• Tuesday, September 26, 2023
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COVID-19: What Nigeria should do to reduce economic losses

Nigerian economy

What started as a simple feverish condition in Wuhan China, has evolved into a much more global pandemic. At the heart of this, various conspiracy theories have emerged with many linked to the outbreak to the new 5th generation (5G) set up while others saw it to be a different phenomenon altogether.

Be it as it may, the impact of the outbreak on the global and the Nigerian economy is something to worry about, albeit, exposing countries like Nigeria, among others, that have a weak healthcare system.

The pandemic, however, has impacted negatively on lives and the economies at large. The economic uncertainties and disruptions from this outbreak have a significant cost on the global economy which directly has impacted negatively on the Nigerian economy.

The coronavirus, coded COVID-19, has since spread to 210 countries and territories in every continent and 2 international conveyances across the globe, according to the Worldometer COVID-19 data. The swift spread of the virus across the country presents an alarming health crisis that the world is contending with. In addition to the human impact, there is also significant economic, business and commercial impact being felt globally.

As of April 20, 2020, a total of 2,415,294 million people had been infected, 165,192 deaths were reported and 629,512 infected patients had been discharged globally.

A further breakdown shows that the United Kingdom has the fifth-highest official death toll from COVID-19 in the world, after the United States, Italy, Spain, and France, though the figure only covers hospital fatalities and the real number is probably much higher. In Africa, countries with triple-digit death cases include – Algeria with a death toll of 375 people ahead of Egypt, 239, and Morocco,141.

On the other hand, the Nigerian coronavirus outbreak is peaking. Nigeria is currently seating on the 11th position in Africa, with total confirmed cases of 627 infected people, 170 patients tested recovered and 21 deaths were reported as of 20th of April 2020, according to Worldometer COVID-19 data.

With the cases increasing, so are their negative impacts are taking toll on the global demand for Nigeria’s crude oil. This, however, puts a severe pressure on the Nigerian economy, an economy which just recovered from the post-2016 economic recession which was as a result of the fall out of global oil price crash and insufficient foreign exchange earnings to meet basic governance activities.

Read also: Lagos Coronavirus death toll hits 18 as two more patients die

The scenario is playing out again in 2020, in a more subtle manner when compared to an event that led to the 2016 economic recession. In 2016 when Nigeria slipped into recession, oil price hovered around $30 per barrel and the country recorded negative growth in more than four consecutive quarters. More so, there is no escape route from recession in 2020, according to the IMF World Economic Outlook, Gross Domestic Product (GDP) growth rate in Nigeria is projected to decline significantly by 3.4 per cent.

Businessday Research and Intelligence Unit (BRIU) findings show that oil prices hit $15 for the first time in 21 Years. This is far below the initial projected $57 per barrel benchmark for the 2020 fiscal year which was later reviewed downwards to $30 a barrel.

Sadly, the Nigerian 2020 fiscal budget was prepared with significant revenue expectation from crude oil with the assumption that global demand for oil would increase and market price for the product would remain stable at $57 benchmark and oil output put at 2.18 million barrel per day. Revenue from crude oil production is 31 per cent of 2020 fiscal budget and oil alone account for 90 per cent of foreign exchange.

With the sharp fall in price, this will impact government’s ability to meet its fiscal revenue targets as well as spending, and again, it will also impact hugely on forex reserves and debt repayment obligations especially to domestic and foreign creditors.

Apart from the fall in oil prices, the effect of the coronavirus on various segments of the economy varies differently but with similar peculiarities. For example, the Nigerian Stock Exchange (NSE) recorded a loss of N2.3 trillion in three weeks after the first index case was announced in February 27, 2020

– an 18 per cent drop.

So far, what measures have been put in place to curtail the spread?

In a bid to keep vital sectors active, the Central Bank of Nigeria made moves to minimize the economic impact of the pandemic. One of the measures taken include the provision of soft loans to the highly vulnerable sectors of the economy. In addition, a stimulus package of N3.5 trillion, this include – 5 per cent interest on loans up to N50 billion to households, airline service providers and hoteliers, ₦150 billion to the pharmaceutical and healthcare sector and N1 trillion for the manufacturing sector.

Among other measures, the decision to cut the retail price of gasoline under a price modulation arrangement is another step taken by the government.

There was the cessation of movement; however, the poorest of the poor are the ones feeling the brunt of the measure. Government’s palliatives to help them are yet to go round. The sheer lack of data to map out the most vulnerable members of our society are hampering the genuine intention of government.

Possible economic measures to curtail the severe impact of the pandemic on the economy

If there is any time the Nigerian government needs to take the diversification of the economy seriously, it is now. This is one realistic way to sail through the current economic uncertainties and volatilities. Diversification of the economy will help create institutional structures that would insulate it from oil shocks and ensure strong and inclusive growth. For the main time, businesses also should be helped to prevent massive job losses.