RESILIENCE THROUGH REFORMS

Abstract

In 2020, Nigeria experienced its deepest recession in four decades, but growth resumed in the fourth quarter as pandemic restrictions were eased, oil prices recovered, and the authorities implemented policies to counter the economic shock. As a result, in 2020 the Nigerian economy experienced a smaller contraction (-1.8 percent) than had been projected when the pandemic began (-3.2 percent). As part of its response, the government carried out several long-delayed policy reforms, often against vocal opposition. Notably, the government (1) began to harmonize exchange rates; (2) began to eliminate gasoline subsidies; (3) started adjusting electricity tarifs to more cost-reflective levels; (4) cut nonessential spending and redirected resources to COVID-19 responses at both the federal and the state levels; and (5) enhanced debt management and increased public-sector transparency, especially for oil and gas operations. By creating additional fiscal space and maximizing the impact of the government’s limited resources, these measures were critical in protecting the economy against a much deeper recession and in laying the foundation for earlier recovery.