In an effort to flatten the curve of the COVID-19 pandemic the world has been forced to come to a standstill. Empty streets have become the new normal during this pandemic, thousands laid off, stores shut down, public gatherings banned, travel restrictions and physical distancing imposed as one-third of the world practice some sort of a lock-down to slow down the spread of COVID-19 and all of these are having impacts on the global economy; industries like airlines, import-export companies, tourism, retailers, events, restaurants and many other non-essential services have been hit, some harder than others.
As at June 23, the number of reported COVID-19 cases had risen to 9.2 million infections around the world with about 474,662 deaths, representing a death rate of about 5.2 percent. To put this into perspective, the coronavirus population is now the 97th largest in the world ahead of countries like Austria and Israel. While about 4.9 million people have recovered from the virus around the world, there are still 3.7 million active cases globally.
In Nigeria, the virus outbreak is less severe is terms of official total numbers, but it is fast rising with geometric leaps. As at June 23, the Nigeria Centre for Disease Control (NCDC) reported that there are 20,919 confirmed cases of coronavirus in Nigeria, with 525 deaths, representing just 2.5 percent fatality rate.
The fatality rate in Nigeria is barley half of the global average which may be as a result of our much younger population who are less likely to die from the disease than other countries with a more elderly population.
But the pace of growth in infections is quite worrisome for health analysts. As at the start of April, there were only about 200 cases in the country, today, its over 20,000 cases, signaling a jump of more than 100 folds.
Between April and May, the federal government in its efforts to manage the virus outbreak mandated a 6 weeks long citywide lockdown in Lagos, Abuja and Ogun State who account for more than half of the reported COVID-19 cases which they hoped will slow down the virus spread. Rather than achieve a reduction in the number of COVID-19 cases, all the lockdown achieved was putting thousands of businesses on the brink of collapse as businesses categorized as “non-essentials” by the Federal Government were not allowed to operate thereby putting millions of jobs at risk. In no time, the government was forced to backslide on its lockdown decision and began reopening the economy to save lives from hunger as efforts to save lives from coronavirus was now second priority.
The economic fallout from the three-way crisis of the virus outbreak, collapse in crude oil prices and foreign exchange shortages is quite severe in Nigeria. International Monetary Fund (IMF) forecast that Nigeria’s economy may contract by -2.4 percent in 2020 while the World Bank see the economy contracting by 3.2 percent. The Nigerian government is even more pessimistic, forecasting an economic contraction of 4.4 percent in its recently passed revised 2020 budget. Another economic contraction this year will definitely be a big blow to the Buhari Administration who have barely restored Nigeria to growth trajectory albeit at a very slow recovery pace after the 2016 recession.
The economic slowdown from the health crisis is already upon us, in the first quarter of the year, the economic growth slowed to 1.87 percent in Q1 2020 from 2.55 percent in Q4 2019. In fact, the slowdown in the non-oil sector was quite evidently worse than it was in the oil sector due largely to the effects of COVID-19 and international trade restrictions. In Q1, Oil sector expanded by 5.06 percent while Non-oil sector expanded by 1.55 percent despite the collapse in crude oil prices in Q1.
While the country still battles the current economic recession that ensued as a result of the current pandemic, the country currently records its highest inflation rate in 25 months. Data from the National Bureau of Statistics (NBS) reveal that Nigeria’s inflation rate increased by 12.40% (year-on-year) in May 2020. This is 0.06% higher than the rate of 12.34% recorded in March 2020 and the highest rise since April 2018.
On a month-on-month basis, the index increased by 1.17% in May 2020, a 0.15% rate higher than 1.02% recorded in the previous month.
Local businesses in response to the economic slowdown and citywide lockdowns have begun slashing employee salaries and retrenching workers with a goal to cutting cost and ensuring the business stays afloat during this trying period. Essential businesses have been allowed to operate but restricted movements, higher cost of transportation, rising inflation and weaker disposable income is still hurting their operating performance. Non-essential services businesses have moved to adopt “telecommuting” or “Work from Home” (WFH) as a way to ensure business continuity through the ongoing partial lockdown/restricted movement around the country, a new reality which happens to certainly be one of the long-term legacies of this crisis as people have begun to work differently and interact differently; the crisis has thus motivated capability development as well as the energy and imperative to migrate to digital means of interaction.. Some business services have been able to migrate to digital usage in an effort to continue running their businesses such as E-learning, online fitness classes, food and grocery delivery services etc.
The governor of the Central Bank of Nigeria, Godwin Emefiele in his speech admitted that the pandemic will spur both a health and economic crisis strong enough to stifle revenues for most businesses in the country and subsequently hinder their ability to service their loans owed to the banks. In response he announced a N3.5 trillion economic stimulus package to keep the economy afloat and stabilize financial markets amid massive disruptions to supply chains but did not say this will be funded. He also announced a temporary regulatory forbearance for DMB’s in the country to restructure their loans for longer tenures. A N50bn credit facility was launched to support households and SME’s affected by the pandemic. He also stated that the central bank has reduced interest rates from 9% to 5% on all its current intervention programmes and extended moratoriums on all principal repayments by an additional year.
While these measures are timely and useful, analysts are of the opinion that these measures are not sufficient enough to cover a substantial percentage of businesses and households in the economy. Zainab Ahmed in her speech envisaged a 0.5% contraction in the economy by year end with adequate stimulus implemented. However, a 4.4% contraction (best case scenario) and an 8.9% contraction (worse-case scenario) was envisaged by the Federal government of Nigeria. World bank predicted a 3.5% contraction while IMF predicted a 2.4% contraction by year end. From analysis, N1 trillion covers only 16% of the problem and would result in a 5.7% contraction, however a N5.6 trillion economic stimulus (4.3% economic activities) would reduce the chances of a 4.4% or an 8.9% anticipated contraction by the Federal government of Nigeria. Hence, the stimulus package needs to cover a wider coverage of businesses and households in order to curtail the economic carnage that lies ahead.
