE CHALLENGE: NIGERIA’S COVID RESPONSE Box 1.1 continued management reform could substantially improve the perception of the country among new investors while enabling firms already operating in Nigeria to regularize their operations. Moreover, this measure could also reduce Nigeria’s overall macroeconomic risk profile, reducing the cost of accessing financing in international markets. Currently, markets perceive a high risk of the government returning to the previous regime once COVID-19 becomes globally managed and portfolio inflows return to Nigeria—and, in parallel, FX reserves return to the CBN.  he CBN has taken important steps to harmonizing exchange rates; greater exchange Figure B1.1.1. T rate flexibility would boost investor confidence. Premium between the parallel and official exchange rate and CBN FX measures Naira/US$ 110 – (i) CBN instructed banks to Post-No-Debit on account of 38 companies. 100 – 90 – 80 – (i) The CBN issued a (i) The CBN issued a circular removing buying circular authorizing and 70 – agents/companies or any instructing dealers to sell third parties from forex to end users at (i) The presidency noted that accessing its SMIS forex N386/$1. the move by the president to 60 – window through FORM M suspend the allocation of forex purchases. foreign exchange for food and (i) Information on the (i) The CBN barred fertilizer imports is an action 50 – operators of Payment borne out of patriotism. website of the CBN Service Banks (PSBs) from (i) CBN restricted access revealed the apex bank accepting foreign (I) CBN sold over $200 million to BDCs since they 40 – for the importation of had adjusted the official exchange deposits and to maize through the official exchange rate to N380/$1 resumed forex sales on Monday, September 7, 2020. CBN forex window. from N360.1/$1. accept any closed scheme This was expected to inject more liquidity to the retail 30 – electronic value (airtime) end of the foreign exchange market, and discourage (i) CBN reportedly instructed bidders as a form of deposit or hoarding and speculation. at its Secondary Market Intervention payment. 20 – Sales (SMIS) to increase their (i) The CBN directed banks to submit (i) CBN sold over $450 million to bidding price to N380/$1 floor. the names, addresses, and Bank BDCs since they resumed forex Verification Numbers (BVNs) of all the (i) The CBN pumped in $50 million into sales on Sept. 7. 10 – (i) CBN Governor confirmed that the apex exporters who have failed to repatriate the FX market in a bid to test demand (ii) BDC operators have urged CBN bank would continue to pursue unification their export proceeds, with plan to take and supply and more importantly, the to reconsider the margin allowed for necessary actions against defaulters. price of naira against the dollar. the currency traders. 0 – around its NAFEX rate. J u n u n u n u g Au g Au g Au g Au g ep ep Se p Se p ct 23 3J 13 J 6A 24 26 27 28 3S 6S 11 25 7O Source: CBN, various news reports. Part 1: Recent Economic Developments and Outlook for Nigeria 21 NIGERIA DEVELOPMENT UPDATE DECEMBER 2020 The Financial Sector: Safeguarding financial sector stability is paramount to sustain the recovery The banking system remains broadly sound, but The above early warning signs highlight the vulnerabilities have mounted. The COVID-19 shocks importance of strengthening crisis management and have translated into a 14 percent rise in Non-Performing resolution frameworks for the banking sector. The Loans (NPLs) since the start of 2020, reversing a 2-year legal underpinnings of these frameworks have been declining trend. NPLs in Nigerian banks increased to the recently upgraded in the amended 2020 Banks and equivalent of about US$3 billion at the end of June 2020; Other Financial Institutions Act (BOFIA) Law, with the top-3 sectors by volume were oil and gas, general inter-alia provisions reflecting the Financial Stability commerce, and construction.3 The increase in reported Board’s “Key Attributes of Effective Resolution Regimes NPLs took place even though on March 16, 2020 CBN for Financial Institutions”. The previous framework had granted regulatory forbearance for the restructuring of important lacunae with regard to the supervisory powers loans exposed to the sectors impacted by COVID-19; in to dilute shareholder equity in a failing institution and a August, CBN reported that over 33 percent of banking relative limited set of resolution tools. It would be critical sector loans would require restructuring. As shown by for the effectiveness of the revised law that regulatory previous crisis episodes (e.g. 2014–2015), the full impact developments include the formulation of a policy on loan portfolio quality takes several quarters to be fully framework for the resolution of domestically systemic reflected in bank financial statements and soundness important banks (D-SIBs), along with new/refined indicators4. The very recent confirmation that Nigeria processes for resolvability assessments. These measures entered into recession in Q3-2020, the continued rise would need to be complemented by an upgrade of the in inflation, and restricted access to foreign currency capacity of the statutory resolution authority (the Nigeria underscore the challenging environment in which Deposit Insurance Corporation) to effectively assess and Nigeria’s financial system is currently operating under. In execute resolution plans for D-SIBs. An upgrade of the this context, latent vulnerabilities will continue surfacing frameworks would provide the authorities with effective in the quarters ahead. Indeed, banking system stress tests and efficient tools to materially lessen the reliance on results reported in CBN’s Half Year 2020 Economic public support in resolving failing banks while moving Report suggest that the system’s regulatory capital could away from regulatory forbearance when dealing with fall below minimum requirement in scenarios involving undercapitalized entities. a recession that extends through end-2020 and into 2021. Currently there are a few middle-size banks with CBN’s policy initiatives and development finance heavy exposures to the oil and gas sectors and to large interventions following the onset of COVID-19 borrowers, along with thinner capital buffers, leaving have managed to stabilize private sector credit. them vulnerable to a combination of economic recession These policies have included a 200 basis points cut and low crude oil prices. in CBN’s monetary policy rate, the aforementioned regulatory forbearance for the restructuring of exposures impacted by COVID-19, a one-year softening of terms on CBN’s development finance interventions and 3 Both construction (19.5 percent) and general commerce (13.9 percent) had NPLs ratio well above the system average (6.4 percent) at end-June, while oil and gas (upstream and downstream) was at 5.4 percent, as per data reported by NBS. 4 The adoption of IFRS 9 in 2018 with the expected loss approach to asset classification would tend to shorten the period by when the full impact of the adverse shock gets reflected in financial statements and financial soundness indicators. 22 Part 1: Recent Economic Developments and Outlook for Nigeria RISING TO THE CHALLENGE: NIGERIA’S COVID RESPONSE  igeria’s financial sector development is Figure 1.18. N  redit growth has declined due to Figure 1.19. C lagging behind its peers. COVID-19 shocks. Private sector credit as percent of GDP Private sector credit, nominal month-to-month change Percent of GDP Percent 180 – last obs.=2019 7– 6.13 160 – 6– 140 – 5– 4– 120 – 3– 100 – 2.1 2– 80 – 1– 1.6 60 – 0– 40 – -1 – 20 – -2 – -2.2 0– -3 – 8 8 8 9 9 9 0 0 0 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 n-1 ay -1 ep -1 an -1 ay -1 ep -1 an -2 ay -2 ep -2 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20 Ja M S J M S J M S ▬ LMICs ▬ Malaysia ▬ Nigeria ▬ SSA ▬ South Africa Source: WDI and World Bank estimates. Source: CBN and World Bank estimates. new lending initiatives. Private sector credit fell by a modest 1.6 percent in real terms (y-o-y) at end-October notwithstanding that commercial and merchant banks have cut exposures, largely offset by microfinance banks and central bank financing.5 Monthly private sector credit growth has been negative in nominal terms in the September and October. These recent developments have taken place against a trend decline in Nigeria’s private sector credit in recent years (from a peak of 14.6 percent of GDP in 2016 to 10.7 percent of GDP as of Q3- 2020), well below the levels for SSA and LMICs (Figure 1.19). Firms face limited availability of medium- and long-term credit, high collateral requirements and high interest rates. On the positive side, commercial banks’ prime lending rate has fallen by 340 basis points since end-March, with the maximum rate falling by 212 basis points as deposit funding cost across different maturities have also fallen between 200–400 basis points. Reversing the trend decline in private sector credit and broadening access is a policy priority to help spur broad based growth and job creation. 5 The private sector used in CBN’s Monetary and Depository Corporations Survey referenced in this section of NDU comprises “Other Financial Corporations”, “State and Local Governments”, “Public nonfinancial corporations”, and households and private firms. Part 1: Recent Economic Developments and Outlook for Nigeria 23 NIGERIA DEVELOPMENT UPDATE DECEMBER 2020 Fiscal Policy: The government has accelerated the pace of reforms to create fiscal space The current crisis exacerbated Nigeria’s fiscal related financial mismanagement of fiscal resources. management challenges. Nigeria’s difficult fiscal Some of these measures (reforms in the power sector, situation arises primarily from low revenues and high gasoline subsidies, VAT reform) are expanding fiscal dependence on crude oil sales (with about 50 percent space in the short-term, while transparency measures, of consolidated revenues coming from oil). Fiscal space by ensuring efficient allocation of resources, are expected has been persistently limited in Nigeria, characterized to create fiscal space in the medium term. Moreover, by low revenue mobilization (with the revenue-to-GDP these measures could lay the foundation for additional ratio around 8 percent in 2018–19, one of the lowest progress to continue fostering revenue mobilization and ratios in the world), high volatility, and low buffers strengthening fiscal management practices. since 2010. Low fiscal space constraints the capacity of the government to deliver adequate services, to provide These reforms will allow the Nigerian government to safety nets, and to close the infrastructure deficit, create additional space to prioritize social spending. estimated to reach US$ 3 trillion in the next 30 years. The expected mobilization of additional non-oil The current shock to oil prices is expected to reduce the revenues, expenditure prioritization of current spending, stream of oil revenue from 3.0 percent of GDP in 2019 and savings from gasoline and power-sector reforms will to 2.1 percent of GDP in 2020, while non-oil revenues create additional fiscal space to cover Nigeria’s mounting are expected to decline from 5.2 percent to 4.2 percent needs. Not only will they support current service delivery of GDP in the same period due to lower economic and funding of social programs, but these funds can be activity. Such limited resources relative to GDP, the used for expanding the social safety net, enable adequate lowest among similar oil producers, have put pressure on healthcare capacity, and reduce the damage to livelihoods Nigeria’s fiscal and external positions, which nonetheless, of the most vulnerable sector of the population (see the have remained sustainable. As in previous years, the sections on Social Protection and Health). Moreover, government has managed to access domestic funding they can support productive investment once the when external funding was not available and cut capital economy moves to the recovery phase. spending when the financing needs cannot be met. Yet, this comes at a cost, weighing on Nigeria’s service The fiscal deficit is expected to widen to 5.8 percent delivery and widening its infrastructure gap. of GDP in 2020 from 4.6 percent of GDP in 2019. In the first half of 2020, the revenue collected by the The government has recently implemented notable Federation exceeded by 2.0 percent the target of the fiscal reforms. Before the pandemic, the government Amended Budget 2020 due to higher-than-forecasted oil had already initiated crucial revenue-enhancing and fiscal prices (the Amended Budget 2020 assumes an oil price of management reforms, but the pace of implementation US$ 28). Despite this slight improvement, government accelerated notably in the second and third quarters of revenues are projected to plunge by 1.8 percent of 2020. These reforms were implemented while Nigeria GDP, from 8.2 percent of GDP in 2019 to 6.4 percent moved towards exchange rate harmonization, reducing in 2020, with both oil revenues and non-oil revenues serious distortions in the FX and debt markets and declining 0.9 percent of GDP in 2020. Oil revenues 24 Part 1: Recent Economic Developments and Outlook for Nigeria RISING TO THE CHALLENGE: NIGERIA’S COVID RESPONSE have been impacted by lower oil prices (US$ 42 in 2020, Debt service could reduce fiscal flexibility but does compared to US$ 65 in 2019), and lower production— not pose any significant threat in the short-term. from 2.0 million barrels per day in 2019 to 1.8 million Public debt is projected to increase from 21.7 percent of barrels per day in 2020. Non-oil revenues have also been GDP in 2019 to 27.1 percent in 2020, but it will remain impacted, with lower imports cutting customs revenues, sustainable due to the expected recovery in oil prices while lockdowns have affected corporate profits. In and low-interest rates. Nigeria’s public debt is largely contrast, VAT collection increased 22.9 percent as of domestic and mostly issued by the federal government. September 2020 as the result of a VAT reform passed Given the low revenue of Nigeria, the debt service-to- in November 2019, but this is only expected to increase revenue is expected to reach 74.0 percent by the end VAT collection by 0.1 percent of GDP in 2020. Faced of 2020. While this indicator may seem alarming, this with a widening fiscal deficit, the government is cutting reflects mainly the domestic debt as Nigeria’s external non-rigid spending and reprioritizing expenditures: public debt is low (6.2 percent of GDP in 2020). capital expenditure is expected to decrease from 3.5 to Thus, credit rating agencies have not downgraded 3.1 percent of GDP, while interest and wage bill, two- the credit rating of Nigeria’s papers. In October, the thirds of current spending, are expected to remain largely Nigerian National Assembly approved a medium- unchanged. The fiscal deficit is expected to narrow to term expenditure strategy for 2021–2023 that includes about 4.6 percent of GDP by 2022 as the government about US$18 billion (US$6 billion annually from revenue-mobilization reforms yield higher corporate tax International Financial Institutions and Eurobonds) for and VAT collection. federal government external borrowing. This measure should in turn reduce the use of the CBN’s overdraft facility by the federal government.  he shock to oil prices has reduced the Figure 1.20. T  nrealistic revenue forecasting has Figure 1.21. U government’s stream of revenues. resulted in underestimated deficits and financing needs. Fiscal Revenues and oil prices Federal Government Fiscal Deficit Fiscal revenues, percent of GDP Oil prices, US$ per barrel Percent of GDP 9– – 80 5.0 – 8.1 8.2 8.2 8– 7.6 – 70 4.5 – 72 7.1 7– 6.7 4.0 – 6.4 – 60 65 5.9 3.5 – 6– 55 – 50 53 3.0 – 5– 50 45 44 – 40 2.5 – 42 4– – 30 2.0 – 3– 1.5 – 2– – 20 1.0 – 1– – 10 0.5 – 0– –0 0– 2016 2017 2018 2019 2020f 2021f 2022f 2023f 2018 2019 2020f 2021f ▬ Revenues ▬ Oil price (Bonny Light), rhs J Budget Q Actual Source: World Bank estimates. Source: 2018–2021 Budget Proposals, Office of the Accountant-General of the Federation (OAGF) and World Bank estimates. Part 1: Recent Economic Developments and Outlook for Nigeria 25 NIGERIA DEVELOPMENT UPDATE DECEMBER 2020 Sector Fiscal reforms recently implemented Transparency of For the first time in its history, the Nigerian National Petroleum Corporation (NNPC) oil revenues completed and published independently audited financial statements of 20 subsidiaries and corporate units for fiscal year (FY) 2018 in June and of 22 subsidiaries and corporate units as well as the consolidated group statement for FY 2019 in October. This follows a series of steps NNPC has taken starting in 2015 towards heightened transparency that in the medium-term could reduce financial leakages affecting fiscal sustainability. NNPC also published detailed monthly reports for the first half of the year containing the volumes and values of the oil and gas delivered, fiscal payments made, uses of oil lifted in kind, and a detailed breakdown of deductions by NNPC. Also, in September, NNPC became a supporting member of the Extractive Industries Transparency Initiative. Power sector Electricity tariffs were increased towards more cost-reflective levels (from 56 percent to over 80 percent) in November while moving to a regime of service-based tariffs and ensuring that the increases in average tariffs do not adversely impact those poor and low- income households who do have access to grid electricity. To complement the tariff reforms, the government is implementing regulations to stop arbitrary estimated billing, accelerate mass metering and enforce payment discipline of the distribution companies, all aimed at improving the financial sustainability of the sector. Gasoline Previous price increases to 2016 were not sufficient to end price subsidies. In 2016, the subsidy government moved to a new pricing regime by setting a price band that was to move in line with actual costs and ended budget support to reimburse oil marketing companies for under-recoveries. However, prices were not raised when the naira depreciated sharply, and the world oil price rebounded and were frozen from May 2016 to March 2020. In the absence of budgetary support, NNPC became the sole importer of gasoline because there was no mechanism for any other company to recover the losses. These losses amounted to US$2.4 billion in 2018 and US$1.7 billion in 2019, taken from the crude oil lifted by NNPC on behalf of the Federation. The government issued new gasoline pricing regulations in March 2020, establishing a market-based gasoline pricing mechanism although without implementation details. The government lowered gasoline prices twice after issuing the March regulations and then began raising prices starting in July. In mid-November, for the first time since 2016, the government moved the price band above the one in effect until mid-March 2020, signaling that market-based pricing was here to stay. The next step is for the government to clarify if prices have been deregulated—in which case the March 2020 regulations, which continue the government’s price control, will need to be replaced—or if the regulations are in place, in which case the implementation guidelines need to be published and pricing templates updated and posted on the regulatory agency’s external website. Debt In June the Ministry of Finance mandated the compilation of a comprehensive catalog transparency of contingent liabilities, including from ministries, public agencies, and parastatals. This information on contingent liabilities will be published as part of the annual Budget and will inform a contingent-liability management strategy. Moreover, the Debt Management Office published, for the first time, information on Federal Government loans that have been contracted but not yet disbursed and has started regularly publishing debt stock and servicing data on a quarterly basis. Accountability The government implemented a COVID-19 spending program and in contrast to the of COVID-19 previous practice of creating off-budget funds, this program was budgeted and combined Spending with measures to enhance procurement systems and conduct independent audits of these expenditures. A total of 70 percent of the COVID-19 fund is targeted towards social spending through public works, including the construction of rural roads, support to smallholder farmers, the social housing program, SME support, employment assistance, and social programs. States’ Adoption The Federal Government adopted an amended budget for 2020 (passed in May 2020) that of Amended cut non-essential expenditures and increased the borrowing ceiling. Even though the fiscal Budgets federalism framework did not compel states to be fiscally transparent and accountable to the Federal Government or follow its fiscal responsibility framework, all 36 States have passed Amended Budgets for 2020. This remarkable step has adjusted the budget forecasts to consider the significant revenue decline and reprioritize spending to protect social expenditures and create fiscal space for COVID-19 expenditures while maintaining fiscal sustainability by having fully financed budget deficits. 26 Part 1: Recent Economic Developments and Outlook for Nigeria RISING TO THE CHALLENGE: NIGERIA’S COVID RESPONSE Box 1.2. The Federal Government’s 2021 Budget Proposal. The Budget Proposal for 2021 assumes a strong and fast recovery in 2021. The 2021 Budget—“Budget of Economic Recovery and Resilience”—follows the same COVID-response principles as the 2020 Amended Budget. According to the government, it is also expected to quicken the pace of economic recovery, encourage economic diversification, and ensure social inclusion. The Budget, presented in October to the National Assembly, assumes a recovery in the benchmark oil price from US$28 to US$40 per barrel and an increase in projected aggregate oil production from 1.8 to 1.9 million barrels per day. It also reflects an official exchange rate of N379/US$. Economic growth is projected to recover to 3.0 percent in 2021 from -4.4 percent in 2020 and annual inflation is expected to decelerate to 12.0 percent in 2021. Based on these assumptions, federation net oil revenue projections are 98.0 percent higher than in the 2020 Amended Budget and the total budgeted federal government expenditure is expected to increase by 11.0 percent. Thus, the federal government fiscal deficit is projected to decrease to 2.7 percent of projected GDP, mainly financed by new equal shares of external and domestic borrowings.  he 2021 budget proposal envisages a recovery in oil and non-oil revenues. Table B1.1.1. T Amended 2020 Parameters 2021 Parameters and and Projections for 2020 Projections for 2021 Crude Oil Price (US$/bbl) 28 40 Crude Oil Production (mbpd) 1.8 1.9 Exchange rate (N/US$) 360 379 Inflation (percent, annual average) 14.1 12.0 Real GDP Growth (percent) -4.4 3.0 In Naira trillion Federal Government Revenues 5.1 7.9 o/w oil 0.9 2.0 Federal Government Expenditures 9.7 13.1 Federal Government Deficit 4.6 5.2 Financing 4.6 5.2 External borrowing 2.0 2.4 Domestic borrowing 2.2 2.4 Privatization 0.1 0.1 Other sources 0.3 0.3 Source: Federal Government’s 2021 Budget Proposal. Part 1: Recent Economic Developments and Outlook for Nigeria 27 NIGERIA DEVELOPMENT UPDATE DECEMBER 2020 Economic Outlook Global Prospects: The global businesses confidence. Growth in advanced economies is economy is climbing out of the projected to firm to 3.9 percent in 2021, while emerging depths, but new waves of COVID-19 market and developing economies are expected to infections cloud the outlook grow at a stronger rate of 6.0 percent, largely reflecting China’s anticipated rebound. Disappointments in the The COVID-19 pandemic is set to cause the deepest effectiveness and roll out of vaccines compounded with global recession in the last 70 years. The COVID-19 an upsurge in infections caseloads could inhibit the pandemic has dealt a devastating blow to the world projected rebound. economy, with global activity projected to contract by 4.4 percent in 2020—the deepest recession since World The recent sharp increase in the COVID-19 caseloads War II, although the collapse in output was slightly less in many countries threatens global growth prospects. steep than envisioned in June 2020 projections (World The number of daily confirmed COVID-19 cases has Economic Outlook October 2020; Figure 1.22). This markedly increased since September, especially the upward revision of the near-term global growth forecasts United States and several countries in the European in October is underpinned by a rebound in activity in Union. As of November 1, 2020, 46 million people the second quarter of 2020, partly reflecting better- have been infected by the COVID, with over a million than-expected improvements in manufacturing, whereas lives lost since the start of the pandemic. These new containment measures continued to thwart activity waves of infections, if not brought under control, in the services sector. Advanced economies have been could force countries to implement new lockdowns particularly hard-hit, with output contracting by an and containments restrictions, that are bound to estimated 5.8 percent. Major advanced economies such damage the already fragile recovery. As of November 1, as the United Kingdom (-9.8 percent), the Euro Area the Oxford COVID-19 government response tracker (-8.3 percent), Canada (-7.1 percent), The United States showed countries in Europe and the Americas as ranking (-4.3 percent) suffered substantial output losses. The highest based on the COVID-19 Government Response economic contraction was smaller in Emerging Market Stringency Index.6 and Developing Economies (EMDEs), with output falling by 3.3 percent. There is substantial uncertainty Oil prices are expected to remain below pre-pandemic around these growth forecasts, given the unprecedented levels in the near-term. The October Commodity nature of the COVID-19 shock. Market Outlook, in its baseline scenario, anticipates oil prices to average US$4/bbl in 2020, before edging up to The global output is expected to rebound in 2021, US$44/bbl in 2021. This represents an upward revision but the economic activity will likely remain soft. from the June forecasts, but well below the pre-pandemic The global output is envisioned to expand 5.2 percent levels (Figure 1.23). The upward revision is predicated on in 2021, in the wake of the 2020 output collapse. The a slow recovery in consumption and oil demand as well expected resumption of activity is predicated on positive as a gradual resumption of production among OPEC+ developments regarding the effectiveness of social members. Nigeria’s oil output is expected to average distancing measures and the widespread distribution 1.8 million barrels per day (mbd) in 2020, compared to of vaccines that would help restore consumers and an average of 2.0 mbd in 2019. 6 The COVID-19 Government Response Stringency Index, compiled by the University of Oxford, is a composite measure based on nine response indicators including school closures, workplace closures, and travel bans, rescaled to a value from 0 to 100 (100 = strictest). 28 Part 1: Recent Economic Developments and Outlook for Nigeria RISING TO THE CHALLENGE: NIGERIA’S COVID RESPONSE  he Global Economy is Expected to Figure 1.22. T  il Prices Are Likely to Remain Lower Figure 1.23. O Contract in 2020. than pre-pandemic levels in 2020–21. 2020 Real GDP Growth in Major economies Global Crude Oil Prices: 2017–2021 Percent US$/bbl 0– 80 – 70 – -2 – 60 – -4 – 50 – -6 – 40 – 30 – -8 – 20 – -10 – 10 – -12 – 0– Advanced United States Euro area Japan economies World 2017 2018 2019 2020f 2021f J June 2020 projection J October 2020 projection ▬ Crude oil price (April forecast) ▬ Crude oil price (October forecast) Source: International Monetary Fund (IMF) World Economic Outlook (WEO) (June and Source: World Bank Commodity Market Outlook (April and October). October 2020). Nigeria’s Outlook: Amid high risks, flows, as well as stimulating domestic investments to policy reforms are the only way to boost Nigeria’s economic recovery, create jobs, stabilize ensure a strong recovery the poverty rate, and ultimately “build back better”. Though oil production is expected to stabilize, it The economic outlook remains highly uncertain would not make a significant contribution to growth because it depends on how the COVID-19 pandemic immediately because investment in the sector is likely to is globally managed and how the world economy and remain subdued until the price outlook becomes more oil prices recover. Even in the most favorable global favorable and industry regulation is clarified through context, the policy response of Nigeria’s authorities will new petroleum industry legislation. As per capita be crucial to set the foundations of a robust recovery incomes fall, the pandemic is projected to leave about path. We analyze three possible scenarios for Nigeria’s 11 million more Nigerians living in poverty by 2022 economic outlook in this section. relative to the pre-COVID-19 forecast. In our baseline scenario, Nigeria’s growth would A second scenario envisions a ‘muddle-through’ recover from -4.1 percent in 2020 to 1.1 percent pathway of partial reform measures (i.e. reforms not in 2021 and gradually catch up with population fully implemented), resulting in a slower recovery in growth over the medium term ( Table 1.2). This 2021. This scenario envisages authorities not deepening scenario assumes that the authorities maintain and macroeconomic reforms, in particular the adoption strengthen current macroeconomic reform efforts that of more flexible and transparent FX management, are essential to managing the shock-induced fiscal and damaging investor confidence and reducing private external financing gaps. Particular priorities include investment. The economic recovery is expected be revenue-based fiscal consolidation, the reprioritization slower under such a scenario, with growth recovering to of spending and the strengthening of expenditure and about 0.3 percent in 2021, coupled with slightly higher debt management, reforms for financial sector stability, inflation, little job creation, and rising poverty and and the adoption of a more flexible and transparent inequality. Nevertheless, Nigeria would be able to meet foreign exchange management regime. They are crucial its medium-term external and fiscal financing needs. to spurring the much-needed external official and private Public debt would also be deemed sustainable. Part 1: Recent Economic Developments and Outlook for Nigeria 29 NIGERIA DEVELOPMENT UPDATE DECEMBER 2020 Table 1.1. Nigeria’s economic outlook under three scenarios. Scenario 3 (Slow Bleed): Scenario 1 (Baseline): Sustain Scenario 2 (Muddle Through): Further shocks and an and deepen macro reforms No further macro reforms inadequate policy response Global context: Oil prices Global context: Oil prices Global context: Prolonged average US$44/bbl. average US$44/bbl. oil-price shock (US$ 27/bbl). COVID-19: The pandemic COVID-19: The pandemic COVID-19: A more severe in Nigeria is adequately in Nigeria is adequately domestic spread of managed. managed. COVID-19. Policy: Government Policy: Authorities not Policy: Reversal of recent authorities maintain current deepening macro reforms reforms, such as changes Major Assumptions macroeconomic reform such as the adoption to the electricity and in 2021 efforts, namely revenue- of more flexible and gasoline subsidies, and based fiscal consolidation, transparent FX management no adjustment to nominal expenditure reprioritization, exchange rates. debt management, financial sector stability reforms, and adopt a more flexible and transparent foreign exchange management regime. Source: World Bank. Real GDP growth Fiscal balance Percent y-o-y Percent of GDP 4– -3.0 – 2.6 2.2 1.9 1.8 2– 1.1 1.6 -3.5 – 0.8 -3.8 -3.8 1.1 -3.9 1.1 0– -4.0 – -4.2 0.3 -3.9 -1.6 -4.4 0.4 -2 – -4.5 – -4.6 -4.6 -4.6 -4.6 -4 – -5.0 – -4.7 -4.7 -4.1 -6 – -5.5 – -5.8 -8 – -7.4 -6.0 – -5.8 2016 2017 2018 2019 2020f 2021f 2022f 2023f 2016 2017 2018 2019 2020f 2021f 2022f 2023f ▬ High risk ▬ Muddle through ▬ Baseline ▬ High risk ▬ Muddle through ▬ Baseline Public debt Current account balance Percent of GDP US$ billion 35 – 34.0 15 – 33 – 32.5 10.4 31.9 10 – 30.5 31.1 31 – 31.7 29.4 31.0 3.9 29 – – 5 2.7 27.1 29.3 2.2 1.1 1.0 27 – 0– 25 – -5 – -2.5 -2.7 -2.5 23 – 21.7 21 – -10 – -7.0 19.3 18.9 19 – -12.2 -12.1 17.3 -15 – -12.8 17 – -17.0 15 – -20 – 2016 2017 2018 2019 2020f 2021f 2022f 2023f 2016 2017 2018 2019 2020f 2021f 2022f 2023f ▬ High risk ▬ Muddle through ▬ Baseline ▬ High risk ▬ Muddle through ▬ Baseline 30 Part 1: Recent Economic Developments and Outlook for Nigeria RISING TO THE CHALLENGE: NIGERIA’S COVID RESPONSE Inflation Percent y-o-y 30 – 25.1 24.6 25 – 20 – 18.3 15 – 16.5 15.6 12.8 12.1 11.7 12.9 12.1 11.7 10 – 11.4 11.0 10.4 5– 0– 2016 2017 2018 2019 2020f 2021f 2022f 2023f ▬ High risk ▬ Muddle through ▬ Baseline Source: World Bank. Table 1.2. Nigeria’s Macroeconomic Scenarios. Historical Baseline Muddle Through High Risk Description Unit 2016 2017 2018 2019 2020 2021 2022 2023 2021 2022 2023 2021 2022 2023 Oil price (Bonny Light) US$/bbl 45 55 72 65 42 44 50 53 44 50 53 27 30 31 Oil production mbpd 1.8 1.9 1.9 2.0 1.8 1.8 1.8 1.9 1.8 1.8 1.9 1.7 1.7 1.7 Growth Gross Domestic Percent, -1.6 0.8 1.9 2.2 -4.1 1.2 1.8 2.6 0.3 1.1 1.6 -7.4 0.4 1.1 Product yoy Fiscal Accounts - general government Percentage Fiscal balance -3.8 -3.9 -4.2 -4.6 -5.8 -4.6 -4.4 -3.8 -4.7 -4.6 -3.9 -5.8 -4.7 -4.6 of GDP Percentage Revenues 5.9 6.7 8.1 8.2 6.4 7.1 7.6 8.2 6.7 6.8 7.7 5.8 6.1 6.5 of GDP Percentage Expenditures 9.7 10.6 12.3 12.7 12.2 11.7 12.0 12.0 11.4 11.4 11.6 11.6 10.8 11.1 of GDP Percentage Public Debt (net) 17.3 18.9 19.3 21.7 27.1 29.3 31.0 31.7 29.4 31.1 31.9 30.5 32.5 34.0 of GDP Balance of Payments Current account US$ billion 2.7 10.4 3.9 -17.0 -7.0 -12.8 -12.2 -12.1 -2.5 -2.7 -2.5 1.0 2.2 1.1 balance Exports of Goods US$ billion 38.4 50.8 66.0 69.9 42.3 48.6 54.8 62.0 46.3 52.2 58.0 33.3 35.9 38.2 and Services o/w oil US$ billion 32.0 42.3 56.6 54.5 32.2 32.2 37.6 41.8 32.2 37.6 41.8 19.2 21.3 22.0 Imports of Goods US$ billion 47.0 50.9 71.6 100.8 64.1 77.6 86.6 97.7 64.7 73.4 82.8 47.1 51.1 58.1 and Services Net Income US$ billion -8.6 -11.5 -14.7 -12.5 -5.4 -5.2 -5.0 -4.6 -5.1 -4.9 -4.5 -5.1 -4.9 -4.5 Net transfers US$ billion 19.9 22.0 24.1 26.4 20.2 21.5 24.6 28.2 21.1 23.5 26.9 20.0 22.3 25.5 Financial account US$ billion 0.7 8.2 -9.8 13.6 -7.8 12.9 16.2 17.9 5.7 6.7 6.9 -0.2 1.6 1.7 balance Gross External Months of 6.6 9.1 7.2 4.6 6.1 5.1 5.1 5.3 6.8 6.7 6.6 7.9 7.6 6.7 Reserves (end period) Imports Inflation Consumer Price Index Percent, 15.6 16.5 12.1 11.4 12.9 11.7 11.0 10.4 12.8 12.1 11.7 25.1 24.6 18.3 (CPI) yoy Source: Nigerian authorities and World Bank estimates. Part 1: Recent Economic Developments and Outlook for Nigeria 31 NIGERIA DEVELOPMENT UPDATE DECEMBER 2020 The third scenario is a high-risk “slow bleed” scenario (i) managing the COVID-19 outbreak that assumes a more adverse global context and a (ii) enhancing macroeconomic management to boost severe domestic COVID-19 outbreak in a context investor confidence of reforms reversal, leading to a deeper recession. (iii) safeguarding and mobilizing revenues Such scenario assumes a more protracted decline in oil (iv) reprioritizing public spending to protect critical prices relative to the baseline scenario and stalling of development expenditures pending reforms. The reversal of recent reforms, such as (v) supporting economic activity and access to changes to the electricity and gasoline subsidies, is not services and providing relief for poor and ruled out either. Consequently, foreign and domestic vulnerable communities. investment would continue declining, significantly hampering Nigeria’s growth prospects. Thus, GDP Even if Nigeria manages to limit the spread of would continue contracting in 2021. Lower public COVID-19, the pandemic has caused substantial expenditure would deepen the already substantial gaps in damage to the economy. Before COVID-19, the human and physical capital as well as worsening public challenges Nigeria faced were already formidable; among service delivery. (see Table 1.1: Nigeria’s Macroeconomic them were falling per capita incomes and rising poverty. Scenarios). A deeper recession could also threaten the The pandemic has exacerbated these challenges while stability of an already-stressed financial sector (with increasing vulnerabilities in the external and domestic Non-Performing Loans (NPLs) rising by 14 percent front. Rising inflation has eroded the purchasing power in the first half of 2020, reversing a two-year declining of Nigerian households and lower domestic demand in trend). The probability of macro-financial instability a context of reduced mobility has negatively affected would be high despite the restructuring of over one third livelihoods. Moreover, the pandemic is far from being of banking sector loans as of the third quarter of 2020. over and it could potentially worsen, depending on In such a scenario, CBN’s decision to grant regulatory how the virus is contained globally. Thus, recovery after forbearance for the restructuring of loans would make 2020 remains highly uncertain and dependent also on little difference. the recovery of oil prices as well as the domestic policy response. The authorities have implemented important key policy measures in recent months; yet, amid Policy options to mitigate the heightened risks, it is critical to deepen reforms. Table economic shocks of COVID-19 1.3 provides a summary of recent reforms implemented and lay foundations for a strong by the Government of Nigeria. recovery A stronger recovery will require sustained reform The recession occasioned by the COVID-19 pandemic momentum. COVID-19 has impacted all economies demands an unprecedented package of strong policy around the world and is causing the first recession in responses. In our June 2020 edition, we outlined Sub-Saharan Africa in 25 years and the worst recession a number of near-term and medium-term policy in Nigeria in the last four decades. Yet, this crisis options that the Government of Nigeria could consider has presented a unique opportunity to address long minimizing the duration and the magnitude of the unresolved issues. The current pace of the reforms is recession and lay the foundation for a strong economic fairly adequate, but much more remains to be done. recovery. These policy actions were grouped under five Even if oil prices recover in the medium-term, a return to pillars business-as-usual will be detrimental to achieve Nigeria’s 32 Part 1: Recent Economic Developments and Outlook for Nigeria RISING TO THE CHALLENGE: NIGERIA’S COVID RESPONSE development goals. Not deepening the reform agenda on these reforms which are expected to help the country will reduce Nigeria’s growth prospects, resulting in lower avoid a deeper recession and “build back better”(Table living standards and reduced access to opportunities 1.4). Eight of these policy options were highlighted for the Nigerian people. This edition of the Nigeria earlier as critical, and are further emphasized in Table Development Update proposes urgent actions to build 1.4.  ecent policy measures mitigating the impacts of COVID-19 and laying the foundations for a strong Table 1.3. R recovery. • The Ministry of Finance mandated the compilation of a comprehensive catalog of contingent liabilities, including from ministries, public agencies, and parastatals. This information on contingent liabilities will be published as part of the annual Budget, and the Debt Management Office (DMO) will use it to draw up a contingent-liability management strategy, supported by technical assistance from the World Bank and the IMF. • The Debt Management Office published, for the first time, information on Federal June Government loans that have been contracted but not yet disbursed. • For the first time in its history, the state oil company, NNPC, completed and published independently audited financial statements of twenty (20) of its subsidiaries and corporate units for FY2018. NNPC also published detailed monthly reports (Jan-Jun 2020) containing the volumes and values of the oil delivered and a detailed breakdown of deductions by NNPC. • The government published regulations establishing a market-based mechanism for gasoline prices. July • With the recent oil price increases, to maintain parity with the market cost of importing gasoline, the government increased domestic gasoline prices from N121.50–123.50 to N141–144 per liter in July, N146–149 per liter in August, N158–162 per liter in September, and to about N168–172 in November. • The CBN took a major step towards exchange rate unification by aligning the Official Exchange Rate within 2 percent of the Investors and Exporters Exchange Rate. • The federal government enacted an Amended Budget for 2020 which introduced realistic domestic and external borrowing limits—this means that Nigeria will be able to borrow from August marketable debt instruments ex-ante and at a lower cost than rely on high-cost overdrafts from the Central Bank ex-post. • NNPC became a supporting member of the Extractive Industries Transparency Initiative. • 36 state governments adopted crisis-response budgets, cutting back on non-essential expenditures to direct resources for a COVID response. • The Office of the President delivered the Petroleum Industry Bill to the National Assembly. September • The CBN has been increasing the supply of FX in the Investors and Exporters Exchange Rate window to start addressing the FX backlog. • The federal government submitted the Budget Proposal for 2021 to the National Assembly. The 2021 budget follows the same COVID-response principles as the 2020 Amended Budget. October • NNPC published the 2019 audited financial statements for 22 subsidiaries and corporate units as well as the consolidated group statement. • The 2021 budget speech of the President confirmed the government’s commitment to the gasoline subsidy reform. • Electricity tariffs were increased (by about 50 percent) towards more cost-reflective levels (from 56 percent to over 80 percent), while moving to a regime of service-based tariffs and ensuring that the increases in average tariffs do not adversely impact those poor and low- November income households who do have access to grid electricity. • To complement the tariff reforms, the government is implementing regulations to stop arbitrary estimated billing, accelerate mass metering and enforce payment discipline of the distribution companies, all aimed at improving the financial sustainability of the sector. Part 1: Recent Economic Developments and Outlook for Nigeria 33 NIGERIA DEVELOPMENT UPDATE DECEMBER 2020  olicy priorities to support a stronger recovery for Nigeria. Table 1.4. P Immediate Priorities Near-Term Priorities Area (Next 3 to 6 months) (Next 6 to 15 months) Managing the COVID-19 outbreak Health • Continue improving testing capacity. • Leverage primary health care facilities to • Further strengthen community deliver essential health services coupled engagement to facilitate flows of credible with effective communications to avoid information on social distancing, wearing disruptions to service delivery. of masks, and other international best • Scale-up coverage of life and health practice recommendations. insurance to provide an additional • Plan for the purchase and distribution of indemnity and safety net. a COVID-19 vaccine. Enhancing macroeconomic management to boost investor confidence Exchange rate • Allow the exchange rate to reflect • Fully unify exchange rates into a single, management market fundamentals, which will market-driven window. preserve reserves, increase the naira value of external financing and dollar- denominated revenue proceeds, and boost investor confidence. Monetary policy • Ensure clear separation and improved • Strengthen the management of coordination of fiscal, financial, and monetary policy toward the primary monetary policies, including more objective of price stability, with more transparent reporting of the CBN's transparent targets and operational and quasi-fiscal interventions (e.g., financing liquidity management mechanisms (e.g. of government functions through the by reducing the use of the discretionary overdraft facility, subsidized lending Cash Reserve Ratio; and ensuring schemes). a clear distinction between public borrowing and liquidity management. Macroprudential • Define measures for rescheduling and • Review regulations that affect bank policies restructuring the loans of borrowers recovery and resolution planning to affected by COVID-19 and heighten reduce systemic risks in the financial monitoring of bank capital requirements system. and the effectiveness of forbearance • Review prudential requirements related measures. to bank sales of nonperforming loans to the Asset Management Corporation of Nigeria (AMCON) and similar companies to transparently streamline the process for efficient resolution of nonperforming loans. Trade Policy • Reopen land borders for all traders • Review the impact of foreign exchange and firms to limit inflationary restrictions and other measures limiting pressures and develop coordinated select imports on the supply of food and border management procedures with other staple goods as well as on the neighboring countries. competitiveness of Nigerian industry. • Operationalize annexes of the African • Develop priorities through consultations Continental Free Trade Area agreement, for Phase II AfCFTA negotiations on including on the development of national investment, competition and intellectual committees, customs cooperation property rights and analyze impact of and the development of early warning these agreements. systems. 34 Part 1: Recent Economic Developments and Outlook for Nigeria RISING TO THE CHALLENGE: NIGERIA’S COVID RESPONSE  olicy priorities to support a stronger recovery for Nigeria. Table 1.4. P Immediate Priorities Near-Term Priorities Area (Next 3 to 6 months) (Next 6 to 15 months) Safeguarding and mobilizing revenues Tax Policy • Facilitate tax payments through online • Mobilize tax revenues in a way that platforms. does not negatively affect investment and growth, including defining priorities for the rationalization of ineffective tax concessions; adjusting currently-low excise taxes to bring in more revenue e.g. from alcohol, cigarettes, and airtime; leveraging the property tax; adjusting the corporate income tax by introducing an anti-fragmentation rule; and introduction of measures to counter international tax avoidance by amending the international tax rules related to corporate and personal income taxes, VAT, and capital gains taxes. Oil Revenues • Communicate a clear timeline for the • Ensure the timely publication of audited repayment of non-oil tax relief measures financial statements for NNPC and its at both federal and subnational tiers of subsidiaries and monthly publication of government. oil sector data. • Increase the transparency of oil and gas • Ensure that any revenue by a revenue reporting by continuing monthly government-owned entity that is due to publication of financial and volumetric the government but retained by the entity data in the oil and gas sector, including is governed by terms and conditions deductions for all strategic projects specified in a written agreement with the funded by the government. regulator and approved by the Minister of Petroleum Resources. Part 1: Recent Economic Developments and Outlook for Nigeria 35 NIGERIA DEVELOPMENT UPDATE DECEMBER 2020  olicy priorities to support a stronger recovery for Nigeria. Table 1.4. P Immediate Priorities Near-Term Priorities Area (Next 3 to 6 months) (Next 6 to 15 months) Reprioritizing public spending to protect critical development expenditures Gasoline pricing • Ensure the sustainability of the • Continue market-based pricing of gasoline subsidy reform either by gasoline while facilitating competition in publishing detailed guidelines for the market, including for imports. the March 2020 regulations, “Market Based Pricing Regime for Premium Motor Spirit”, or by fully deregulating gasoline prices. Fiscal Policy • Ensure that execution of the 2020 • Expand the coverage of the expenditure Amended Budgets at both federal commitment management and control and state levels and are transparent, module of the Government Integrated including adequate procurement, Financial Management System to and auditing for COVID-19 related cover all expenditures, budgetary and expenditures. nonbudgetary, of Federal ministries, • Continue tightening fiscal coordination departments, and agencies. across tiers of government to ensure the • Accelerate action on the most efficient use of very scarce fiscal recommendations of the Public resources. Expenditure and Financial Accountability (PEFA) and Public Investment Management Assessment (PIMA) diagnostics to strengthen public financial management. • Monitor current public sector guarantees, including any added during the crisis, and devise a strategy for managing fiscal risks. • Continue tightening budgeting practices (revenue modelling and forecasting, expenditure allocation), to improve budget execution, spending efficiency and debt management and transparency. Power Sector • Continue power sector reforms, including bringing electricity tariffs from an 80 to 100 percent cost- reflective level, and implementing regulations to stop arbitrary estimated billing, accelerate mass metering, and enforce payment discipline of the distribution companies, all aimed at improving the financial sustainability of the sector while ensuring that the increases in average tariffs do not adversely impact low-income households. 36 Part 1: Recent Economic Developments and Outlook for Nigeria RISING TO THE CHALLENGE: NIGERIA’S COVID RESPONSE  olicy priorities to support a stronger recovery for Nigeria. Table 1.4. P Immediate Priorities Near-Term Priorities Area (Next 3 to 6 months) (Next 6 to 15 months) Supporting economic activity and access to services and providing relief for poor and vulnerable communities Social Protection • Extend the reach of social safety nets, • Increase the efficiency of social including targeted cash transfers protection spending by improving both and livelihoods grants for poor and traditional and nontraditional targeting vulnerable households. methods, such as geographical, categorical, or community-based targeting. Jobs and SMEs • Implement targeted labor-intensive • Facilitate access to finance for credit public works and infrastructure distressed and vulnerable enterprises; microprojects to support employment and provide one-off grants to SMEs, to while bolstering the capital stock. cover operational costs and IT solutions. • Issue guidelines for adapting • Activate e-procurement. procurement procedures to support and encourage SMEs to participate in public procurement. Food Security • Reduce food insecurity for poor rural households through the distribution of seeds and fertilizers, the provision of agricultural extension services, the use of block grants for purchasing assets and equipment, the upgrading of sanitary infrastructure in markets, and the expanded availability of equipment for small-scale processing and packaging. Education • Ensure students go back to school and • Strengthen school infrastructure. gradually and safely resume school First, improving water and sanitation activities. infrastructure would help ensure that • Scale-up successful remote learning proper hygiene conditions prevent the interventions. spread of diseases and that students have adequate handwashing facilities. • Ensure funding for paying active Second, improving digital connectivity teachers. would help enhance remote learning and remedial education through digital technologies. Part 1: Recent Economic Developments and Outlook for Nigeria 37 NIGERIA DEVELOPMENT UPDATE DECEMBER 2020 References Hale, T., Noam A., Emily C., Laura H., Beatriz K., Saptarshi M., Anna P., Toby P., Helen T. and Samuel W. (2020). Oxford COVID-19 Government Response Tracker, Blavatnik School of Government. International Monetary Fund (2020). World Economic Outlook, October: A Long and Difficult Ascent. Washington, DC. Max Roser, M., Ritchie, H., Ortiz-Ospina, E. and Hasell, H. (2020). Coronavirus Disease (COVID-19) Statistics and Research. OurWorldInData.org. Retrieved from: 'https://ourworldindata.org/ coronavirus' World Bank (2020). Nigeria Development Update, June 2020: Nigeria in Times of COVID-19 - Laying Foundations for a Strong Recovery. Washington, D.C.: The World Bank. World Bank (2020). Phase II: COVID-19 Crisis Through a Migration Lens. Migration and Development Brief 33. The World Bank Group, Washington, D.C. October. 38 Part 1: Recent Economic Developments and Outlook for Nigeria Part 2: Taking a Closer Look NIGERIA DEVELOPMENT UPDATE DECEMBER 2020 Work and COVID-19 in Nigeria Summary: Even though many Nigerians returned to work households’ responses to the COVID-19 crisis—the after the easing of strict lockdown measures in the early share of household heads who were working almost phase of the COVID-19 crisis, most households remain in halved between the pre-crisis period and April/May 2020 an economically precarious situation. Indeed, more than as strict lockdown measures were implemented (Figure two in three report lower incomes now than one year ago. 2.1).8 Moreover, in April/May 2020, around 78 percent One reason is that, according to a sample of household heads of Nigerian households reported a loss in income interviewed through high-frequency telephone surveys, a over the previous month. At the same time, around large share of Nigerian workers has entered or switched into 85 percent of households were affected by increases in less productive agricultural jobs. With incomes down, food the prices of key food items and a further 46 percent insecurity is also far more prevalent than in previous years, saw the prices of farming and business inputs rise, with with the poorest households being especially likely to report a such shocks being far more prevalent than in previous deterioration in their food security throughout the course of years. Data on indebtedness also suggest that the crisis the COVID-19 crisis. Additionally, it appears that women’s has left households on weaker financial footing. Almost working situation has been disrupted more than men’s as the one quarter of households took out new loans after the crisis has evolved. onset of the pandemic. Prior to the pandemic, a mere 2 percent had any outstanding loans.9 COVID-19 struck at a difficult time for Nigeria’s labor market, which was already precarious as the economy Most household heads returned to work after the was still recovering from the 2016 recession. Over the initial hiatus caused by the pandemic. By August past five years, growth in the labor force has outstripped 2020, the share of household heads who were working job creation, meaning that unemployment and approached the pre-crisis levels documented in 2019 underemployment have been rising.7 Additionally, the (Figure 2.1). The share of household heads who were vast majority of working Nigerians in 2018/19 did not working contracted more and recovered more slowly have wage-employment jobs. Instead, around 43 percent in urban areas than in rural areas. As such, the share of were engaged in farming and a further 38 percent were household heads in urban areas who were working in engaged in non-farm household enterprises, according to August 2020 remained below pre-crisis levels. the General Household Survey (GHS). Additional indicators suggest that the labor market High-frequency data collected throughout 2020 may be partially stabilizing as the COVID-19 crisis indicate that jobs, incomes, and welfare suffered continues. The share of household heads experiencing substantially when the COVID-19 crisis first hit. any sort of job “turnover”—i.e. moving in or out of According to a balanced panel sample of household employment or changing jobs since the previous survey heads from the National Longitudinal Phone Survey round—declined from over 40 percent in June 2020 to (NLPS)—a monthly phone survey being used to monitor under 20 percent in August 2020. However, considering 7 From “Jumpstarting Inclusive Growth: Unlocking the Productive Potential of Nigeria’s People and Resource Endowments” (2019) Nigeria Economic Update, Fall 2019, p.8, The World Bank Group, Washington, DC; “COVID-19 From the Ground Up: What the Crisis Means for Nigerians. Findings from the Nigeria COVID-19 National Longitudinal Phone Survey (NLPS) Round 1, April-May 2020” (2020) The World Bank Group, Washington, DC. 8 See https://www.worldbank.org/en/country/nigeria/brief/monitoring-covid-19-impact-on-nigerian-households for more details about this survey. This balanced panel includes only household heads who participated in all survey rounds. Results from other NLPS briefs may differ from this analysis because of the panel feature of this data. Since this sample focuses on household heads, women are underrepresented: about 80 percent of the sample is male. 9 COVID-19 NLPS Round 4 Brief ” (World Bank Group 2020). 40 Part 2: Taking a Closer Look RISING TO THE CHALLENGE: NIGERIA’S COVID RESPONSE  any Nigerian household heads returned Figure 2.1. M  any more Nigerian workers now work Figure 2.2. M to work after initial lockdown measures in agriculture compared to the outset of eased. COVID-19 crisis. Share of households/household heads Relative proportion of individuals transitioning between employment status Percent Percent 100 – Agri. 90 – 22 19 Agriculture 80 – 10 70 – Agri. Non 25 31 60 – 50 – 40 – 13 Agri. Employment Non 30 – 11 Non 20 – 54 Employ. 10 – Non 11 0– Pre-crisis* Apr/May 2020 Jun 2020 Jul 2020 Aug 2020 April/May 2020 August 2020 ▬ Total share working ▬ Urban share working ▬ Rural share working ▬ Any household member not able to work as usual ▬ Job turnover Source: GHS, NLPS, and World Bank estimates. Source: NLPS Rounds 1 and 4 and World Bank estimates. Notes: All estimates are from a balanced panel of 1,781 household heads that is about Notes: This figure shows the relative proportions of individuals transitioning between 3 80 percent male. The indicator for whether any household member is not able to work employment status (Agriculture, NA=Non-Agriculture, NE=Non-Employment) between as usual is at the household level. Turnover = 1 for any household head who transitions Round 1 (April/May 2020) and Round 4 (August 2020) of the NLPS. The sample is a from non-employment to employment, or vice-versa, or changes jobs from the previous balanced panel of household heads who report their working status during these two NLPS survey to the current survey. Pre-crisis employment is estimated from the GHS Wave 4 waves. To account for selection into the panel, new panel weights are calculated using the post-harvest survey data (Jan/Feb 2019), and household-level weights reflect selection same covariates used to create the NLPS sampling frame. into the balanced panel. that only about 2 percent of the same set of household who were not working had declined to 14 percent, with heads surveyed in January/February 2019 (in the GHS) the share working in non-agriculture remaining about reported any job loss since 2017, job turnover still seems the same. The rising share of household heads engaged in substantially higher than a year ago. Moreover, the share agriculture came mostly from individuals who were not of households in which any member reported being working in April/May 2020. However, some individuals unable to work as usual declined from about 25 percent also switched from non-agricultural jobs to agricultural to just over 10 percent between April/May 2020 and jobs.10,11 As a result of these dynamics, the share of August 2020. household heads engaged in agriculture is much larger than in comparable months in previous years. Nevertheless, many workers are now engaged in more precarious work in the agricultural sector. Figure Consistent with the evidence of increased precarity 2.2 shows the share of household heads transitioning in the labor market, many households also report between three working states—Agriculture, Non- that their incomes have declined. In August 2020, Agriculture, or Non-Employment—between April/ 67 percent of households reported that they received less May 2020 and August 2020. During the period of overall income than in August 2019 (Figure 2.3). This strict lockdown measures in April/May 2020, about stems from a drop in labor income, with the majority 54 percent of household heads were not working, with of households that rely on farming (58 percent) and the remaining household heads engaged in agricultural non-farm household businesses (65 percent) reporting (22 percent) and non-agricultural (25 percent) work. Yet, that such income sources were lower than one year ago. by August 2020, the share of household heads working Yet non-labor income sources—including remittances, in agriculture had risen to around 60 percent, almost a assistance from non-family members, and income from three-fold increase, while the share of household heads properties, investments, and savings—also declined for 10 Of the 60 percent of household heads engaged in agriculture in August 2020, about half (31 percent of all household heads) were not working in April/May 2020. 11 Around 40 percent of those household heads working in the non-agricultural sector in April/May 2020 transitioned to agricultural work by August 2020. The 40 percent is calculated by dividing 10 percent, the number transitioning from non-agriculture to agriculture, by 25 percent, the total proportion. Part 2: Taking a Closer Look 41 NIGERIA DEVELOPMENT UPDATE DECEMBER 2020  ouseholds report reduced income Figure 2.3. H  ood insecurity increased sharply after Figure 2.4. F between August 2019 and August 2020. COVID-19. Share of households who had each income source in the Share of households affected by food insecurity in the last last 12 months 30 days 80 – All income sources 19 14 67 70 – 60 – Household farming, 28 12 58 3 livestock, or fishing 50 – 40 – Non-farm family business 23 11 65 1 30 – 20 – Wage-employment 21 34 43 2 10 – 0– 0 20 40 60 80 100 Jul/Sep 2018 Jan/Feb 2019 Apr/May 2020 Aug 2020 J Increased J No change J Decreased J No income from this source in August 2020 ▬ Adult household member skipped a meal ▬ Household ran out of food ▬ Adult household member did not eat for an entire day Source: NLPS Round 4 and World Bank estimates. Source: NLPS, GHS Wave 4, and World Bank estimates. Notes: Less prevalent income sources, not shown here, include assistance from other Notes: Sample is a balanced panel of respondents with weights adjusted for selection into non-family individuals, remittances from family within and outside the country, income the panel. Each question asked the respondent whether their household experienced these from properties, savings, investments, pension payments, NGO/charitable assistance, food insecurity situations in the past month. and government assistance. 83 percent of households reported having income from household farming, livestock, or fishing in the last 12 months. 69 percent of households reported having income from non-farm family business in the last 12 months. 26 percent of households reported having income from wage-employment in the last 12 months. the majority of households who normally receive such April/May 2020 and August 2020. The results of a income sources. In addition, in line with these findings, multivariate regression (Figure 2.5) show that changes 82 percent of households consistently reported that in household food insecurity are related to households’ the pandemic was a substantial or moderate threat to pre-crisis monetary consumption. For all three food household finances in both April/May 2020 and August insecurity indicators, poorer households are more 2020. likely to report worsening food security, while richer households have a lower probability of worsening Levels of food security have decreased with household food security. For example, for the measure of whether incomes. Prior to the pandemic, the share of households household members skipped meals, households in the skipping meals during the agricultural lean season stood two highest consumption quintiles had a 5–10 percent at 43 percent, according to figures for July–September probability of improving on this measure, while 2018. This fell to 27 percent during the non-lean season, households in the two lowest consumption quintiles had as data for January/February 2019 reveal. By April/May about a 5 percent probability of deteriorating on this 2020, however, the figure had jumped to 74 percent. measure. In August 2020, it still stood at an elevated 69 percent (Figure 2.4).12 Similarly, the share of households Women are more likely than men to have seen reporting running out of food was 59 percent in August their work circumstances disrupted as a result of 2020, while, most worryingly, the share of households the COVID-19 crisis, according to expanded data reporting not eating for an entire day reached 33 percent, collected in September 2020. In September 2020, a significantly higher share than in 2018/19. Round 5 of the NLPS expanded its sample to include all working-age members of the household, enabling Food insecurity has affected the poorest households further analysis of women’s labor market outcomes.13 most in the COVID-19 crisis, with these households This expanded analysis shows that a disproportionate most likely to report a deterioration between share of women have been both pushed out of work 12 All questions ask about whether any of the food security incidents occurred in the past 30 days in the household. 13 The sample of household heads analyzed above is about 80 percent male. 42 Part 2: Taking a Closer Look RISING TO THE CHALLENGE: NIGERIA’S COVID RESPONSE  oorer households are more likely to Figure 2.5. P report worsening food security. References Probability that a household experiences a worsening food security status 0.3 – Barrot, L.D., Calderon, C. and Serven, L. (2018). Sectoral productivity shifts in sub-Saharan 0.2 – Africa. Washington, DC: World Bank Group. The World Bank Group. (2020). Findings from the 0.1 – Nigeria COVID-19 National Longitudinal Phone Survey (NLPS). Washington, DC: The 0– World Bank Group. The World Bank Group. (Fall 2019). Nigeria Economic -0.1 – Update. Washington, DC: International Bank 1 2 3 4 5 for Reconstruction and Development / The Consumption quintile World Bank. J Skipped a meal J Ran out of food J Did not eat entire day Source: NLPS Rounds 1 and 4 and World Bank estimates. World Bank Group (2019). Nigeria Development Note: This figure shows the probability of worsening food security status by the consumption quintile of the household. A higher quintile represents a higher socioeconomic Update, Fall 2019: Jumpstarting Inclusive status. The bars are estimates of the probability of a household’s food security worsening from a simple regression analysis. Growth - Unlocking the Productive Potential of Nigeria’s People and Resource Endowments. and into work during this crisis. Specifically, women Washington, DC: World Bank. who were working before the crisis (especially those in World Bank Group. (2020). NLPS Round 4 Brief. wage-employment) moved to inactive status at a rate far Washington, DC: World Bank Group. higher than for men14, and, to a smaller extent, women World Bank Group. (2020). WBG FY20-FY24 Country moved from inactive status to working status too. Both Partnership Framework for Nigeria. Washington, movements can be interpreted as symptoms of economic DC: World Bank Group. distress. On the one hand, women who stopped working could be suffering either from job loss or from unexpected increases in care burdens due to sickness from COVID-19 or the shutdown of schools. Yet at the same time, women moving from inactive status to working status could be doing so to make up for lost income from another income source, such as the labor income of their spouse or another family member. 14 The share of women moving from working in July/August 2018 to being fully inactive by September 2020 (13 percent of previously working women) is almost double the analogous share of men (7 percent of previously working men). Part 2: Taking a Closer Look 43 NIGERIA DEVELOPMENT UPDATE DECEMBER 2020 Nigeria’s social protection system during COVID-19 and beyond Summary: Nigeria has notably high levels of poverty and Nigerians lived in a household that had been affected vulnerability. Predictions indicate that the ongoing global by at least one “climatic shock”, such as loss of harvest economic crisis induced by the COVID-19 pandemic or property due to fire, poor rains, or flooding. Almost has contributed to a worsening of these levels. Among two-thirds (64.3 percent) of Nigerians, meanwhile, other instruments, the Nigerian government has sought lived in a household that had been affected by at least to leverage its social protection system to provide relief. one “non-climatic shock”, including theft, death or Integral to this effort are ongoing innovations in data illness of a household member, or sudden price increases. that assist in understanding on-the-ground realities and Of those experiencing such shocks, around one third in shaping a response. At the same time, the government reduced their food consumption in order to cope. An has sought to continue important reforms to build, and estimated 16.3 percent ate into their household savings improve the performance of, the social protection system. for the same reason, while 17 percent sold household Policy options going forward include greater and more assets. Only 0.3 percent reported receiving government sustainable financing of social protection by government, assistance in response to the shock their household had plus stronger coordination and alignment in program experienced. design and implementation across government agencies and administrative levels. Other priorities include further Simulations suggest that 10.9 million Nigerians advances in the development and use of data systems, greater may fall into poverty due to the COVID-19 crisis, resilience and responsiveness of the social protection system a large share of whom are set to be urban dwellers to shocks, and better interlinkages between social safety net who depend on service-sector, non-farm business programs and other programs and services. income. Before the COVID-19 crisis, the poverty rate was forecast to remain virtually unchanged, with the Even before the COVID-19 crisis hit the country, number of poor people set to rise to 90.0 million by around four in ten Nigerians were living below 2022 due to natural population growth. Yet the poverty the national poverty line and millions more were rate is now forecast to rise to 45.2 percent by 2022, with vulnerable to falling into poverty. An estimated 100.9 million people living in poverty.15 Taking the 40.1 percent of Nigerians (82.9 million people) were difference between these two forecasts, the COVID-19 living below the national poverty line in 2018–19. A crisis is expected to result in an additional 10.9 million further 25.4 percent of the population (52.6 million poor Nigerians by 2022. While poverty has traditionally people) had consumption levels between one and one- been concentrated among rural households dependent and-a-half times the national poverty line, making them on agriculture, more than one-third of those falling into “vulnerable” to falling into poverty. poverty due to the COVID-19 crisis are projected to be urban residents, around one-third are projected to live Around two in every three Nigerians experienced an in households whose heads work in services, and almost adverse shock in the three years prior to 2018–19, half are projected to live in households whose heads many of whom adopted negative coping strategies in work in nonfarm enterprises. response. In this period, an estimated 21.5 percent of 15 These results differ slightly from the World Bank’s Macro-Poverty Outlook (World Bank 2020a). Further details of the national poverty forecasting model used for Nigeria can be found in the previous edition of the Nigeria Development Update (World Bank 2020c), although the results now differ due to changes in the macroeconomic projections. 44 Part 2: Taking a Closer Look RISING TO THE CHALLENGE: NIGERIA’S COVID RESPONSE Nigeria’s social protection system Challenges Critical financing gaps and institutional challenges persist. As previously noted, institutional and Recent developments programmatic developments are underway to address this, but the system remains fragmented. Programs Advancing a comprehensive social protection system suffer from contradicting mandates and objectives of is high in the government’s priorities. In 2017, the the different agencies and line ministries supervising government introduced a Social Protection Policy them, which often leads to an overlap of activities and Framework, as well as a social registry of poor and duplication of efforts. vulnerable households. A social protection coordinating platform was also established in the Office of the Nigeria spends less on social safety net programs President. This was recently transferred to the newly than every other lower-middle income country and created Federal Ministry of Humanitarian Affairs, most of its regional peers. In the recent past, annual Disaster Management, and Social Development. government outlay on social safety net programs is The goal of the platform is to oversee and coordinate estimated at 0.3 percent of the GDP (Figure 2.6). social protection programs. The federal government Instead, government fiscal space is taken up by fuel price also increased its budget allocation to social safety net subsidies, which are expensive and highly regressive, interventions as part of its social investment program. mainly benefitting richer consumers. The major elements of the social protection Despite the government launching several new policy framework comprise poverty-based safety net programs in recent years, social protection targeting of beneficiaries, automated management coverage remains low, even if well targeted. For information systems, electronic payments, and example, in 2018–19, just 1.6 percent of Nigerians social accountability mechanisms. Further work on lived in a household that was enrolled in the National developing an electronic National Identity Number Social Safety Net Project (NASSP), which is the (NIN) system is underway. Several state governments country’s flagship social protection program, and the are also developing their own social protection systems share of households receiving benefits from most other by putting in place coordination and implementation programs was even lower (Figure 2.7). Nevertheless, the arrangements for social investment and social safety characteristics of NASSP beneficiaries closely resemble net programs. State governments have also begun to those of the bottom-60 percent of the monetary introduce social insurance programs in relation to health consumption distribution, the very households that and old age, as well as microcredit programs for low- NASSP sought to target. They have similar average income households. consumption levels, devote similar shares of their consumption baskets to food and non-food items, have Key programs have been launched through the similar demographic characteristics, and their household National Social Investment Programs (NSIPs) in heads tend to work in similar occupations (Figure 2.8). recent years. The NSIPs are currently coordinated under the Federal Ministry of Humanitarian Affairs Disaster Apart from low coverage, the performance of the Management and Social Development. NSIPs split their government social safety net programs is variable and interventions into two broad categories; social safety nets can also be low, as measured by other dimensions and other social investments. of design and implementation. These areas include the adequacy of program benefits; links with active Part 2: Taking a Closer Look 45 NIGERIA DEVELOPMENT UPDATE DECEMBER 2020  t 0.3 percent of GDP, Nigeria spends Figure 2.6. A  he coverage of government social safety Figure 2.7. T less on social safety net programs than net programs is generally low. most of its regional, aspirational, and structural peers. Government spending on social safety programs Share of the population living in an enrolled/recipient household Percent of GDP Percent 5.0 – 20 – 4.5 – NAM 18 – 1.0 – 16 – 3.5 – EGY 14 – 3.0 – 12 – COL 10 – 2.5 – 8– 2.0 – VNM BFA 6– 1.5 – RWA 4– 1.0 – BGD TCD IDN 2– 0.5 – PAK GHA 0– TGO ZMB NGA 0– CIV NASSP School feeding program All other programs (enrolled) (recipient in the last (recipient in the last 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 12 months) 12 months) GDP per capita, PPP$, 2018 J National J Urban J Rural Source: Spending statistics obtained from the World Bank’s Atlas of Social Protection Source: Authors’ estimates based on data from the 2018–19 Nigeria Living Standards Indicators of Resilience and Equity (ASPIRE) database (https://www.worldbank.org/en/ Survey. data/datatopics/aspire). Statistics on GDP per capita obtained from the World Bank’s Note: Estimates exclude Borno. NASSP = National Social Safety Net Project. For NASSP, World Development Indicators database (https://databank.worldbank.org/source/world- figures focus on enrollment rather than receipt of social assistance benefits. “All other development-indicators). programs” include YouWin, Inputs-For-Work Programme (FADAMA), E-Wallet Input Note: PPP = purchasing power parity. GDP per capita, PPP US$, 2018 is measured using Subsidy Programme, Growth Enhancement Scheme, N-Power, and all other federal, state, constant international dollars for 2017. Regional, structural, and aspirational peers are and local government assistance programs. Estimates are adjusted for sampling weights based on the World Bank’s Nigeria Systematic Country Diagnostic (World Bank 2020b).  overnment social safety net program beneficiaries have similar household characteristics to those Figure 2.8. G in the bottom-60 percent of the consumption distribution. Panel A. Overall consumption Panel B. Consumption basket share Mean nominal Naira per capita per year, in thousands Share of the average consumption basket, percent 400 – 100 – 372,716 350 – 90 – 80 – 300 – 70 – 250 – 60 – 221,025 200 – 50 – 150,374 40 – 150 – 119,897 30 – 100 – 20 – 50 – 10 – 0– 0– Bottom-60 Top-40 Bottom-60 Top-40 NASSP sample percent percent Total NASSP sample percent percent Total J Food J Meals outside the home J Non-food J Education J Health J Housing Source: Authors’ estimates based on data from the 2018–19 Nigeria Living Standards Survey. Note: NASSP = National Social Safety Net Project. Estimates exclude Borno. NASSP oversample drawn from additional sample of households all of whom were receiving government social assistance. Estimates are unweighted given the different sampling strategies deployed by the main sample and the NASSP oversample in the 2018–19 Nigeria Living Standards Survey. 46 Part 2: Taking a Closer Look RISING TO THE CHALLENGE: NIGERIA’S COVID RESPONSE labor market programs for potentially improved self- The World Bank is currently preparing a new employment and wage-employment outcomes; ex- COVID-19 emergency response lending operation — ante or ex-post program coverage of households the COVID-19 Action Recovery and Economic that experience adverse shocks and links with social Stimulus or CARES project—to support the federal and insurance programs; and links with nutrition, health, state governments in their efforts to mitigate the negative and education programs and services for potentially effects of the COVID-19 pandemic in the country. The improved human development outcomes for children. project is a short-term response targeting preexisting and newly poor and vulnerable households, agricultural value chains, and micro and small enterprises affected by the crisis. The project offers the added benefit of consolidating currently fragmented social protection Social protection response to the programs at the state level into streamlined platforms COVID-19 crisis and building capacity of these platforms to ensure sustainability beyond the life of the project. The World Bank’s ongoing NASSP operation is offering Social protection program coverage has remained low complementary support by building the institutional during the COVID-19 crisis. Between mid-March and capacity of the platforms at the state level. July 2020, just 4.9 percent of households had received assistance in the form of cash from any institution— including the government—and 3.6 percent had received in-kind (non-food) assistance. While food assistance was more common, having been received by 23 percent of Longer-term reform directions for households over the same period, such transfers are more a more effective social protection likely to be received by nonpoor households. system Innovative techniques are currently being explored Greater and more sustainable government financing. to target poor and vulnerable Nigerian households Sound, long-term fiscal planning for government in the wake of COVID-19. Given the pandemic’s investments in the social protection system is essential. disproportionate impact on urban areas, where pre- This planning should seek to increase fiscal resources pandemic poverty rates were the lowest, it is vital to available for social protection programs through better better understand emerging pockets of poverty in channeling of oil and non-oil revenues. Nigeria’s towns and cities. To this end, a poverty map using satellite and other ‘big data’ sources has been Stronger coordination and alignment in program produced to estimate poverty at the ward level in Nigeria. design and implementation across government This new poverty map is being used to select urban agencies and administrative levels. There is a need to wards for scaling up NASSP. By accelerating registration institutionalize coordination, alignment, and integration and rapid expansion both in rural and urban areas, it is of various social protection programs across the federal, expected that the NASSP cash transfers will be provided state, and local government levels. Capacity building to about four million poor and vulnerable households for program delivery at scale is a major priority at the (over 20 million people) across all of Nigeria’s states. state level. States are at various stages of implementing the National Social Investment Program, as well as developing and implementing their policies and programs. Further, building off the system developed by Part 2: Taking a Closer Look 47 NIGERIA DEVELOPMENT UPDATE DECEMBER 2020 national programs, there is a need to develop a common References delivery platform for social protection programs implemented by different ministries and agencies and at different levels of government, toward reducing World Bank (2020a). Nigeria Development Update, fragmentation. June 2020: Nigeria in Times of COVID-19 – Laying Foundations for a Strong Recovery. Further advances in the development and use of data Washington, DC: World Bank. systems. Nigeria’s social protection system would benefit World Bank (2020b). Nigeria on the Move: A Journal greatly from the collection and application of credible, to Inclusive Growth. Systematic Country up-to-date, and relevant information for program design, Diagnostic. Washington, DC: World Bank. implementation, and reform. These data sources include World Bank (2020c). Sub-Saharan Africa: Macro Poverty the National Social Registry and the management Outlook: Country-by-country Analysis and information systems of the NSIPs. Projections for the Developing World. Annual Meetings 2020. Washington, DC: World Bank. Improved resilience and responsiveness of the social protection system to shocks, plus better interlinkages between social safety net programs and other programs and services. Performance could quickly accelerate with the development and implementation of a coherent suite of safety net programs that offered adequate, regular, and well-targeted benefits. Similar outcomes could arise from creating well-defined links between social safety net programs, on the one hand, and social insurance programs, labor market programs, and nutrition, education, and health services for the poor and vulnerable, on the other. Such efforts are underway under various NSIPs, including NASSP, but they require further strengthening. 48 Part 2: Taking a Closer Look RISING TO THE CHALLENGE: NIGERIA’S COVID RESPONSE Nigeria’s health response to the COVID-19 pandemic Summary: With 65,148 COVID-19 cases registered as of Institutional structure of the November 16, Nigeria ranks among the top ten countries government’s COVID-19 health heavily affected by COVID-19 in Africa. The government response responded to the pandemic by: strengthening its political and technical structures through a cross-sector COVID-19 The Nigerian government developed an initial 28-day response effort, coordinated by a new Presidential Task plan and subsequently a six-month incidence action Force based in the office of the Secretary to Government of plan in response to COVID-19. The political response Federation; bolstering the role of the Ministry of Health as was led by a cross-sector, multilateral partnership based custodian of the response through a new inter-ministerial out of the Secretary to Government of Federation, technical working group; and boosting the core functions under the Presidency. The technical health response, of the Nigeria Centre for Disease Control to ensure it has meanwhile, was led by the Federal Ministry of Health sufficient capacity. COVID-19 has negatively impacted and the Nigeria Centre for Disease Control. service delivery for disease control programs as well as essential healthcare services. This can be attributed to both The response of Nigeria’s health sector to COVID-19 the direct health effects of the virus, as well as the knock- is structured along the following main pillars and on effects for the economy and the consequent ability of the activities: population to pay for services. • Coordination: At the Federal level, the Presidential Task Force (PTF) on COVID-19 established by the President in March 2020 was mandated to coordinate and oversee the country’s multi-sectoral and inter-governmental response efforts while the Nigeria Centre for Disease Control through her  he number of new daily cases reached its peak in June. Figure 2.9. T Trajectory of daily cases from onset of pandemic to November 19, 2020 900 – 800 – 700 – 600 – 500 – 400 – 300 – 200 – 100 – 0– 0 0 0 0 0 0 0 0 0 0 0 n-2 b-2 r-2 r-2 y-2 n-2 Ju l-2 g-2 p-2 t-2 v-2 Ja Fe Ma Ap Ma Ju Au Se Oc No Source: https://www.ecdc.europa.eu/en/publications-data/download-todays-data-geographic-distribution-covid-19-cases-worldwide. Downloaded 11/19/2020. Part 2: Taking a Closer Look 49 NIGERIA DEVELOPMENT UPDATE DECEMBER 2020 national multisectoral Emergency Operations Centre success in dealing with misinformation, many persist (EOC) activated at the highest level of response for in believing that COVID-19 is a fiction. This results public health emergency coordinates the public in gaps in the adoption of preventive measures. health response and provide technical inputs to the PTF and the Situation Room in the FMOH. NCDC • Surveillance:  The NCDC has successfully rolled out also supported each State to activate their EOC to an integrated surveillance approach, led by a newly coordinate the response at sub-national level and established Rapid Response Team and supported by deployed multi-specialty rapid response team along community surveillance officers and port-of-entry with needed health commodities for COVID-19 officers. NCDC has also provided training in the detection, investigation and response at the State- management of SORMAS to all state authorities. level. Sub-national coordination was through COVID-19 EOC in the SMOH which operates • Points of Entry (POE): L  and, sea, and airports have along the same strategic response pillars in line with been the crucial entry points for COVID-19. Nigeria guidance from NCDC. Also, Governors constituted has developed policies and frameworks to ensure State COVID-19 Task Force for multisectoral that all passengers are screened and safe. Guidance coordination at that level. has been provided on managing both incoming and outgoing travelers. In addition, POE staff have been • Laboratory System strengthening:  From the initial trained and equipment has been procured to support three laboratories located in two states (Lagos and this process. Edo) and FCT, the NCDC scaled up its diagnostic capacity to every state of the Federation. Testing capacity was extended to a total of 68 labs, made up of 52 molecular laboratories and 16 GeneXpert laboratories. To achieve this, NCDC increased Impact of COVID 19 on primary and laboratory staff’s capacity through the provision of essential health service delivery laboratory equipment, reagents and consumables. It also monitored the performance of all the laboratories within the network. As a result, daily testing capacity The ongoing COVID-19 pandemic has posed was improved to about 15,000 tests per day and an Nigeria’s primary health systems and essential services improved turnaround time (24–48hrs). The NCDC with unprecedented challenges. Utilization rate of basic was also able to establish sample collection centers health and nutrition services has dropped as a result of in each of the 774 local governments in the country. social distancing measures, fear of infection, distrust in To date, however, collection rates have not reached the system, and reduced household income. At the same the point where the laboratory system’s expanded time, services have been affected by health problems capacity has been used fully. and low motivation among service providers, who have had to go about their jobs in the face of supply chain • Risk Communication:  The NCDC has initiated a disruptions, mobility restrictions, and lack of infection series of high-impact awareness campaigns, such as prevention and control (IPC) training and equipment: “Take Responsibility” and “Mask-up Naija”, with the goal of increasing the adoption of preventive • Decreases in service utilization:  Based on HMIS measures. These campaigns were supported by data analysis , utilization of key services in public 16 community and religious leaders, as well as other key facilities has fallen. For example, outpatient care- opinion formers. While there has been significant seeking decreased by 18 percent in April 2020, 16 Analysis by Development Research Group, in collaboration with GFF, Federal Ministry of Health and Nigeria HNP team. 50 Part 2: Taking a Closer Look RISING TO THE CHALLENGE: NIGERIA’S COVID RESPONSE Table 2.1. COVID-19 has largely impacted outpatient attendance in Nigeria. Estimated impact (percentage drop from expected) of COVID-19 on essential services in Nigeria Number of Third dose of Consultations FP clients First Antenatal Total deliveries BCG Pentavalent (Outpatient counselled Visit (#) vaccination #) vaccine (#) attendance) March 2020 -3.4 -1.2 -3.1 -0.6 -3.7*** 2.4** April 2020 -17.5*** -10.7*** -15.5*** -0.9 -12.3*** -5.7*** May 2020 -19.8*** -14.8*** -14.6*** -6.2*** -11.7*** -6.0*** June 2020 -14.7*** 0.2 15.7*** -5.8** -1.4 4.7*** July 20201 -21.3*** -9.6*** -13.9*** -6.5** -7.4*** -5.3*** Source: Analysis from GFF and DEC in collaboration with FMoH and Nigeria HNP team, using HMIS data. This analysis is a part of the multi-county support to GFF countries. Note: This analysis incorporates facility type or size, difference by first subnational unit and seasonality—output from a regression analysis that adjusts for the factors above. Negative values indicate an estimated decrease in service delivery levels compared to the expected level. The coefficients are percentage changes from the expected level. For instance, a value of -17.5 means an almost 18 percentage drop in the number of consultations compared to the level in the absence of COVID. * p-value<0.100, ** p-value< 0.050; ***p-value<0.001. Drops in July may be affected by under-reporting.  he percentage of people who are not able to access care decreased once the movement Figure 2.10. T restrictions were eased. Nigerian households needing health services and those unable to access them Percent April/May June July 40 – 38.7 30 – 34.3 35.1 20 – 25.7 10 – 14.2 14.0 0– Reasons for not being able to access care Lack of money 55.4 70.0 78.4 No medical personnel available 3.6 9.4 4.5 Turned away because facility was full 1.3 0.0 0.0 Due to movement restrictions 23.8 5.6 0.0 Other reasons 15.9 14.9 10.8 0 25 50 75 100 0 25 50 75 100 0 25 50 75 100 J Someone in HH needed medical treatment J Out of HH reporting needing care, percentage not able to access Source: Poverty GP, Nigeria COVID-19 Household survey. This analysis is also a part of the multi-county support to GFF countries. accounting for prior trends and seasonality. • Family planning and vaccination:  HMIS data Furthermore, this indicator has not recovered (See from August reveal that uptake of some services has Table 2.1 for overall results).17 For most of these improved, albeit not to pre-COVID-19 levels. service indicators, disruptions were largest in states with the highest number of COVID cases. Even a low-impact, six-month disruption in services could lead to as many as 42,000 additional maternal • Demand shock:  Results from the household phone and under-five deaths in Nigeria  (See Figure 2.11 survey, led by the poverty team, shows that the below). In light of the immediate and medium-term percentage of people who are not able to access care impacts already witnessed, service disruptions are likely decreased once the movement restrictions were eased. to see a rise in the number of non-COVID-related A substantial number of people still lack access, deaths in 2020 as compared to previous years. Nigeria is nonetheless. Of these, over 70 percent cite lack of likely to continue to see disruptions in care-seeking even money as the key reason. See Figure 2.10 for the after the mobility restrictions have been eased (as it had results. in June and July). Based on existing evidence to date, the main cause of these disruptions will be people’s inability 17 Insufficient information is currently available concerning COVID-19’s impacts on service provision and utilization in private-run health facilities. More information on this should be available by December based on the Bank’s technical engagements. Given the general impact of COVID-19 on household incomes, the impact is likely to mirror that of the public sector. Part 2: Taking a Closer Look 51 NIGERIA DEVELOPMENT UPDATE DECEMBER 2020 to pay to access healthcare. In addition, problems with Policy options local and regional supply chains may further impact service provision in the coming months. State Coordination  ven moderate disruptions in essential Figure 2.11. E care services could take a high toll on Nigerians’ health. • Role of state governors:  The COVID-19 response Estimated additional maternal and under-five deaths in brought to the fore the critical role of state Nigeria due to disruptions in essential care services In thousands governors. Most kept to guidelines and protocols 400 – set by the Federal government. Not all followed 350 – 359 official guidance to the letter, however, with the 300 – governors of Kogi and Cross River cases in point. 250 – The Federal government can encourage, but not oblige, state governments to follow federal norms. 200 – 180 147 Use of conditional cash transfers is an option to align 150 – the states with the national response guidelines and 100 – 90 83 73 protocols. 50 – 37 42 21 0– • Federal and state communications:  Gaps in 3 months 6 months 12 months J Low impact J Moderate impact J High impact communications between the State’s Task Force and Scenario key: Low Impact Scenario: Scenario 1 in the paper, effective coverage reduction of RMNCH services between 9.8 percent to 18.5 percent.; Moderate Impact Scenario: the SMOH-led EOC led to a degree of misalignment Scenario 2 in the paper, effective coverage reduction of RMNCH services between 18.9 percent to 26.9 percent; High Impact Scenario: Scenario 3 in the paper, effective coverage in some states. While the Task Force controls the reduction of RMNCH services between 39.3 percent to 51.9 percent. Source: Roberton, T., Carter, E.D., Chou, V.B., Stegmuller, A.R., Jackson, B.D., Tam, Y., resources, the technical team in EOC leads the actual Sawadogo-Lewis, T. and Walker, N., 2020. ‘Early estimates of the indirect effects of the COVID-19 pandemic on maternal and child mortality in low-income and middle-income response. In some states, these two coordinating countries: a modelling study.’ The Lancet Global Health. 8(7): e901-e908. structures have little or no alignment regarding their respective response priorities. There should be clear Together with developmental partners, the terms of reference that confine the Task Force to government has taken key proactive and incremental multisectoral coordination and resource mobilization, steps to mitigate the impact of COVID-19 on while giving the technical sectors the necessary space essential health care systems. This includes updating and resources to respond as appropriate to national guidelines for health workers and communities to guidelines. maintain essential services. Other steps include: the training of national and state health managers, healthcare workers, and community members (leaders and civil Technical and Implementation Guidance society organizations)18; social media campaigns; the implementation of a modified version of Nigeria’s • Response and prevention support: Th  e delay existing integrated outreach program; and the restocking in shutting international airports, coupled with a of vaccines and other critical supplies.19 reliance on passengers to self-report and self-isolate with limited monitoring and follow-up, led to the widespread importation and spread of the virus. Similarly, delays in restricting inter-state travel in and out of Lagos and Kano—two epicenters of the 18 By the end of this exercise, 200,000 health workers and a minimum of ten community members per ward were trained in 36 (+1) states in the country. 19 On the immunization supply chain side, changes in vaccine procurement systems (and delays) due to COVID has led the government to optimize stocks within the country to mitigate any shortfalls. United Nations International Children's Emergency Fund (UNICEF) has also used chartered flights to meet shortfall in vaccines, increasing the cost of procuring these vaccines and other health products. 52 Part 2: Taking a Closer Look RISING TO THE CHALLENGE: NIGERIA’S COVID RESPONSE virus—turned both states into sources of national References transmission. • Private-sector involvement: U  nlike in South Africa, Roberton, T., Carter, E.D., Chou, V.B., Stegmuller, where the private sector was quickly mobilized to A.R., Jackson, B.D., Tam, Y., Sawadogo-Lewis, provide laboratory diagnostic services while the T. and Walker, N. (2020). ‘Early estimates of the public laboratories were being optimized, Nigeria indirect effects of the COVID-19 pandemic on initially relied on public laboratories alone. As maternal and child mortality in low-income and a result, the private sector was only brought on middle-income countries: a modelling study.’ board much later. The positive contribution of the The Lancet Global Health. 8(7): e901-e908. private sector is evident in overall testing figures. By November 3, 2020, these amounted to 4.87 million in South Africa and about 660,000 in Nigeria, respectively. • Role of primary care facilities: M  obilizing primary health care facilities for the implementation of essential health services, coupled with effective demand-side messaging, is critical to the minimal disruption of service delivery. Part 2: Taking a Closer Look 53 NIGERIA DEVELOPMENT UPDATE DECEMBER 2020 Education and COVID-19: Policies to mitigate the impact and accelerate progress Summary: The COVID-19 pandemic will exacerbate efficacy of those strategies depending on households' the challenges that the education sector faces in Nigeria. socioeconomic level. Learning levels could decline by 10 percent or more, which in turn will translate in an economic loss equivalent to at In response to the current crisis, the government has least 10 percent of the current GDP. The state and federal implemented multiple measures, both at the federal governments have taken multiple measures to mitigate these and state levels. First, in March, Nigeria closed risks. Scaling up successful interventions and protecting schools for more than 45 million students, due to the education funding will be fundamental to minimize and high risk of COVID-19 exposure and in concordance mitigate the impacts of this crisis on education while setting with the most prevalent practice in the world. One of the the scene to build back a better education system that can first reactions was the publication of an Education Sector benefit all. COVID-19 Contingency Plan to ensure that the school community was protected. Among its specific objectives, With over 10 million school-age children out-of- the plan aimed to ensure the continuation of education, school, Nigeria accounts for one in every five out- provide safe water and hygiene facilities in schools, and of-school children worldwide. Data from the Human train and sensitize the school community on preventive Capital Project shows that children who start school at measures.21 age four can expect to complete 10.2 years of schooling by their 18th birthday20. When this value is adjusted During the school closures, Nigeria strived for by what children actually learn, the expected years of learning continuity despite the abrupt closure, with schooling are equivalent to only 5 years. The resulting distance learning reaching approximately 60 percent learning gap of 5.2 years is one of the largest in the of school children, a strong performance compared world. to other countries in the region.22 On October 12, the government started reopening schools, following COVID-19 will exacerbate these challenges. a careful approach that included fewer days of classes Preliminary estimations show that the average years of per week and a double shifting to ensure low levels of schooling would go down from 10.2 to 9.4 years, and exposure to COVID-19. the learning-adjusted years of schooling would go down from 5.04 to 4.52 years. This 10.34 percent reduction in Moving forward, the country will have to build on years of schooling as a result of complete school closure its efforts to mitigate the effects of COVID-19 on for a few months will have life-long consequences for education and accelerate progress. This will imply at the current cohort of school-goers. The crisis will also least six different interventions. First, states need to increase learning inequality across income quintiles, ensure that all kids go back to school and gradually regions, states, and genders, given the unequal access to and safely ensure the full resumption of school remote learning among these groups and the differential activities. This will entail a rigorous identification of children that, after schools reopened, did not go back 20 World Bank, 2020. Human Capital Project. 21 Government of Nigeria, 2020. Education Sector COVID-19 Contingency Plan. 22 Josephson, Ana; Kilic, Talip, and Michler Jeffrey, 2020. Socioeconomic impacts of COVID-19 in four African countries, Development Data Group, World Bank. 54 Part 2: Taking a Closer Look RISING TO THE CHALLENGE: NIGERIA’S COVID RESPONSE to school, and the development of targeted policies to reinforcing digital platforms and infrastructure at the bring them back and reduce dropout rates. Resources university level and technical and vocational education such as administrative data, the available phone surveys, and training and adapting the learning process to digital/ and effective social mobilization would be important to virtual reality will be critical. identify not only children who did not return to school but also those at risk of dropping out. The targeted I  n fact, there are many successful experiences that can approach to bringing children back to school will require be scaled-up or replicated in other regions. For example, a combination of interventions from multiple sectors Edo state's government launched EdoBEST@Home, and can include simple text messages to households, an adaptation of its flagship EdoBEST program, which communication campaigns to return to school, door- incorporated digital self-study packages distributed to-door campaigns, and subsidies or cash transfers to online and through messaging applications, a learning vulnerable families. It will also be important to identify platform, the distribution of hard copies of learning those children who should have started primary school materials for hard-to-reach students.24 Similarly, Niger this academic year but have not done it due to the state launched a strategic plan to reduce school closures' pandemic. The same kind of policies will be useful to negative impacts, which includes lessons on radio and attract them. television. The state has also been working actively to engage parents and learners. In a similar vein, Anambra  e available evidence shows that it is very likely that Th state launched "Teaching on Air", a program through girls will experience a more substantial impact. In Sierra which classes are broadcasted on radio, television, and Leone, when the schools reopened after being closed online platforms. for almost an entire academic year during the Ebola outbreak, girls ages 12–17 were 16 percentage points Third, ensuring that teachers are paid and that they less likely to be in school than boys.23 Thus, the targeted teach will be essential. Once children are back in school, policies to bring vulnerable children and adolescents it will also be important to ensure that they can learn. back to school should have a strong focus on girls. The evidence shows that teachers are the most critical factor for learning. Thus, in the short term, the priority Second, the states need to scale-up successful remote is to pay teachers who actually teach on a timely basis learning interventions. It would be important to to align teachers' incentives to go to school and tertiary expand interventions that have worked to continue institutions and teach. This entails preserving funding learning during school closures. This expansion should for teachers' salaries and overseeing that they invest their have two goals: to create resilience to face a potential time in teaching while providing the necessary measures second wave of school closures and reinforce the system's for their health and safety. capacity to complement learning at school with learning at home. This could be done through a multimedia Fourth, conduct a learning loss assessment and approach, combining TV and radio materials, online provide remedial programs. Measuring the learning platforms, digital resources, support mechanisms loss that the pandemic and the school closures have through which teachers can reach students, and hard originated will be critical to design a proper remediation copies of workbooks and learning materials for children strategy. State government and education institutions who cannot be reached with any technologies. In (schools, TVET providers, and universities) could addition, simple guides to parents and guardians on how conduct a learning assessment to identify the main gaps to support children learning from home will continue created during the lockdown and identify the groups to strengthen the school-families partnership. Similarly, 23 Bandiera, O., N. Buehren, M. P. Goldstein, I. Rasul, and A. Smurra. 2019. The Economic Lives of Young Women in the Time of Ebola: Lessons from an Empowerment Program. Washington, DC: World Bank. 24 https://blogs.worldbank.org/education/learning-despite-crisis-case-edo-state-nigeria Part 2: Taking a Closer Look 55 NIGERIA DEVELOPMENT UPDATE DECEMBER 2020 of students who have lost the most, who will, in turn, References receive remedial programs. Fifth, strengthen school infrastructure with a focus Bandiera, O., Buehren, N., Goldstein, M. P., Rasul, I. on resilience. In the medium term, state governments and Smurra, A. (2019). The Economic Lives of can improve school infrastructure in at least two ways. Young Women in the Time of Ebola: Lessons First, water and sanitation infrastructure should be from an Empowerment Program. Washington, improved to ensure that proper hygiene conditions DC: World Bank. prevent the spread of diseases and that students have Government of Nigeria (2020). Education Sector adequate handwashing facilities. Second, connectivity COVID-19 Contingency Plan. should be enhanced to improve access to remedial Josephson, A., Kilic, T., and Michler. J. (2020). education through digital technologies, expand digital Socioeconomic impacts of COVID-19 in four skills training, and strengthen education management. African countries, Development Data Group, It would be important for state governments to work World Bank. closely with the Federal Ministry of Communications World Bank (2020). Human Capital Project. and Digital Economy and the Nigerian Communications Commission. Sixth, it will also be essential to reinforce the post- basic education system. During the crisis, tertiary education can support school systems in the rollout of online learning. Universities can unfold focused applied research and promote local innovation in response to COVID-19, such as addressing shortages in critical supplies and reducing supply chain disruptions. After the crisis, the role of TVET and tertiary education will be essential to ensure that young people have the skills to participate in a very depressed and demanding labor market. A focus on digital skills will be vital to ensure that the supply is adapted to the new nature of work requirements. At the end of the day, one of the most critical policies will be to protect education funding. Given the immense needs that the country is experiencing in the middle of the pandemic, the temptation to further reduce education funding might grow. However, any attempt to reduce education funding will be counter- productive as education is vital not only to improve the wellbeing of this generation of children, but it will also be critical for medium- and long-term economic growth that will benefit generations to come and to put the country on the path towards sustainable development. 56 Part 2: Taking a Closer Look Part 3: Spotlights on Nigeria’s Development Agenda NIGERIA DEVELOPMENT UPDATE DECEMBER 2020 Spotlight 1: Opening development opportunities in Nigeria by closing gender gaps25 Summary: Gender disparities in economic opportunities Nigeria’s labor market is hamstrung by and earnings limit inclusive development and constrain low female participation, the roots of growth. Data from the Nigerian household survey (2018– which begin after primary school and 19) indicate that women in Nigeria earn considerably less are aggravated by early marriage and from their economic activities than men. In agriculture, childbirth women plot managers produce 30 percent less per hectare farmed than men. In entrepreneurship, women earn There are significant gender gaps in labor force about one third of what men earn. In wage work, salaried participation and labor supply in Nigeria. The latest women earn over one-fifth less (22 percent) than their Nigeria General Household Survey (2018–19) reveals male colleagues. These gaps in earnings not only hold back that only slightly more than half (51 percent) of working- the Nigerian economy, but also represent an opportunity: age women in Nigeria work, 13 percentage points lower closing the gender gaps in key economic sectors could yield than men’s participation (64 percent) (Figure 3.1). The additional gains of US$9.3 billion to US$22.9 billion. gender gap in participation in the labor market carries Further analysis of the household survey data reveals seven over into the intensity of labor supply as well. Among key constraints that could be driving lower earnings for the working population, women work almost 5.5 hours women, including: choice of low-value crops, limited access less per week than men. There are also significant gender to farm inputs, and access to less productive labor for women differences in occupational choice: while women and farmers; low levels of growth capital and subordinate men are equally likely to be occupied in entrepreneurial position in the value chain for women entrepreneurs; sectoral activities, women are 10 percentage points less likely to segregation for female wage earners; and multiple non-work participate in agriculture and 7 percentage points less pressures on women’s time. These constraints could reinforce likely to have a wage-paying job. one another, further limiting women from reaching their full potential. It is therefore pivotal to design innovative A persistent gender gap in economic participation policies and programs that can ease these constraints and emerges at adolescence. Boys and girls are equally likely close gender gaps. to either attend school or work until the age of 14, after which women’s economic participation drops (Figure 3.2). The emergence of this gender gap at the end of basic schooling pinpoints the school-to-work transition as a critical challenge for many Nigerian women. For the remainder of the age distribution, the magnitude of the gap is relatively stable at around 18-percentage points. Early marriage and early childbirth hold back labor market outcomes. Nigeria has one of the world’s highest 25 This spotlight summarizes the findings from the forthcoming Nigeria Gender Diagnostic, which uses the latest 2018/19 Nigeria General Household Survey data to quantify gender gaps in key economic sectors, to identify their underlying drivers, and to estimate their costs for the Nigerian economy. It also offers targeted policy recommendations and proposals for further research to realize a more inclusive economy. 58 Part 3: Spotlights on Nigeria’s Development Agenda RISING TO THE CHALLENGE: NIGERIA’S COVID RESPONSE  igerian women are less likely to work Figure 3.1. N  conomic participation for women drops Figure 3.2. E than their male counterparts, and when around the transition to secondary school they work, they are likely to work fewer despite girls having similar attendance hours. rates to boys at primary school. Percent of working-age individuals who worked in the past Percent of individuals in each age cohort that are either week and average hours spent on income generating attending school or working activities among those who worked Percent working Mean hours worked Percent working or attending school 100 – – 40 90 – 90 – – 35 80 – 80 – 70 – – 30 70 – 60 – 60 – – 25 50 – 50 – – 20 40 – 40 – – 15 30 – 30 – – 10 20 – 20 – 10 – –5 10 – 0– –0 0– National North South 5 10 15 20 25 30 35 40 45 50 55 60 Age J Female working J Male working Q Female hours worked Q Male hours worked J Women J Men Source: Nigeria Gender Diagnostic Report (World Bank, Forthcoming). Source: Nigeria Gender Diagnostic Report (World Bank, Forthcoming). rates of early marriage for women. Nationwide, nearly a four-percentage point gap between male (44 percent) one in five girls (18 percent) are married by the age of and female (40 percent) secondary school enrollment 15. Within three years, at age 18, the proportion more rates. These gaps have implications for women’s future than doubles (to 43 percent). The respective figures for job prospects; an additional year of post-secondary Sub-Saharan Africa are 11 percent and 35 percent.26 education is estimated to increase the probability of a Early marriage negatively affects labor market outcomes. woman’s participation in the wage market by 15 percent A study in four Sub-Saharan countries finds that in Nigeria. early marriage effectively wipes out the benefits of secondary education, which, in other circumstances, The COVID-19 pandemic is likely to exacerbate is the main factor determining whether women enter gender gaps in labor force participation. Women wage employment. One of the key pathways through in Nigeria are likely to respond to the COVID-19 which marriage impacts labor market outcomes is pandemic by reducing their labor supply for several childbirth. Women who marry before the age of 18 have reasons including their high concentration in self- approximately 20 percent more births over their lifetime employment activities and their disproportionately relative to those who marry later, after controlling for high caregiving responsibilities.27 This is already evident socio-economic characteristics. in recent data. A May 2020 survey of business owners and managers of small and medium-sized enterprises in Gender gaps in schooling precipitate later gender Nigeria found that 42 percent of women-owned firms gaps in economic outcomes. Gender gaps in had closed as a result of the pandemic, compared with educational enrollment persist despite Nigeria’s Universal only 33 percent of men-owned firms.28 Basic Education policy, which guarantees children the right to six years of free primary school and three years of free secondary school. In 2016, for example, there was 26 Le Nestour et al. (2018). 27 World Bank (2020). 28 Facebook/OECD/World Bank (2020). Part 3: Spotlights on Nigeria’s Development Agenda 59 NIGERIA DEVELOPMENT UPDATE DECEMBER 2020  hroughout Nigeria, women farmers Figure 3.3. T Across economic activities, women produce significantly less per hectare than workers in Nigeria consistently earn less men. than men Calculated difference in agricultural productivity between male-managed plots and female-managed plots. Conditional difference controls for individual, household, and plot Analysis of recent nationally representative survey characteristics Gender gap, percent data reveals major gender earnings gaps in agriculture, 40 – self-employment, and wages. Quantifying these gaps 35 – helps demonstrate the economic barriers facing women 30 – in Nigeria. Additional analysis using the Kitagawa- Oaxaca-Blinder decomposition approach determines 25 – which factors contribute most to these gaps, highlighting 20 – priority areas where policy and program innovation may 15 – be particularly effective at closing earnings gender gaps. 10 – 5– 0– Ì  Measuring and identifying drivers of the gender National North South J Unconditional J Conditional earnings gap in agriculture Source: Nigeria Gender Diagnostic Report (World Bank, Forthcoming). Female farmers (plot managers) in Nigeria produce Women farm less-valuable crops. Crop choice significantly less per hectare than their male represents one of the most fundamental decisions counterparts. Nationally, the value of the output per farmers make, and the farming of different crops is a key hectare on female-managed plots is 30 percent lower driver of the productivity gap between female-managed than comparably sized male-managed plots (Figure 3.3). plots and male-managed plots. There are consistent This agricultural productivity gap shrinks to 16 percent value differences in both the North and the South across after controlling for individual, household, and plot- common crop types: on average, households farming level characteristics. Notably, gender gaps are similar yams attain significantly higher values per hectare in Nigeria’s North (23 percent) and South (22 percent) while those farming other roots and tuber crops attain regions. The research indicates that this persistent gender significantly lower values per hectare. In both the North productivity gap is driven by input use, crop choice, and and the South, women consistently farm the less valuable the composition of labor used on the plot. roots and tuber crops, holding back their agricultural productivity relative to men farmers. Women use fewer farming inputs, lowering yields. Agricultural inputs, such as fertilizer, can significantly Women use less productive labor. Female plot improve agricultural yields. Nationally, male farmers managers work more than their male peers and use use over 8 times more fertilizer and 50 percent more more household and hired labor, however the male herbicide per hectare than their female counterparts. labor contracted by male farmers tends to be more Women farmers’ lower use of these inputs depresses productive. This could relate to shortage of time (men yields because, on average, doubling the quantities of have more time to supervise workers), cultural bias (male fertilizer and herbicide used on a plot in Nigeria increases laborers work less hard for a woman supervisor) or lack agricultural productivity by 6 percent and 18 percent, of resources (hiring more productive workers may be too respectively. expensive). 60 Part 3: Spotlights on Nigeria’s Development Agenda RISING TO THE CHALLENGE: NIGERIA’S COVID RESPONSE Ì  Measuring and identifying drivers of the gender Ì  Measuring and identifying drivers of the gender earnings gap in self-employment earnings gap in wage work Self-employment is the most common income- Only 12 percent of Nigerian women primarily earn generating activity among women in Nigeria, but wages, and those that do earn 22 percent less than market position and lack of capital limit women’s their male counterparts. Wage employment is low for profitability. In Nigeria, almost half of income-earning women in Nigeria, although it increases fractionally (to women spend most of their time in entrepreneurship- 15 percent) for those with a secondary school education. related activities, yet their profits are 66 percent less When accounting for individual, sectoral, and employer- than those of men (Figure 3.4).29 This is primarily due level characteristics, female wage workers earn 28 percent to a lack of physical capital and to their difficulties in less than their male counterparts (up from 22 percent accessing high-revenue markets. without controls) (Figure 3.5). This gap is primarily explained by the fact that women consistently work in  omen entrepreneurs obtain significantly Figure 3.4. W lower profits than men. lower-paid sectors. Difference in entrepreneurial profits between male-  omen in the labor market earn lower Figure 3.5. W managed enterprises and female-managed enterprises. wages than men. The conditional difference also controls for individual and household characteristics Difference in wage incomes between men wage workers Percent and women wage workers. The conditional difference also 90 – controls for individual, sector, and employer characteristics Wage gender gap, percent 80 – 45 – 70 – 40 – 60 – 35 – 50 – 30 – 40 – 25 – 30 – 20 – 20 – 15 – 10 – 10 – 0– 5– National North South Urban Rural J Unconditional J Conditional 0– Source: Nigeria Gender Diagnostic Report (World Bank, Forthcoming). National North South J Unconditional J Conditional Women operate less capitalized firms. On average, the Source: Nigeria Gender Diagnostic Report (World Bank, Forthcoming). value of the equipment owned by women-operated firms is only 16 percent of the total value for firms operated Women work in less-remunerated sectors. This is by men. This lower capitalization may be related to the seen most clearly in the education sector, where women quantity of credit available. are more than twice as likely to work, relative to men. Working predominantly in education holds back Women almost exclusively sell to final consumers. women’s earnings because, in Nigeria, education is the Selling to final consumers generates 46 percent lower lowest paying sector, with earnings averaging 28 percent profits than selling to traders or small businesses. Despite less than in other sectors, after controlling for other its lower profitability, almost all female entrepreneurs individual and occupation characteristics. (95 percent) operate in this lower profit space and are half as likely (5 percent) to sell to traders or small Women are 11 percentage points more likely to work businesses as men entrepreneurs (10 percent). in government. This decreases the wage gap because 29 This gap increases to 71 percent after controlling for individual, household, and enterprise characteristics. Significant regional variation is also evident, with self-employed women in the North and South earning 56 percent less and 79 percent less than their male counterparts, respectively. Part 3: Spotlights on Nigeria’s Development Agenda 61 NIGERIA DEVELOPMENT UPDATE DECEMBER 2020 Box 3.1. The cost of gender gaps to the Nigerian economy. The total estimated foregone earnings based on gender gaps in agricultural productivity, firm profits, and wage earnings amounts to US$9.3 billion, equivalent to 2.3 percent of overall GDP. This is a lower bound estimate, which corresponds to the amount of additional earnings generated if every woman’s productivity, profits, and wage level was equalized with those of men. Using GDP multipliers, which take into account potential spillover effects across sectors of the economy, the costs could actually be as high as US$22.9 billion, or 5.8 percent of overall GDP. Recent research has shown that allocating labor more efficiently across the economy —i.e. through decreased segregation—can yield large and sustained dynamic impacts on growth. Thereby, the economic benefits to closing gender gaps may be substantial. For instance, decreased race and gender segregation in the United States’ labor market is estimated to be responsible for 20–40 percent of the increase in per capita output between 1960 and 2010 (Hsieh, Hurst, Jones and Klenow 2019). men and women in the public sector benefit from investments in soil conservation. Without secure land employer-specific wage premium and the gender-neutral rights, women may have difficulty increasing agricultural salary structures in place in government work. productivity or accessing the financing necessary to start productive enterprises. nequalities related to land tenure security I Gender differences in livestock holdings may and livestock holdings also constrain constrain women’s wealth accumulation. In Nigeria, women’s economic empowerment the livestock sector makes up 6 to 8 percent of the national GDP and approximately 13 million households Differential access to and use of land may be holding have farm animals. Livestock is a particularly useful back on-farm and off-farm opportunities for women. and versatile asset, especially for poor households: Although women represent between 60 and 79 percent it can store wealth, serve as collateral, and buffer of Nigeria’s rural labor force, men are five times more against shocks. Livestock is also highly profitable as it likely than women to own land. Seventy percent of plots is easy to commercialize (either as a whole or through are owned by individual men, while only 8 percent are its byproducts) and has high reproductive potential. owned by individual women. Moreover, the remaining Additionally, it can provide complementary inputs for jointly owned plots do not necessarily entail equal crop production owing to its assistance with ploughing rights between men and women. This is critical as land and its contribution of organic fertilizer. Animal assets can generate income via agricultural and livestock ownership is higher in Nigerian male-headed households activities as well as rental or sale. They also serve to store than in female-headed households. In addition, women and accumulate wealth, as well as providing collateral to livestock owners are more likely to own lower-value facilitate future investments. Evidence from the region animals (such as goats, sheep, and poultry) than men shows the importance of secure use and ownership of livestock owners (who are more likely to own cattle). land for agricultural productivity. Weaker land tenure The quantity of livestock owned by men also tends to be security for women in Ghana led to productivity losses greater. Women’s limited access to capital restricts their on their plots while formalization of women’s land rights ability to purchase livestock and care for them with feed, in Rwanda through titling programs increased their veterinary services, and other supplies. 62 Part 3: Spotlights on Nigeria’s Development Agenda RISING TO THE CHALLENGE: NIGERIA’S COVID RESPONSE Policy recommendations fertilizer—increased fertilizer use, output, income, and expenditures. Notably, the income impacts were Nigeria has an opportunity to simultaneously largest in female-headed households.33 Agricultural tackle its sizable gender gaps and stimulate the information programs catered to women farmers may economy. Addressing gender barriers will not only also help women purchase and use agricultural inputs. increase women’s economic empowerment but will Such programs could also use digital technology to share also accelerate the recovery and lay the foundation for information about input prices and available suppliers. inclusive economic growth in the future. The following Initial evidence suggests that digital technology can policy recommendations are backed by recent World increase farmers’ access to information and productivity Bank research and seek to address the specific constraints but rigorous evidence on the impacts of these programs driving the gender gaps in agricultural productivity, for women in the Nigerian context is still needed. entrepreneurship profits, and wage income, with a view towards helping policymakers implement effective Policy priority 3: Easing women’s access to farm labor policies and programs to narrow gender gaps in earnings. and mechanization. Providing cash vouchers or in-kind transfers could help women farmers purchase labor- Policy priority 1: Promoting women farmer’s choice saving machinery and hire high-quality labor, potentially of higher value crops. Input subsidies and targeted narrowing productivity gaps between men and women information could help women farmers transition to farmers. Input provision could also be a promising higher-value crops. Research from Niger, Kano, and intervention for enhancing women farmers’ labor use. Osun states shows that input subsidies for improved Evidence from Mali, for instance, indicates that female rice seeds yielded positive household welfare impacts, beneficiaries of a fertilizer distribution program increased but these were significantly larger for male-headed their use of other complementary inputs, including hired households than female-headed households.30 Designing labor.34 Recent evidence on mechanization shows the agricultural extension services and other information important role of social norms around the gendered use interventions with the needs of women farmers in and ownership of machinery: mechanization in Zambia mind could also increase adoption of new agricultural and Tanzania had time-saving benefits for women technologies, as seen in recent studies in Mozambique farmers but also led them to be more dependent on and Malawi.31,32 The same approach could be taken to men to conduct the mechanized tasks.35,36 These social insurance products. Other possible interventions include norms, together with capital constraints, could constrain couples’ trainings to engage men and promote women’s women’s ability to purchase labor-saving technology. participation in cash crops, as well as psychology-based Hiring or leasing services may be a promising policy business trainings to help women farmers develop alternative. However, more research is needed to measure actionable plans to adopt cash crops. the effectiveness of such innovations on women’s adoption of time-saving technologies and, ultimately, the Policy priority 2: Enhancing women farmers’ use impact on their productivity. of farm inputs. Input subsidies or seasonal financing for women farmers can directly ease their financing Policy priority 4: Unlocking firm owner’s access constraints and increase their access to inputs. to growth capital. Large capital infusions through An evaluation of Nigeria’s Growth Enhancement cash grants can help women dramatically grow their Support Scheme—which included subsidized businesses. A recent study found large returns to winning 30 Awotide, B. et al. (2013). 31 Kondylis, F. et al. (2017). 32 BenYishay, A. et al. (2016). 33 Ogguniyi, A (2017). 34 Beaman, L. et al. (2013). 35 Daum, T et al. (2019). 36 Fischer, G. et al. (2018). Part 3: Spotlights on Nigeria’s Development Agenda 63 NIGERIA DEVELOPMENT UPDATE DECEMBER 2020 Nigeria’s YouWiN! business competition, with the Policy priority 5: Promoting women’s engagement program’s grants of around US$50,000 increasing firm in greater value addition. Recent research suggests entry and survival, profits and sales, and employment.37 that psychology-based entrepreneurial mindset training The promising results of large infusions contrast with and role model/mentoring programs can help women the evidence on small cash grants, which generally yield engage in greater value addition or improve their little effect on the outcomes of businesses owned by position in the value chain. A recent study in Togo, for women. An important consideration in providing grants example, found that the training boosted profits for to women-owned businesses is the size and nature of women microentrepreneurs by 40 percent. In addition, such businesses. For instance, emerging global evidence participants were induced to be more innovative, indicates that targeting specific subsets of entrepreneurs introduce new products, take out more and larger loans, (e.g. experienced entrepreneurs) for microfinance under and make larger investments in their firms.41 certain conditions (e.g. with flexible credit terms) can improve women’s earnings. Evidence from Ethiopia, Policy priority 6: Decreasing occupational meanwhile, suggests that meso-loans offered to growth- segregation. Providing training on sector-specific skills oriented women entrepreneurs had a significant impact or information on sector-specific earnings may help on accelerating their business growth and boosting women enter male-dominated occupations and secure employment levels.38 Further, cash transfers, provided higher paying jobs. One recent study focusing on within safety net programs, have the potential to Nigeria’s male-dominated ICT sector found persistent alleviate the capital constraint of extremely poor women. impacts from helping university graduates acquire In Northern Nigeria, an unconditional cash transfer of the communication, computer, and cognitive skills approximately US$350 transferred over fifteen months demanded by the sector: the intervention increased the was found to increase the likelihood of rural women likelihood of working in an ICT job by 26 percent, starting a non-farm business.39 two years after the program.42 Relatedly, a recent study in Kenya found that providing information about the M  obile savings and banking accounts represent another earnings in various male-dominated trades encouraged promising opportunity to unlock capital for women. women to pursue vocational education training in these Mobile phone-linked savings accounts can help women fields.43 However, the information alone was insufficient insulate their earnings from external demands and to sustain their engagement, suggesting that preferences can provide a safe place to save for larger purchases or or other social norm-based factors may be holding back investments in her firm. In Malawi, adding access to women’s sustained participation in male-dominated business bank accounts to support firm formalization industries. led to significant increases in women’s use of business bank accounts and insurance, which in turn led to Policy priority 7: Easing women’s time constraints. large impacts on their sales and profits.40 Innovative Interventions such as providing childcare services and approaches to financial products, such as psychometric introducing couples’ trainings that promote men’s testing and non-asset-based forms of collateral, provide involvement in household work can ease women’s time another potential avenue for facilitating access to larger constraints. There is limited but growing evidence on business loans for women-owned firms. the impacts of childcare centers: a rigorous study in Mozambique showed that preschools allowed caregivers (primarily mothers) to save 15 hours of childcare duties 37 McKenzie, D (2017). 38 Alibhai, A. et al (2018). 39 Friedman J. et al. (2020). 40 Campos, F. et al. (2015). 41 Campos, F. et al. (2017). 42 Croke, K. et al. (2018). 43 Hicks, J et al. (2011). 64 Part 3: Spotlights on Nigeria’s Development Agenda RISING TO THE CHALLENGE: NIGERIA’S COVID RESPONSE per week and increased their labor force participation.44 various delivery modalities could help identify which Similarly, there is credible evidence that engaging men implementation options are most effective. Impact can change gender norms and behaviors related to the evaluations can generate the evidence required to inform distribution of household work. In the Democratic scale-up efforts by the government and its development Republic of Congo, for example, a 16-week training partners. Current pilots in Nigeria to test cashflow-based for men significantly increased their participation in lending, which has the potential to improve women’s housework.45 access to credit and potentially increase firm capital, provide an example of this experimental approach To conclude, there is limited evidence on effective in action. Importantly, new knowledge produced by approaches to ease the priority gender constraints in Nigeria has the potential to strengthen the emerging Nigeria (Figure 3.6 provides an overview). Innovation regional and global evidence base on policies and in policy and programming is crucial to develop programs to effectively increase women’s economic effective methods to ease constraints preventing empowerment. women from fully engaging in the Nigerian economy. This will involve looking beyond “business as usual” ideas and instead designing interventions that address the barriers that keep women from being as productive as men in key economic sectors. While it may not be feasible to directly implement large-scale innovative programs, piloting and experimenting with  he strength of the evidence base in support of different interventions to target the key priority policy Figure 3.6. T constraints varies considerably. Frontier Emerging Credible Subsidies for improved seeds Engaging men to change norms around gendered crops Crop choice Insurance products suited to women farmers Socioemotional skills training Female extension services agents Crop choice and input use Digital technology for agricultural extension Input use Subsidies for inputs/fertilizer Subsidies to mechanize farm labor Farm labor and mechanization Cash transfers Subsidies for inputs/fertilizers Mesocredit/mid-sized loans Cash transfers Firm capital In-kind grants Large grants Secure savings mechanisms Social network building Position in value chain Socioemotional skills training Job training in non-female-dominated sectors Information about earnings Occupational segregation Childcare services Programs that build networks, role modelling and mentorship Childcare services Time constraints Engaging men to participate in housework Source: Nigeria Gender Diagnostic Report (World Bank, Forthcoming). Note: Credible indicates that more than one impact evaluation from Sub-Saharan Africa demonstrates consistent, positive impacts of an intervention; emerging indicates that just one impact evaluation (from Sub-Saharan Africa or another developing context) shows positive impacts or multiple impact evaluations show mixed or not exclusively positive results; frontier indicates that there are no impact evaluations showing strong positive impacts, but other non-experimental evidence suggests that the intervention could address the given constraint. 44 Martinez, S. et al. (2012). 45 Vaillant, J. et al. (2020). Part 3: Spotlights on Nigeria’s Development Agenda 65 NIGERIA DEVELOPMENT UPDATE DECEMBER 2020 household allocation of time in Zambia. ZEF- References Discussion Papers on Development Policy No. 278 Facebook/OECD/World Bank (2020). The Future of Business Survey, available at: dataforgood. Alibhai, A., Buehren, N., & Papineni, S. (2018). Better fb.com/global-state-of-smb. loans or better borrowers? impact of meso-credit on female-owned enterprises in Ethiopia. World Fischer, G., Wittich, S., Malima, G., Sikumba, G., Bank Policy Research Working Paper, (8511). Lukuyu, B., Ngunga, D. and Rugalabam, J. https://doi.org/10.1596/1813-9450-8511 (2018). Gender and mechanization: exploring the sustainability of mechanized forage chopping Alibhai, S., Buehren, N., Frese, M., Goldstein, M., in Tanzania. Journal of Rural Studies 64, 112- Papineni, S., and Wolf, K. (2019). Full Esteem 122. Ahead? Mindset-Oriented Business Training in Ethiopia. Policy Research Working Paper, No. Friedman, J., Goldstein M., Gonzalez, M.P. and 8892. World Bank, Washington, DC. Papineni S. (2020). Cash Is Queen Local Economy Growth Effects of Unconditional Cash Awotide, B., Amoke, A.K., Aliou D., and Tebila N. Transfers to Women. Manuscript. (2013). The impact of seed vouchers on poverty reduction among smallholder farmers in Nigeria. Hicks, J.H., Michael K., Isaac M., and Edward M. Agricultural Economics 44, 647-658. (2011). Vocational Education Voucher Delivery and Labor Market Returns: A Randomized BenYishay, A., Jones, M., Kondylis, F., Mobarak, A.M. Evaluation among Kenyan Youth. Working (2016). Are Gender Differences in Performance Paper. Innate or Socially Mediated?. Policy Research Working Paper;No. 7689. World Bank, Kondylis, F., Valerie M., and Jessica Z. (2017). Seeing Is Washington, DC. Believing? Evidence from an Extension Network Experiment. Journal of Development Economics, Campos, Francisco Moraes Leitao, Goldstein, Markus 125 (C), 1–20. P., and Mckenzie, David J. 2015. “Short-term impacts of formalization assistance and a bank Beaman, L., Karlan,D., Thuysbaert, B. and Udry, C. information session on business registration (2013). Profitability of Fertilizer: Experimental and access to finance in Malawi.” World Bank Evidence from Female Rice Farmers in Mali. Policy Research Working Paper No. WPS 7183, American Economic Review 103, 381-86. 25 Washington, DC: World Bank Group. Le Nestour, A., Fiala, O. and Wodon, Q. (2018). Campos, F., Michael F., Markus G., Leonardo L., Hillary Global and Regional Trends in Child Marriage: J., David M., and Mona M. (2017). Teaching Estimates from 1990 to 2017, Mimeo, London Personal Initiative Beats Traditional Training in and Washington, DC: Save the Children UK Boosting Small Business in West Africa. Science, and World Bank. 357 (6357), 1287–90 Martinez, S., Naudeau, S. and Pereira, V. (2012). The Croke, K., Markus G., and Alaka H (2018). Can Job Promise of Preschool in Africa: A Randomized Training Decrease Women’s Self-Defeating Impact Evaluation of Early Childhood Biases? Experimental Evidence from Nigeria. Development in Rural Mozambique. The World Other Operational Studies 30495, World Bank, Bank and Save the Children. Washington, DC. McKenzie, D. (2017). Identifying and Spurring High- Daum, T., Capezzone, F., and Birner, R. (2019). Of Growth Entrepreneurship: Experimental trackers and tractors. Using a smartphone app Evidence from a Business Plan Competition. and compositional data analysis to explore American Economic Review 107 (8), 2278–2307. the link between mechanization and intra- Ogguniyi, A., Oluseyi, O.K., Adeyemi, O., Kabir, S.K. and Philips, K. (2017). Scaling up Agricultural 66 Part 3: Spotlights on Nigeria’s Development Agenda RISING TO THE CHALLENGE: NIGERIA’S COVID RESPONSE Innovation for Inclusive Livelihood and Productivity Outcomes in Sub-Saharan Africa. Africa Development Review 29(52), 121-134. Vaillant, J., Koussoubé, E., Roth, D., Pierotti, R., Hossain, M. and Falb.K. (2020). Cluster- Randomized Controlled Trial to Reduce Intimate Partner Violence in North and South Kivu, DRC: Engaging Men to Transform Inequitable Gender Attitudes Approach. World Bank, Washington, DC. World Bank (Forthcoming). Nigeria Gender Diagnostic Report. Washington, D.C.: The World Bank. World Bank (2020). Nigeria Development Update, June 2020: Nigeria in Times of COVID-19 - Laying Foundations for a Strong Recovery. Washington, D.C.: The World Bank. Part 3: Spotlights on Nigeria’s Development Agenda 67 NIGERIA DEVELOPMENT UPDATE DECEMBER 2020 Spotlight 2: Making the most of young Nigerians’ economic potential: The case for more and better managed international labor migration from Nigeria46 Summary: The surge in irregular migration from Nigeria in 2010 to 23.1 percent in 2018. Unemployment during the height of the European migration crisis in 2016- rate was significantly higher for youth (34.7 percent) 17 is a direct consequence of worsening joblessness, combined compared to non-youth (19 percent). With COVID- with young people not having regular channels to find work 19-induced lockdowns, this trend is likely to have overseas. Travel restrictions and border closures caused worsened, especially in urban areas. Over three in by COVID-19 are leading to declines in international four (77 percent) respondents in a survey this August migration from countries of origin such as Nigeria. But this by the NBS and the World Bank reported working is a short-term hiatus. Over the medium term, international in a town or city, for instance, a fall from more than migration is likely to continue increasing, primarily due to four in five (85 percent) before mid-March.47 While economic and demographic factors. Given the overwhelming unemployment rates have increased substantially for evidence of the economic benefits of economic migration in Nigerians across all education levels over the years, it the global context, Nigeria stands to benefit from creating has become progressively more challenging for educated new migration corridors as well harnessing additional Nigerians to find employment opportunities. Between returns from existing corridors. Opening new, safe, and 2010 and 2020, the unemployment rate increased by orderly channels for international labor migration could 22.6 percentage points for Nigerians with secondary unlock unrealized gains for Nigeria’s economy and help education and 30.1 percentage points for Nigerians with facilitate its recovery. post-secondary education (Figure 3.8). Concerned about their prospects at home, Nigeria’s A combination of rising unemployment, youth are increasingly looking to other economies booming demographics, and unfulfilled for work. A Gallup poll conducted before the 2019 aspirations is increasing the pressure on presidential elections shows that roughly half of all young Nigerians to migrate in search for Nigerians said it was a “bad time” to find a job in the gainful employment overseas. economy.48 Unemployment for both youth and adults has consistently ranked as the most important issue Nigeria’s expanding working-age population, facing the country, above management of the economy, combined with scarce domestic employment poverty, corruption, and electricity.49 Consequently, opportunities, is creating high rates of multiple surveys show that the number of Nigerians unemployment. Between 2010 and 2018, 25 million who are looking to migrate internationally is high and Nigerians entered the labor force. During the same increasing. The proportion keen to leave permanently period, the unemployment rate rose from 9.7 percent has increased from 36 percent in 2014 to 52 percent 46 Prepared by Samik Adhikari, Economist, Social Protection and Jobs. 47 World Bank, 2020. 48 Gallup, 2019. 49 See summary of results from Round 5, Round 6, and Round 7 of the Afro Barometer Surveys for Nigeria. 68 Part 3: Spotlights on Nigeria’s Development Agenda RISING TO THE CHALLENGE: NIGERIA’S COVID RESPONSE  nemployment rates among Nigeria’s Figure 3.7. U  nemployment rates among educated Figure 3.8. U youth have been rising steeply. Nigerians have accelerated since 2015. Percent Percent 40 – 50 – 35 – 45 – 40 – 30 – 35 – 25 – 30 – 20 – 25 – 15 – 20 – 15 – 10 – 10 – 5– 5– 0– 0– 10 11 12 13 14 15 16 17 18 19 20 10 11 12 13 14 15 16 17 18 19 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 20 ▬ Youth (Nigeria definition) … Non-youth (Nigeria definition) ▬ Never attended school ▬ Below primary ▬ Primary ▬ Youth (ILO definition) … Non-youth (ILO definition) ▬ Secondary ▬ Post secondary Source: World Bank Calculations based on data from the National Bureau of Statistics (NBS). Note: Unemployment (ILO Definition): The unemployed comprise all persons of working age who were: (a) without work during the reference period, i.e., were not in paid employment or self-employment; (b) currently available for work, i.e. were available for paid employment or self-employment during the reference period; and (c) seeking work, i.e. had taken specific steps in a specified recent period to seek paid employment or self-employment. Unemployment (National Definition): In addition to the unemployed as defined by ILO, NBS considers any individual as ‘unemployed’ who could not find work for at least 20 hours during the reference period.  he desire of Nigerians to migrate Figure 3.9. T  hose Nigerians who are keenest to Figure 3.10. T internationally has grown in recent years migrate tend to be young, well educated, (Gallup). and urban (Afro Barometer). Proportion of respondents who would move permanently to Proportion of respondents considering emigrating to another another country country Percent Percent 55 – 50 – 45 – 50 – 40 – 35 – 45 – 30 – 25 – 40 – 20 – 15 – 10 – 35 – 5– 0– 30 – Overall Youth Secondary Post Nigeria Unemployed (18–34) education Urban secondary 2014 2015 2016 2017 2018 education  igerians are more likely to want to migrate internationally than almost all their peers in the sub- Figure 3.11. N Saharan Africa region. Proportion of respondents who would move permanently to another country (Nigeria and regional peers) Percent 80 – 70 – 60 – 50 – 40 – 30 – 20 – 10 – 0– eri a on e eri a an a go bo n ia vill e ine a ire al nin on so nia ad li er Lib Le Nig Gh To Ga mb za 'Ivo eg Be ero Fa rita Ch Ma Nig a Ga z Gu d Se n m na u Si err Bra ote Ca rki Ma ng o C Bu Co Source: World Bank Calculations based on data from Gallup (Panel A) and Afro Barometer (Panel B). Part 3: Spotlights on Nigeria’s Development Agenda 69 NIGERIA DEVELOPMENT UPDATE DECEMBER 2020  he share of Nigerian migrants in Europe Figure 3.12. T  igerian international migrants are most Figure 3.13. N and North America has increased numerous in the United Kingdom, the considerably since 1990. United States, and Cameroon. Stock of international migrants from Nigeria in select Destination countries for Nigerian migrants in 1990 and regions, in millions 2019 1.6 – USA – 309,699 55,530 GBR – 205,698 1.4 – 45,984 NER – 130,982 38,319 1.2 – BEN – 86,226 15,728 1.0 – ITA – 11,859 80,235 GHA – 14,876 79,023 0.8 – CMR – 105,140 148,076 0.6 – CAB – 45,188 0.4 – DEU – 44,015 ESP – 29,204 0.2 – TGO – 32,176 0– CIV – 44,791 1990 1995 2000 2005 2010 2015 2019 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 J Other regions J Europe J Northern America J SSA Source: United Nations, Department of Economic and Social Affairs, International Migration Outlook, 2019 revisions and World Bank estimates. in 2018, according to Gallup (Figure 3.9). This is one Young Nigerians are increasingly opting of the highest levels in sub-Saharan Africa (Figure for irregular migration routes to realize 3.11). Data from Afro Barometer show that the desire their hopes for a better life overseas. to migrate is higher among unemployed (38 percent), youth (39 percent), secondary education graduates With options for legal migration limited, young (39 percent), urban residents (41 percent) and post- Nigerians are increasing choosing irregular secondary graduates (45 percent) in Nigeria (Figure alternatives to find better work opportunities overseas 3.10). Notably, these proportions far exceed the actual than they can find at home. The number of first-time proportion of international migrants in the Nigerian asylum seekers from sub-Saharan Africa and Nigeria population. into Europe peaked in 2016 (Figure 3.14), at the height of the “European migration crisis”, before subsiding Nigeria’s volume of international migrants has more in late-2017. Nigerians represented the largest group than tripled since 1990, increasing from 450,000 of migrants from Sub-Saharan Africans who arrived in then to around 1.4 million last year.50 Over the Europe in 2016 and 2017. Nearly 40,000 Nigerians same period, the proportion of Nigerians classifying arrived in Italy in 2016, with over 90 percent of those as international migrants has risen by 0.2 percentage arriving via sea routes. Nigerian migrants arriving in points, to 0.7 percent. This is much lower than in Sub- Italy were more like to be women (32 percent)51 and Saharan Africa (2.5 percent) and the world (3.5 percent). have completed secondary education (39 percent)52 Most Nigerians migrate within Sub-Saharan Africa, than other migrants from sub-Saharan Africa (the although as a share of total migrants in this region their proportion of which stand at 24 percent and 21 percent, representation has fallen. Nigerians going to Europe and respectively). North America, meanwhile, has increased considerably since 1990 (Figure 3.12). Around 85 percent of all Irregular migration carries a tremendous economic, Nigerian migrants in 2019 were concentrated in 12 physical, and psychological cost, yet Nigerian destination countries, with United States, United migrants still choose to go ahead with it. Those Kingdom, and Cameroon topping the list (Figure 3.13). migrating from Nigeria to Italy tend to be from relatively 50 UNDESA, 2020. 51 World Bank calculations based on data from Eurostat. 52 World Bank, 2018. 70 Part 3: Spotlights on Nigeria’s Development Agenda RISING TO THE CHALLENGE: NIGERIA’S COVID RESPONSE  sylum seekers from sub-Saharan Africa Figure 3.14. A  igerian migrants pay up to US$10,000 Figure 3.15. N and Nigeria to Europe peaked in 2016 to migrate to Europe through irregular and 2017 before subsiding. means. Number of first-time asylum seekers in EU countries, in Migration costs paid by migrants to reach destination thousands countries (US$) 250 – Nigerians: 1,979 Nigeria to Italy (KNOMAD) 200 – Median asylum 2,250 seeker from SSA (EASS) Nigerians: 2,773 150 – Libya to Italy (IOM) Median asylum 3,500 100 – seeker from Africa (EASS) Nigerians: 8,436 Niger to Italy 50 – (IOM) Nigerians: 10,000 Libya to Netherlands 0– (IOM) 10 11 12 13 14 15 16 17 18 19 20 20 20 20 20 20 20 20 20 20 0 4,000 8,000 12,000 ▬ SSA ▬ Nigeria Source: Eurostat, IOM, KNOMAD, EASS reports and World Bank estimates. richer households. Even so, these journeys cost around studies confirm an inverted-U shaped relationship 10 times their average household monthly income, at between emigration levels and income.55 That is, as a minimum. Aside from the economic costs, migrants countries grow richer, emigration levels tend to increase face a high risk of abuse, especially at the hands of until they reach upper-middle income status. Recent data criminal networks. Over 14,000 Nigerians have been from Nigeria confirms this trend. Relatively richer states returned from Libya through IOM’s Assisted Voluntary in Nigeria with lower poverty rates receive a higher share Humanitarian Return and Repatriation (AVHRR) of international remittances (Figure 3.16). The share of programs since 2016.53 Outside of Libya and in other Nigerians actively preparing to emigrate internationally transit countries, the number of Nigerians in Niger is higher in the richer quintiles of the income increased from 19,177 in 2010 to 93,179 in 2015.54 distribution (Figure 3.17). Labor shortages in developed Besides migrants in transit, many migrants have lost countries and labor surplus in developing countries such their lives in the Sahara Desert and the Mediterranean as Nigeria mean that employment opportunities will Sea while striving to reach Europe. likely remain unequally distributed across the globe in the future. This creates an opportunity for some young Nigerian jobseekers to find temporary employment Nigerians will continue to migrate abroad. The effect of the aging populations of developed overseas for work in the foreseeable countries is similar. The ratio of people over 65 to the future; this can benefit Nigeria through total population is predicted to reach 48 percent in the remittances and the transfer of skills EU compared to 4 percent in Nigeria by 2050.56 and technology, but it needs to be well- managed and regulated. The contribution that international migrants make Given that the economic and demographic factors to Nigeria’s GDP through remittances far outweighs driving international migration remain largely their size as a proportion of the population (i.e. unchanged, Nigerians can be expected to continue 0.7 percent).57 Nigerian migrants and others in the migrating abroad for the foreseeable future. Multiple diaspora contributed over 25 billion dollars to the 53 Info Migrants, 2019. 54 United Nations, 2019b. 55 Zelinksy (1971); Martin and Taylor (1996); de Haas (2010); Clemens (2014). 56 United Nations, 2019a. 57 World Bank calculations using United Nations Data on International Migrants Stock (2019). Part 3: Spotlights on Nigeria’s Development Agenda 71 NIGERIA DEVELOPMENT UPDATE DECEMBER 2020  hare of households receiving Figure 3.16. S  hare of Nigerians actively preparing to Figure 3.17. S international remittances is higher in emigrate is higher in the richer quintiles States with lower poverty rates. of the income distribution. Share of households receiving international remittances Probability of preparing for migration along the per adult compared to national poverty rates household income spectrum Percent Income density Probability of preparing for migration 12 – – 0.08 0.4 – 10 – Edo – 0.06 8– 0.3 – 6– – 0.04 0.2 – Lagos Imo 4– Oyo Ogun Delta Ekiti 0.1 – – 0.02 Ondo Abia 2 – Osun Cross River Plateau Adamawa Anambra Rivers Enugu Ebonyi Kwara Kogi FCT Kebbi Katsina Yobe Jigawa Gombe Taraba 0– Bayelsa 0– –0 Akwa Ibom Benue Kaduna BauchiNiger Sokota 0 20 40 Kano 60 Zamfara 80 100 100 1,000 10,000 Poverty rate, percent Household income per adult, PPP$ in scale Source: NBS and World Bank estimates. Source: Clemens, 2020. Nigerian economy in 2019 (6 percent of Nigeria’s emergence of sectors that would otherwise have not GDP58). This is the equivalent of total oil rents in 201759 been created in countries of origin.61 The links that and is fourfold what Nigeria received through foreign migrants help generate between two countries help direct investment and official development assistance reduce trade-related transaction costs.62 Returning combined. Remittances also have the benefit of being migrants also contribute to the spreading of ideas, less volatile. technology, and knowledge in their countries of origin, as well as the creation and expansion of export-oriented The imperative going forward is to open safe and sectors.63 Managed labor migration schemes directly orderly channels for international migration, to the benefits prospective migrants and their households, and benefit of recipient countries and Nigeria alike. A indirectly benefits the Nigerian economy by bringing to more regularized system would help ensure Nigeria’s fruition unrealized economic gains.64 excess labor is productively used, generating value for the country where they work while also allowing for the transfer of knowledge, skills, and resources back to Migrants are key to economic recovery Nigeria. For emigrating workers, migration provides from COVID-19 in many destination an opportunity to move to a higher earning job and countries, who are facing shrinking send back remittances to their families. For sending population and labor shortages in key households, global evidence strongly suggests that sectors remittances help in investments in human capital of children and provides cushions against economic In many high-income countries, migrants will shocks.60 Looking more broadly, migrants help spur continue to plug labor shortages in essential sectors. innovation in the economy, which often leads to Many high-income OECD countries are facing a 58 World Bank, World Development Indicators. 59 Ibid. 60 See for example, Azizi (2018) using data from 122 developing countries. 61 For example, the IT sector in India and Israel, see Khanna and Morales (2017) and Rosenberg (2018). 62 Cohen et al (2017), Parsons and Vezina (2018). 63 Bahar et al (2018). 64 See for example UCTAD (2018) report on international migration in Africa which states that international migrants contributed about 19 percent of Cote d’Ivoire’s GDP in 2008 and 9 percent of South Africa’s GDP in 2011. 72 Part 3: Spotlights on Nigeria’s Development Agenda RISING TO THE CHALLENGE: NIGERIA’S COVID RESPONSE  igeria has a much higher ratio of Figure 3.18. N  ost Europeans favor a degree of Figure 3.19. M working age people to those aged 65 immigration, especially for skilled and older than high-income OECD professionals who can plug key skills countries. shortages. Ratio of working age-population to those aged 65 and older Favorability for skilled and unskilled migration in the EU Percent 25 – 100 – 9 12 90 – 25 32 80 – 23 20 – 26 70 – 60 – 33 15 – 50 – 34 44 40 – 43 30 – 10 – 33 20 – 26 10 – 23 19 10 8 5– 0– Professionals Professionals Unskilled Unskilled from poor from poor labourers labourers (specific) (specific) from poor from poor 0– European non-European (specific) (specific) countries countries European non-European 2020 2025 2030 2035 2040 2045 2050 countries countries ▬ Nigeria ▬ USA ▬ Canada ▬ United Kingdom J Allow many J Allow some J Allow a few J Allow none ▬ France … Germany ▬ Italy Source: UNDESA Population Projections and World Bank estimates. Source: European Social Survey and World Bank estimates.  number of innovative migration approaches for Nigerians are now in place, led by Box 3.2. A various European countries in partnership with private companies and international organizations. a 21-month project funded by the European Commission through the Mobility Partnership Digital Explores,  Facility (MPF), is a temporary legal labor migration scheme that employed 50 young ICT specialists from Nigeria in Lithuania. The program objective is to enhance skills and address labor shortages as well as contribute to the growth and development of career advancement in both countries. It is facilitated, on the Nigerian side, by Ventures Platform Foundation and Jobberman (a private recruitment company). Lithuanian companies were interested in tapping the potential of a growing and vibrant pool IT professionals in Nigeria. The program shows great potential for socio-economic impact and Nigeria was considered to have huge potentials for human resources export. The conversation is now moving from brain drain to brain circulation. Similarly, IOM MATCH a ims to address existing labor shortages in Belgium, Netherlands, Italy, and Luxembourg in the ICT sector through smart and organized labor migration. This will be done by facilitating matches between highly skilled African talents in Nigeria with employers in the four destination countries through an international private recruitment agency. Selection and screening of candidates will take place in countries of origin with highest recruitment standards and advanced technologies to test for language and technical skills. A shortlist of the best candidates will be sent to employers for final selection. Onboarding and training will initially be conducted remotely in countries of origin until travel restrictions are in place. Selected candidates will then be assisted to relocate to countries of destination for employment opportunities spanning 1–2 years. Nigeria was selected as one of the countries of origin for this partnership because of a booming IT sector. Part 3: Spotlights on Nigeria’s Development Agenda 73 NIGERIA DEVELOPMENT UPDATE DECEMBER 2020 continuous decline in fertility rates, leading to a went through a process to regularize irregular migrants reduction in the working age population (15–64) and an to enable recovery in critical sectors. increase in the population aged 65 or older (Figure 3.18). This has increased the burden on the social security and healthcare systems and led to economic slowdowns. In Nigeria has the right policy instruments 2013, a survey conducted by the European Union found and institutions in place to take that 39 percent of firms in the European Union (EU) advantage of economic migration, had difficulty finding staff with the right skills.65 Skills remittances and other opportunities shortages were most pronounced in high- and medium- linked to its diaspora, but room for skilled sectors such as healthcare, ICT, hospitality, improvement exists construction, and tourism. While prevailing narrative Nigeria has made significant recent improvements to may suggest Europeans being unfavorable to increased its managed migration framework and continues to levels of migration to the EU, data from opinion polls draw on the support of stakeholders for policymaking suggest that the story is more nuanced (Figure 3.19). and implementation. These stakeholders (Figure 3.20) Majority of the European public are in favor of migration have the mandate to facilitate access to international from African countries, as long as it is skilled—skills that destinations for prospective Nigerian jobseekers; assist plug specific gaps in the European labor market. Sold migrants in crossing necessary legal and administrative in this way, there is a strong interest from a number of hurdles before departure; support them while in European member states in engaging on legal migration destination countries; help facilitate transfers of skills, pathways between Europe and Africa (Box 3.2). technology, and remittances to Nigeria; and coordinate efforts to support migrants in distress as well as upon The key role of migrants in the global COVID-19 return to Nigeria. Various technical working groups response further highlights the value they bring to (TWG) such as the Labor Migration Working Group, high-income OECD countries and their other host and the Migration Working Group offer platforms nations. Lessons since the onset of the COVID-19 crisis for stakeholders to come together, discuss issues, and in many high-income countries suggests that migrants propose actions to improve migration management formed a large share of “essential” worker category across framework. Similarly, Table 3.1 summarizes key national the skills spectrum. For example, in the United States, level policy documents in place to improve the current 30 percent of doctors and 27 percent of farm workers managed migration framework and reap further returns were foreign-born.66 In Australia, 53 percent of doctors from migration and diaspora. and 35 percent of nurses are immigrants.67 In the EU, more than one in three domestic workers and one in five Nigeria’s labor migration management system workers in the food processing industry are migrants.68 continues to gaps that require closing. Most bilateral Realizing the key role played by migrants in the crisis agreements (BLAs) that Nigeria has entered into recently response, some countries have already instituted reforms only concern the return of irregular Nigerian migrants. realizing that contributions from migrants will be even They are not complemented with BLAs and MOUs that more critical during the recovery phase. Portugal granted offer legal pathways for Nigerians to gain employment all migrants and asylum-seekers citizenship rights. In internationally. Even though national policy documents the US, foreign-born healthcare workers were given mention engaging with destination countries to assess temporary work permits and skills recognition. Italy skills shortages and prepare Nigerian jobseekers to fill those shortages, these strategies are not implemented 65 https://www.cedefop.europa.eu/files/3071_en.pdf 66 Migration Policy Institute (2020). 67 ILO, 2020. 68 VoxEU, 2020. 74 Part 3: Spotlights on Nigeria’s Development Agenda RISING TO THE CHALLENGE: NIGERIA’S COVID RESPONSE  diverse range of institutions and stakeholders participate in policy-making processes throughout Figure 3.20. A the migration lifecycle. National Immigration Service International Labor Migration Pre-Departure Desk – FMLE Post-Migration Ÿ Issues passports and relevant travel documents Ÿ Ensures protection of employment and social rights of Ministry of Foreign Affairs Nigerian workers abroad National Electronic Labor National Commission for Ÿ Negotiates Bilateral Agreements Exchange, International Labor Nigerians in Diaspora Refugees, Migrants and and Memorandum of Migration Desk Commission Internally Displaced Persons Understandings with countries and National Agency for of destination Ÿ Acts as a labor intermediation Ÿ Offers support to diasporas in the Prohibition of Trafficking in platform collecting information need abroad Persons Federal Ministry of Justice and on jobseekers and international Federal Ministry of Interior employers; registers PEAs Ÿ Helps facilitate transfers of Ÿ Coordinates efforts to receive skills, technology, and returnee migrants and Ÿ Helps ratify relevant National Board of Technical investment from the diaspora reintegrate them into the society international conventions on Education – Federal Ministry of migrants Education Central Bank of Nigeria Federal Ministry of Labor and Employment National Agency for the Ÿ Provide skills training and Ÿ Regulates banks and Prohibition of Trafficking in certification to potential other financial institutions; and Ÿ Provide employment services to Persons migrants governs the remittance of funds returning/repatriated migrants into Nigeria, including and help them integrate in Ÿ Helps create awareness against Migration Resource Centers, determining the remittance Nigeria’s labor market human trafficking International Labor Migration commission/charge. Desk National Board of Technical Federal Ministry of Labor and National Bureau of Statistics and Education – Federal Ministry of Employment Ÿ Serves as a “one-stop shop” National Population Commission Education where intending, actual and Ÿ Develops processes for the returning migrants access Ÿ Have the mandate to provide Ÿ Equip institutions to provide registration and licensing of relevant migration and update data on migrants technical accreditation of skills genuine Private Employment information on legal, organized abroad of returning migrants Agencies (PEAs) and humane migration, rights and protection of migrants Federal Ministry of Health Ÿ Issues necessary medical During Pre-Decision certification to prospective Migration migrants  stimated impact (percentage drop from expected) of COVID-19 on essential services in Nigeria. Table 3.1. E Policy Document Recommendations for Improving Migration Management and Diaspora Issues • Acknowledges the scant formal structure currently in place to aid prospective Nigerian migrants, and attributes this lack of structure for migrants being poorly informed about the conditions governing entry, work, residence, skills required, cultural issues, and their rights and obligations in destination National Labor Migration countries; Policy (2014) • Calls for the establishment of an effective, responsive, and dynamic labor migration governance system that includes Bilateral Labor Agreements and MOUs on labor migration that would deter risky and unsafe migration by providing jobseekers with information about regular means of securing visas for work purposes in other parts of the world; • Calls for mainstreaming of migration in Nigeria’s development process through its integration in the National Development Plan; National Migration Policy • Outlines several innovative ways for designing programs that attract (2015) foreign investments in Nigerian workforce development systems including determining the types of skills that Nigerian workers need in Nigeria and in other countries and by collaborating with the private sector in destination countries in the provision of continuous training of Nigerian workers; • Proposes initiatives to leverage the economic success of Nigerians in the diaspora and to protect the well-being of Nigerian migrants, including National Policy on Diaspora by reducing the cost of remittances, facilitating transfers of technology Matters (2017) and knowledge back to Nigeria, improving awareness regarding consular services available to Nigerian migrants, and strengthening relevant institutions for proper coordination and administration on diaspora issues; Part 3: Spotlights on Nigeria’s Development Agenda 75 NIGERIA DEVELOPMENT UPDATE DECEMBER 2020 in practice. In the same vein, more steps could be taken for Nigerians to migrate internationally. Driven to support Nigerian migrants in distress as well as by economic and demographic factors, economic harness ideas and investments from the diaspora. Lack migration will continue to increase from Nigeria in of available data on prospective, current, and returning the foreseeable future. On what terms this migration migrants prevents stakeholders from making informed happens (regular/irregular) can somewhat be decisions to improve migration management practices. determined by policy. This requires a concerted push by the Nigerian government to secure more, larger labor migration partnerships with other countries, in Policy options order to allow prospective Nigerian jobseekers to be gainfully employed in destination countries. Donor Prioritizing the increase of regular migration and private sector led efforts are currently underway alongside reducing irregular migration would to build the capacity of Federal Ministry of Labor generate important positive outcomes for Nigeria, as and Employment (FMLE) which hosts platforms would steps to improve the transfer of investments such as the Migrant Resource Center (MRC), which and skills from Nigeria’s diaspora and its returning provides pre-departure orientation and training to migrants. A sound labor migration management potential migrants; and the National Electronic framework consists of three Pillars: (i) that Prevents Exchange (NELEX) that helps source domestic irregular migration; (ii) that Promotes better migration; and international jobs to match domestic and and (iii) that Provides services to returning migrants and international employers with Nigerian jobseekers. the diaspora. These platforms suffer from lack of financial and technical resources to carry out international • Preventing Irregular Migration:  Since the onset of labor intermediation and should be strengthened the migration crisis in Europe in 2016 and 2017, through government and donor efforts. Similarly, more than 770 million euros have been invested in prospective migrants could be better informed on migration related projects in Nigeria, through the steps involved to migrate through regular means and European Trust Fund for Africa (EUTF) project the harms of irregular migration. As an example, financed by the European Commission.69 Majority of the Overseas Worker Welfare Administration in the the financing from EUTF goes towards strengthening Philippines provides a comprehensive web platform border controls, creating anti-trafficking awareness, to disseminate this information. and for domestic job creation programs.70 The impact of these programs are largely unknown. Besides • Provide Services to the Returning Migrants and measures to tighten border control, identifying Current Diaspora:  More than 15,000 Nigerians and addressing constraints to obtaining gainful have been repatriated from various countries since wage employment; boosting self-employment 2016. More migrants could return following the opportunities and incomes; strengthening enterprise onset of the COVID-19 induced economic crisis productivity, growth, and profitability in the in destination countries, that has eroded income- domestic economy; as well as providing effective earning opportunities. Returning migrants need to protection against negative shocks could help deter be better equipped with information and referral on youth from seeking avenues for irregular migration. services available in Nigeria (such as applying for business loan, investing options in Nigeria, getting • Promote Better Migration:  Only 0.3 percent of accredited for skills, searching for jobs, and seeking the total EUTF funds invested in Nigeria have health and social protection services, among others). been allocated towards creating more legal pathways Proactive outreach well before and immediately after 69 The Correspondent, 2019. 70 Ibid. 76 Part 3: Spotlights on Nigeria’s Development Agenda RISING TO THE CHALLENGE: NIGERIA’S COVID RESPONSE return, intensive follow-up and handholding after the (NBTE), can partner with the FMLE, and involve provision of information and referral services, and international recruiters and domestic private sector, a formal link to the services offered for preventing to design vocational training courses that are based on irregular migration and promoting better migration projected shortages in key sectors and are relevant for could put returning migrants on a sustainable both Nigeria and destination markets. economic path in Nigeria. The Nigerians in Diaspora Commission (NiDCOM) offers a suitable platform Harnessing better migration data would greatly assist for hosting these services. Similarly, current diaspora policymaking. Lack of regular, disaggregated data on facing difficulties abroad, could be informed on international migrants, across the spectrum, is a major resources available through diaspora networks, blind spot in migration-related policymaking in Nigeria. labor attaches, and embassies abroad using the same Data to understand stock and flows of Nigerians residing platform. in other countries remains incomplete and fragmented. Basic administrative data on migrant outflows and Labor migration needs to be mainstreamed in inflows cannot be accessed through the government’s key national policy documents. While key sectoral web platforms. The education and job market profile documents such as the National Labor Migration Policy of prospective and returning Nigerian migrants is not (2014) and National Employment Policy (2017) offer collected in representative household surveys. Very suitable suggestions to leverage managed migration little is known about migrants that irregularly cross (or for providing overseas employment opportunities to attempt to cross) Nigerian borders in a bid to reach Nigerian youth, the issue of migration is absent or European countries, beyond some available data for less salient in the Economic Growth and Recovery those who manage to reach European shores. Even Plan (2017–2020). With Nigeria receiving more than then, data on the income profile of households before US$ 25 billion in remittances in 2019, the absence of migration, costs of migration, or the role of smugglers/ migration as a mainstream development tool to provide networks in facilitating such journeys is unavailable. jobs to the bulging youth population is perplexing. The Similarly, despite a large share of Nigerian migrants drafting of the new EGRP provides a good opportunity residing within countries in sub-Saharan Africa, the for labor migration to be mainstreamed as one of the status of intra-African Nigerian migrants in terms of key strategies to generate employment for Nigerian nature (temporary, circular, or long-term) or motive jobseekers. (business, education, or transit) of migration is hard to assess. Mapping of skills shortages at home and abroad could incentivize demand-driven skills development in Working with ECOWAS, Nigeria can help set up a Nigeria. The private sector in Nigeria is currently unable regional labor migration agency that would allow to absorb all of the growing number of educated youths talented African professionals to find work in West entering the labor force. The tertiary education system is Africa and further afield. Among the benefits that such likely exacerbating this challenge as it is unable to align a regional agency could bring are: enabling systematic its curriculum to meet the global demand for a skilled and safe intra-regional labor mobility through managed workforce. As such, the Federal Ministry of Labor and migration approaches; facilitating labor intermediation Employment (FMLE) can carry out a comprehensive and the certification of skills training and recognition at assessment of skills shortages in key destination markets a regional level; offering social protection services, such to understand the projected labor demand in these as insurance and portability of benefits to migrants; and, countries. The domestic skills development system, facilitating bilateral agreements with countries outside overseen by the National Board of Technical Education Africa. Part 3: Spotlights on Nigeria’s Development Agenda 77 NIGERIA DEVELOPMENT UPDATE DECEMBER 2020 economic-picture-election-day-nears.aspx References [Accessed: November 6, 2020] International Labor Organization (2020). Labor Migration. Available at: https://www.ilo.org/ Afro Barometer. Nigeria Data. 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Immigrant key workers in Europe: The COVID-19 response that comes from Part 3: Spotlights on Nigeria’s Development Agenda 79 Nigeria: Key Economic Indicators RISING TO THE CHALLENGE: NIGERIA’S COVID RESPONSE Economy 2015 2016 2017 2018 2019 2020f Real GDP Growth (percent yoy) 2.7 -1.6 0.8 1.9 2.2 -4.1 Nominal GDP (Naira tr) 95 103 115 129 146 153 Oil Production (mb/d) 2.1 1.8 1.9 1.9 2.0 1.8 Oil Price (Bonny light, US$/bbl) 54 45 55 72 65 42 Inflation (percent average) 9.0 15.6 16.5 12.1 11.4 12.9 Real sectoral growth (percent yoy) 2015 2016 2017 2018 2019 2020f Real GDP Growth 2.7 -1.6 0.8 1.9 2.2 -4.1 Agriculture 3.7 4.1 3.4 2.1 2.4 1.2 Industries -2.2 -8.9 2.1 1.9 2.3 -10.6 Industry-Oil -5.4 -14.4 4.7 1.0 4.6 -9.5 Industry-NonOil 0.1 -5.0 0.6 2.4 0.9 -11.3 Services 4.8 -0.8 -0.9 1.8 2.2 -4.0 Oil GDP -5.4 -14.4 4.7 1.0 4.6 -9.5 Non-Oil GDP 3.7 -0.2 0.5 2.0 2.1 -3.2 GDP Composition (percent) 2015 2016 2017 2018 2019 2020f Total GDP 100.0 100.0 100.0 100.0 100.0 100.0 Agriculture 20.9 21.2 21.1 21.4 22.1 23.5 Industries 20.4 18.4 22.5 26.0 27.7 23.7 Industry-Oil 6.4 5.3 9.1 10.5 8.6 6.0 Industry-NonOil 14.0 13.1 13.4 15.5 19.1 17.7 Services 58.8 60.4 56.4 52.6 50.2 52.8 Oil GDP 6.4 5.3 9.1 10.5 8.6 6.0 Non-Oil GDP 93.6 94.7 90.9 89.5 91.4 94.0 Source: Nigerian authorities and World Bank calculations. Nigeria: Key Economic Indicators 81 NIGERIA DEVELOPMENT UPDATE DECEMBER 2020 Monetary and Financial Sector (percent yoy, end of period, unless 2015 2016 2017 2018 2019 2020f indicated otherwise) Money Supply (M2) -2.9 11.8 -5.4 5.5 5.0 … Narrow Money 1.1 21.7 -10.3 -4.4 -7.0 … Net Foreign Assets -24.0 41.5 45.3 22.4 -22.8 … Net Domestic Credit 6.2 23.5 -1.9 0.6 28.8 … Credit to Government 53.6 23.8 -9.9 -18.1 87.0 … Credit to Private Sector 3.2 23.5 1.4 1.9 17.6 … Monetary policy parameters: Monetary Policy Rate (absolute rate, end of period) 11.0 14.0 14.0 14.0 13.5 … Liquidity Ratio (absolute rate, end of period) 30.0 30.0 30.0 30.0 30.0 … Cash Reserve Requirement (absolute rate, end of period) 20.0 22.5 22.5 22.5 22.5 … Financial Market Indicators (end of period) Stock Market (NSE) Index … 28,642 26,875 38,243 31,431 26,842 Fitch Sovereign Long Term Foreign Debt Rating BB- B+ B+ B+ B+ … Moody's Sovereign Long Term Foreign Debt Rating Ba3 B1 B2 B2 B2 … S&P Sovereign Long Term Foreign Debt Rating B+ B B B B … External Sector 2015 2016 2017 2018 2019 2020f Exchange rate - official (N/US$, end of period) 197 305 306 307 307 … Exchange rate - parallel (N/US$, end of period) 267 490 363 363 362 … Real effective exchange rate index (end of period) 67 86 99 87 79 … Current Account Balance (percentage GDP) -3.2 0.7 2.8 1.0 -3.8 -1.8 Current Account Balance (US$ bn) -15.4 2.7 10.4 3.9 -17.0 -7.0 Exports of Goods and Services (US$ bn) 49.0 38.4 50.8 66.0 69.9 42.3 o/w oil and gas exports (US$ bn) 42.4 32.0 42.3 56.6 54.5 32.2 Imports of Goods and Services (US$ bn) 71.9 47.0 50.9 71.6 100.8 64.1 Net Income (US$ bn) -12.7 -8.6 -11.5 -14.7 -12.5 -5.4 Net transfers (including remittances) (US$ bn) 20.2 19.9 22.0 24.1 26.4 20.2 Net Direct Investment (US$ bn) 1.6 3.1 2.2 0.6 1.8 1.2 Net Portfolio Investment (US$ bn) 0.9 1.7 3.7 -7.2 9.0 -8.1 Net Other Investment (US$ bn) -9.2 -4.9 -5.2 -9.7 0.3 -6.3 External Reserves (US$ bn, end of period) 29.1 25.8 38.8 43.1 38.6 26.8 Equivalent months of imports of G&S 4.8 6.6 9.1 7.2 4.6 5.0 Source: Nigerian authorities and World Bank calculations. 82 Nigeria: Key Economic Indicators RISING TO THE CHALLENGE: NIGERIA’S COVID RESPONSE Nigeria: General Government Fiscal Summary - preliminary Actual (percentage GDP) 2015 2016 2017 2018 2019 2020f Total revenues 7.5 5.9 6.7 8.1 8.2 6.4 Federally collected 6.4 4.8 5.4 6.6 5.9 4.5 Oil and gas revenues 3.2 1.6 2.3 3.6 3.0 2.1 Non-oil revenues and other revenues 3.2 3.1 3.1 3.0 2.9 2.4 Independent and other revenues 1.1 1.2 1.3 1.5 2.3 1.9 Total expenditure 10.7 9.7 10.7 12.3 12.7 12.2 Overall balance (general government) -3.2 -3.8 -4.0 -4.2 -4.6 -5.8 Public Debt (net) 14.2 17.3 18.9 19.3 21.7 27.1 Source: Nigerian authorities and World Bank calculations. Notes: /1 After budgeted and discretionary deductions, but before derivation. /2 Includes Solid Minerals, NLNG Dividend, and Signature Bonus; exchange rate difference, excess petroleum profit tax. Nigeria: Federal Government Fiscal Accounts - preliminary Actual (percentage GDP) 2015 2016 2017 2018 2019 2020f Total Revenue 2.7 2.0 2.4 3.0 3.2 2.4 Share of federally collected revenues 2.5 1.7 2.0 2.5 2.4 1.7 Oil, Gas and Mineral Revenue (incl. signature bonus) 1.5 0.7 1.0 1.5 1.4 1.0 Non-Oil Revenue 1.0 1.0 1.0 1.0 0.9 0.7 FG Independent revenues and grants 0.3 0.3 0.4 0.6 0.9 0.8 Total Expenditure 5.0 4.7 5.7 6.3 6.8 6.8 Recurrent Expenditure 4.4 3.9 4.4 4.8 5.1 5.6 Personnel Cost (including Pensions) 2.2 1.8 1.8 1.8 1.8 2.2 Overhead Cost 0.1 0.1 0.2 0.1 0.2 0.2 Other recurrent (incl. COVID-19 intervention and na 0.7 1.1 1.2 1.5 1.5 power sector) Interest payments 1.1 1.2 1.4 1.7 1.7 1.7 Capital Expenditure (incl. COVID-19 intervention) 0.6 0.7 1.2 1.5 1.7 1.3 Overall Fiscal Balance -2.2 -2.7 -3.3 -3.2 -3.6 -4.4 Source: Nigerian authorities and World Bank calculations. Notes: The reported revenue and fiscal balance figures differ from the published Federal Government budget figures as the World Bank excludes the non-revenue items under international classification. Total expenditure for some years differs from the Federal Government reports as the World Bank excludes debt amortization payments from expenditure. Figures exclude government-owned enterprises and donor funding. /1 Includes other extractives revenues. /2 The actual capital spending reported for the calendar year. /3 Other Outflows include irregular items. Nigeria: Key Economic Indicators 83 Nigeria Development Update December 2020 View this report online: www.worldbank.org/en/country/nigeria Another Day Another Tale by Millicent Osumuo Millicent Osumuo, a native from Anambra State, Nigeria, is a contemporary artist and entrepreneur. She started drawing and painting at an early age, and studied art at the Department of Fine and Industrial Art of the University of Uyo, where she earned BA Honours in Painting. Throughout her work, Millicent has driven conversations on topics such as the state of the woman in modern society, the meaning of community, and the environment. Her approach contemplates the individual in themselves and in their surroundings, allowing her room to skilfully convey multiple themes. She is currently researching the human experience in the context of poverty and development and is personally developing initiatives that allow her art to contribute to the mental growth of the underserved and unreached in society. To convey her messages, Millicent delivers fine art pieces across the spectrum from natural to abstract and employs bold strokes with a generous application of colors to imbue her work with character and emotional wealth. People forge ideas, people mold dreams, and people create art. To connect local artists to a broader audience, the cover of this report and following editions will feature art from Nigeria.