As the world grapples with the coronavirus, the economic impact is mounting. VICTOR TERHEMBA analyses how it affects Africa’s biggest economy.
It is nearly two months since Nigeria recorded her first case of the now world famous coronavirus on February 28, through an Italian who entered the country three days earlier. And since then, it has recorded almost 300 confirmed cases. As of Thursday, April 9th, 51 fully recovered and have been discharged with seven casualties.
Before this, Africa’s most populous nation had four months to prepare adequately for the eventuality of the virus breaking into its shores. Characteristically, however, the country was caught napping, despite being aware of the devastating effects of the virus.
Most people perceive coronavirus first as an economic crisis before a health risk and this is not surprising seeing that the former’s impact is rising strain. The pandemic has brought global economy to a standstill. So bad the International Monetary Fund says it has never “witnessed the world economy coming to a standstill… It is way worse than the global financial crisis.”
Early estimates, before covid-19 becoming a pandemic, predicated that, should the virus attain global status, most major economies will lose at least 2.4 percent of the value their gross domestic product (GDP) over 2020, leading economists to already reduce their forecasts of global economic growth down from around 3.0 percent to 2.4 percent. To put this in proper perspective, global GDP was estimated at around 86.6 trillion U.S. dollars in 2019 – meaning that just a 0.4 percent drop in economic growth amounts to almost 3.5 trillion U.S. dollars in lost economic output.
In a bid to, first, slow the spread of the virus and then ultimately arrest and contain it, the Federal Government, led by President Muhammadu Buhari, announced a two-week total lockdown in the Federal Capital Territory, Abuja and two states – Lagos and Ogun – which were most affected by the pandemic. The pronouncement has grounded both economic and social activities in these areas and a few others too that keyed into the policy.
The economic effect of the Covid-19 pandemic on Nigeria’s economy has so far been devastating and yet, the future still looks grim, such that even a diamond can’t illuminate.
Nigeria’s budget for the year 2020 was earmarked at N10.59trn (representing 11 percent of the national GDP) which was to be financed chiefly by the sale of crude oil with a benchmark price of $57/per barrel. Since coronavirus became a global pandemic, oil prices have fallen by more than half and currently selling at $27/per barrel.
Given this reality, Nigeria will have challenges actualizing the set goals of her budget as government revenue has fallen, forcing the FG to slash its revenue projection by 40%; from N8.41 trillion to N5.08 trillion.
This undoubtedly put the Nigerian government in dilemma and has cut short its capital budget by N312bn and reduced the oil price benchmark to $30 per barrel.
The nexus between the lockdown and cut in revenue generation for the government is not oblivious even to the blind. Since the nation’s economy is on standstill at the moment, it means the government is losing revenue from taxes and levies.
Last year, Nigeria Customs Service generated over N1.34tr, despite the partial closure of the country’s land borders, in revenues for the FG. Similarly, the NNPC made a revenue of $321.23 million in June 2019 while the FIRS posted a N5 trillion revenue for 2019. Hopes are bleak that the customs and FIRS can reach their N1.68 trillion and N8.5 trillion revenue target for 2020 respectively.
The covid-19 pandemic has further dealt more damage to Nigeria’s unemployment statistics as already companies in Nigeria affected the government’s lockdown have begun laying off some of their staff. No one is certain when the pandemic will come to an end and normalcy return, therefore companies are unwilling to maintain a huge wage bill in a period of economic inactivity.
Already, the International Labour Organisation, ILO, has predicted that over 195 million people are at risk of losing their employment status when the pandemic is all over. If the virus is not curtailed in a quick time, Nigeria’s unemployment rate may shoot far above the FG’s predicted 33.5% for 2020.
Despite the sincere and concerted efforts of the Buhari led administration to improve the economic realities of Nigeria and Nigerians, it is still projected as the country with the highest number of citizens living below the acceptable poverty line. Nigeria is still home to the largest number of out of school children, despite the government’s commendable efforts in the educational sector.
While Nigeria battles with the coronavirus pandemic at the moment, some Nigerians are wondering what would be of Nigeria post-covid-19 era. How will Nigeria be able to recover from the stress of the pandemic? What will become of those who lost their jobs during this pandemic? How will Nigeria guarantee food security? Because already, the prices of basic food items in the market have sore up by more than 200%.
Many Nigerians are worried the worst is yet to be seen. The economy will not pick immediately the pandemic is over, oil prices will not return to normal after the pandemic. It will be gradual.
According to World Bank’s Africa Pulse, Nigeria and other countries in the Sub-Saharan region will experience a reverse growth of between -2.1% to -5.1% due to the covid-19 global pandemic. This decline will cost the region between $37 billion to $79 billion and may plunge the region into its first recession in 25 years.
While it currently seems like the light at the end of the tunnel after the pandemic for Nigeria is very dim, Nigerians can only hope that the government is proactive and already taking actions to help the country’s economic stay on its feet after all this is over.
Source: Nigerian News
