Nigeria’s economy and the symptoms of coronavirus

The health of the economy in Nigeria was in a fragile state before COVID-19, the novel coronavirus, came calling late last month. A cough, fever, tiredness and, in severe cases, difficulty in breathing, are the symptoms of the disease wrecking havoc to lives and economies across the world.

Constricted supply of foreign exchange is the cough, rising inflation, a fever, and the cost of rising prices on consumers has been exhausting. Bank lending to the private sector was good; a sign the economy was managing to breathe. Hardly enough to say the economy was asymptomatic. 

The aftermath of coronavirus on the livelihoods of survivors is uncertain; poverty, unprecedented job losses and a recession are the immediate implications of the pandemic. Consequences that were already widespread in Nigeria….

That’s because the economy has an underlying medical complication: the fondness of the federal government for borrowing. Just like a diabetic, but in this case with too much debt in its system. Medical problems such as diabetes, asthma or heart disease make those who contract the virus more susceptible to falling seriously ill.

A choked foreign exchange market, heated prices, weary consumers and a high debt level make the economy a vulnerable patient of the virus. For months, the feverish pace of inflation was breaking records as food prices went up, while local producers, in whose interest the land borders were shut indefinitely to stop smugglers and promote their business, struggled to meet the rise in demand. While consumers groaned, the government borrowed.

Experts say the spread of the disease in Nigeria, where the first case in sub-Saharan Africa was recorded last March, is still in its early days. The Lagos State Ministry of Health reckons a worst case scenario of as many as 39,000 cases, if preventive strategies like social distancing are not implemented. The federal government too is trying to distance itself from debt. It’s also reluctantly considering other long recommended and overdue prescriptions it has denied the economy.

To fix its sweet tooth for debt, the federal government wants to convert the trillions of naira in overdraft the central bank has extended to it into securities. Even if this is successful, it will likely remain on the life support of the central bank. People with a weak immune system struggle to fight the disease – the prices of oranges and vitamin C supplements have shot up in the past months.

The price of oil, Nigeria’s one and only line of defence, has been afflicted by the virus – countries are preoccupied with saving lives, companies have shut down, consumers are at home. They are all too busy staying alive to buy crude oil or its derivatives. Besides, the world is drowning in it because of a price war between Saudi Arabia and Russia (prices rose to $30 a barrel after the US lately stepped in to negotiate a truce).

Nigeria’s major source of revenue, an addiction and a major inhibitor to reform is in so much turmoil at the moment that it’s senseless to count on it. It has dealt a big blow to the immune system of the economy, what economists call buffers.

In the last ten years, the foreign reserve and excess crude account of Nigeria have lost weight dramatically. Financial Derivatives Company (FDC), a financial advisory firm, says the country’s buffers went from huge to slim to nil in ten years. The $36 billion in foreign reserves today, though better than in 2016, is 68 percent less than what it was in 2008.

Excess money from selling oil and saved for torrential days like this has been sucked dry, from more than $15 billion in 2008 to less than $5 billion in 2016 and a paltry $100 million in 2020 (equivalent to 10,000 ventilators). Money that would have been deployed as stimulus and interventions as governments battle to contain the damage of the disease which has stopped economic activity almost everywhere.

Despite the devastating effect of the virus, people are surviving. Of the 190 confirmed cases in Nigeria, 20 have been discharged. At the same time the thousands of lives lost to the virus can’t be ignored (the number of confirmed cases rose to one million yesterday, according to data compiled by John Hopkins).

The aftermath of coronavirus on the livelihoods of survivors is uncertain; poverty, unprecedented job losses and a recession are the immediate implications of the pandemic. Consequences that were already widespread in Nigeria and will complicate how rapidly the economy will recover from the effects of the pandemic.

FDC projects that the economic storm that will hit the economy, especially Lagos and Abuja, will be significant with April estimated to be the cruellest month before the economy recovers in June, based on its mild scenario. In its moderate scenario, Nigeria bounces back in August and in November in the severe scenario. 

Come what may, the wreckage coronavirus will inflict on the economy are undeniable: slow growth, high unemployment, high debt and rising poverty. These are signs the economy of Nigeria will face on the road to recovery. Signs long seen and encountered but always avoided by sticking to the status quo. Do nothing, carry on; oil will make a way is the preferred response of Nigerian leaders to crises.

While there are no known cures to the disease, while scientists are racing to find a vaccine, while health professionals, along with volunteers, do all that is medically and heroically possible to test and treat people, we all can do five things to save lives and stop the spread: stay at home, keep a safe distance, wash our hands often, cover our cough and call ahead if sick.