The worldwide impact of Corona Virus has already been significantly felt. But as with all pandemics, there is no measure on when it will end with the spread rattling across more nations. What will the economic environment look like in the aftermath? Nigeria took precautions by implementing a quarantine across major cities that included Lagos, Ogun and the nation’s capital Abuja last week.
Just these cities register a huge number of up to 30 million residents. Several measures such as the closure of schools, businesses, religious gatherings, markets and major institutions were implemented across each region following the reports of governors and public officials being tested negatively across every state in Nigeria. The Nigerian economy is a big contributor to the African landscape, so how will Covid-19 affect the nation?
The Economist reports that oil accounts for about a tenth of the Gross Domestic Product (GDP) and directly accounts for 70% of the government revenue. Nigeria’s GDP by sector is largely driven in order by Agriculture, Trade, Energy & Mining, Finance & real estate, IT, Manufacturing, Construction and others and the economy has double in size of over the past decade. These have all been affected and have led to a decline in the performance the economy.
Remote work was recommended for businesses, trading went low with a lot of loss index in the market. African industries and Business Corporations are not excluded in this crisis due to the widespread of the virus. Banks in Nigeria have scaled down staff coming to work and closing off some branches until the virus subsides, this meant a drop in the transaction volumes.
Additionally, cause and effect of the virus means the global demand of oil has dropped and prices have tanked. Being Nigeria’s biggest export, the government relies heavily on the dollar earnings for funding. The benchmark oil price as per $37 billion budget was $57 which is a stark contrast to current $31 to $33 pricing (Quartz Africa,2020). Another recession might be the route that Nigeria is heading towards. Bloomberg reports that Nigeria has requested a total of $6.9 billion from the IMF, World Bank, and AFDB to help with the containment of the virus: Zainab Ahmed said the outbreak poses “significant threats to the Nigerian Economy, the Nigerian healthcare system and even to the national security.
Industrial production has slowed and has been halted in some instances. This is a necessary step as more cases would put a strain on a poor health system with a lack of facilities – with already 232 confirmed cases. Will it work? This has been the major question of the populace over a continent where certain countries are hit by economic crises along with the high rate of unemployment with their region. We also inquire its interpretation for business likewise market people, considering how they would survive.
A recovery is however expected in the 3rd quarter of 2020. The World Economic Forum recommends that policy makers must support vulnerable households and smaller businesses to mitigate the impact of this severe shock. China has shown a blue print to stopping the virus through containment but at a high economic cost. Containment is at the cost of slowing economic activity.
Provision of support to vulnerable households is key through different ways for example waiving utility bills and channeling credit through fintech firms. Subsidized credit is also key in the acquisition of health equipment and for a coordinated outbreak response (IMF,2020).The global economy took a tumble too as a result. According to the Financial Times, major economies have all implemented the lock down, first China, Europe and the United States of America.
Forecasts predict a decline in the annualized GDP in the first quarter of the year that could hit as low as minus 20% which is triple the worst quarter recorded during the great recession in 2009. Goldman Sachs reports an 11-12 percent drop in the US from the pre virus reading and annualized GDP at a decline of 34% in the 2nd quarter of 2020. Part of the challenges for the case of China arose from export orders weakening as foreign markets declined drastically. Industrial output growth has also declined sharply. This led to liquidity shortages and market disruptions across Africa.
Africa leaders need to invest and support the health institutions among major countries across Africa; rural communities should not be discarded in the awareness of this virus. They need water, food, health care and other facilities to curb and prevent the virus. This moment is an opportunity to build more hospitals and health centers, provide portable water for people living in urban and rural areas across the continent in accordance to sustainable development goals. Health professionals should get better incentives in the push to save more lives.