Nigeria, other countries require $150bn to reset economies, says AfDB

*Africa will fall into a recession with economic growth contracting by at least 1.7 percent in 2020

*Economies should prioritise healthcare spending for essential Personal Protective Equipment (PPEs), accelerate local production of medical supplies, vaccine, drug discovery ─AfDB Chief Economist and Vice-President

Alexander Davis | ConsumerConnect

In order to effectively minimise the negative effects of the novel Coronavirus (COVID-19) pandemic on their economies, the African Development Bank (AfDB) Group has projected that Nigeria and other African countries will require over $150billion.

Charles Leyeka Lufumpa, AfDB’s Acting Chief Economist and Vice-President for Economic Governance and Knowledge Management, who disclosed this at the weekend, said targeted cash transfers and subsidies for vulnerable households as well as subsidies and tax relief for businesses should be high on the agenda in this regard, says The Nation.

The lender, however, said to counter the fallout of the ravaging virus and rebuild and strengthen Nigerian and other African economies’ resilience against future economic shocks, there is the need for robust policy responses, paired with strong support from development partners.

Lufumpa said: “The AfDB now projects that Africa will fall into a recession in 2020 with economic growth contracting by at least 1.7 percent.

“In a worst-case-scenario, this figure could turn out as high as 3.4 percent.

“Cumulative losses in Gross Domestic Product (GDP) across the continent could range between $173.1 billion and $236.7 billion in 2020 and 2021.

“The coronavirus pandemic threatens to increase the debt burden of African countries from 60 percent to 70 percent of GDP, heightening the likelihood of a sovereign debt crisis.

“The additional financing required to cushion the consequences of the crisis could be in excess of $150 billion.”

The AfDB Chief Economist stated that Nigeria and other African countries, in the short term, should prioritise healthcare spending for the provision of essential Personal Protective Equipment (PPEs), and accelerate local production of medical supplies including PPEs, vaccine and drug discovery.

According to him, the Central Bank of Nigeria (CBN), and other Central Banks on the African continent must inject liquidity into the economy, turning to unconventional policy tools such as quantitative easing if necessary.

Lufumpa stressed that “in the longer term, countries should seize the imperative of building resilience to future crises.

“As good times return and economies get back on track, it should become a priority to build domestic and external buffers against any potential exogenous shocks.”

He also urged that more money should be earmarked for scientific, economic and social research.

“Countries should pursue global and continental partnerships to prepare for eventualities.

“Private sector growth and revamping education and labour markets for the future of work are also key,” he said.

However, the good news, he added, is that the continent entered the COVID-19 crisis in a reasonably good shape, following decades of progression in health, education and economic outcomes.

He said” “As of early 2020, macroeconomic fundamentals in Africa were improving, with investments, rather than consumption, accounting for more than half of the region’s growth.
“Inflation was falling and the continent was making impressive strides towards accomplishing the United Nations Sustainable Development Goals (SDGs).

Africa must build on the momentum and strive to prevent the coronavirus pandemic from reversing the gains of the past 20 years.”

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