Nigeria Economic Update – A Throw Of The Dice (review of macro forecasts)

A shocking start to the year
According to the International Monetary Fund (IMF), Sub-Saharan Africa (SSA) is likely to face a GDP contraction of 1.6% YoY in 2020—the region’s worst reading on record—as a result of the current health and economic crisis.
Less diversified SSA oil economies, such as Nigeria, are also likely to face significant pressures. For Nigeria, the viral spread came at a time when budgetary space to absorb shocks is limited and external financing conditions are tighter.
COVID-19 threatens to overwhelm domestic healthcare infrastructure, upend livelihoods, deteriorating social conditions, and cripple business activities if left unchecked.
So far, Nigeria’s reaction has been largely in sync with IMF’s suggested response to the viral spread and its fallouts even though the scale of the measures adopted appear insufficient to prevent materially negative distortions to domestic macro variables in the current year.
Figure 1: Nigeria is moving in sync with IMF’s COVID-19 suggested response 
In this report, we analyze the implications of recent policy responses and revisit our macroeconomic expectations for the year. Our revisions are made in cognizance that projections under current conditions are subject to an unusually large degree of uncertainty because economic outcomes depend on several fluctuating factors.
These factors include the length and effectiveness of COVID-19 containment measures across the country; the interaction between the outbreak and the vulnerabilities in local health systems; the longevity of global oil demand decimation; as well as the resumption of global travel and trade.
Our base case assumption is that the peak of economic and health disruptions will occur in Q2’20, leaving legroom for improvements in business activities in the second half of the year as more containment measures are eased and stimulus injections begin to alleviate economic pressures.
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