Fitch Solutions says Nigeria has had no success in flattening COVID-19 curve

The total number of COVID-19 cases in Nigeria is still low given the country’s large population, according to Fitch Solutions Country Risk & Industry Research, a subsidiary of Fitch rating which provides credit and macro intelligence solutions.

The New York-based research agency said its anecdotal evidence suggests that the real infection rate in Nigeria is much higher than the current figures.

“Nigeria has had no success in “flattening the curve”; and is now loosening lockdown restrictions despite a worsening health situation,” Fitch Solutions said in its ‘Nigeria: From Crisis To Crisis’ report released on Tuesday.

A recent analysis by BusinessDay shows that with more testing, Africa’s most populous country could have higher COVID-19 cases than Spain, Italy and the UK combined.

Going by the analysis, nearly 2 million people in Nigeria may have been infected with the virus. The low testing rate in the country has however been a barrier to knowing the actual cases.

As of July, Nigeria with the highest population in Africa has conducted 317,496 sample tests, while Ghana with less than 20 percent of Nigeria’s population, has conducted 370,000 tests as South Africa conducts more than 2.5 million tests.

With the projected decline in consumer spending due to the impact of COVID-19 on consumers’ income, Fitch Solutions says it expects Nigeria’s economy to contract by as much as 6 percent in 2020.

“This will be mostly due to a sharp fall in private consumption spending due to lockdown rules, tighter fiscal policy, and declining oil income,” it said, adding that activity will strengthen in 2021, “but growth will probably remain slow.”

In real terms, Fitch Solutions says output will not return to the level seen in 2019 until 2023. “We expect that headline growth will remain very weak over the coming years, with the country falling behind regional peers.”

While the global GDP is expected to fall by 2.9 percent this year, Fitch Solutions says Nigeria will be one of SSA’s worst-performing economies this year. Like Angola, it says Nigeria is suffering from both the COVID-19 crisis as well as a sharp fall in oil prices.

“We also expect that the country will have a very slow recovery. Structural weakness and poor policymaking that dragged on growth in recent years will continue,” it said, adding that output per head will probably continue to fall, as it has done since 2016.

Africa’s top oil exporter who relies on crude sales for around 90 percent of foreign exchange earnings and more than half of government revenue was forced to review its 2020 budget amid the drop in crude price as the country’s very narrow revenue base (6% of GDP) leaves the government with a very limited ability to service its debts.

While repayment costs already consume well over half of all federal government revenue, Fitch Solutions expect Nigerian Government which already spends more of its budget on debt servicing than any other sort of expenditure to further spend more on debt servicing this year.

From a record low of 20 percent in 2015, Fitch Solution expects Nigeria’s Government debt as a percent of the country’s GDP to rise to more than 35 percent by the end of 2020 and almost 40 percent by 2021.

Given low oil prices and bearish sentiment towards emerging currencies, market analysts expect the pressure on the naira to continue to mount. Fitch Solutions, for example, expects that the currency will weaken to N475 against the US dollar at the end of this year, and further decline to N510 next year.

“The depreciation will come in a series of steps, as in recent years, “it said, adding that policymakers are very unlikely to fully liberalise the FX regime.

On the impact of COVID-19 on Nigerian businesses, the recent report by Fitch Solutions said that the result of its survey suggests the pandemic will have a big effect on small firms.

Its analysis of the survey result reveals that 80 percent of the respondents said they are likely to lay off workers as 30 percent do not expect their businesses to survive the impact of the pandemic.