The tragic health hazards of the COVID-19 pandemic have grabbed the headlines all over the world, aside these health hazards the spread of COVID-19 has also produced negative effects on the global economy which is beginning to have detrimental effects on the nations of the world.
Nigeria has not been spared from the strangulating effect of the Corona virus, the steady rise in the number of cases has lead to quarantine measures halting commercial activities in two major Nigerian states (Lagos and Abuja) and also the imposement of curfew in other states. The informal sector has taken the most beating from the restriction of movements orders, the implications of this cannot be overstated as the informal sector contributes 41% of the Nigerian economic output.
According to a statement from the Office of Accountant General of the Federation, the foreign reserve was $35.94 billion, down by $2.59 billion from $38.53 billion in which it opened the year. As a result of decrease in foreign earnings, the dollar exchange rate for foreign investors was also changed from ₦360 to ₦380. While this will increase the earnings of the government by barrel, it also has negative effects on Nigeria’s equity and fixed income markets which can lead to recession and Naira devaluation.
The gradual slump in oil prices since the outbreak of Covid-19 in China is perhaps the biggest threat to the Nigerian economy. Oil prices hit a 17 year low of $25 per barrel this week, this portends perilous times for nations like Nigeria that depend heavily on revenues from crude oil.
Oil revenues account for 31% of the 2020 Nigerian budget revenue, The Minister of Finance announced that there will be cuts to noncritical capital expenditure and may extend to critical expenditures if oil prices don’t stabilize. This highlights that there would be a slower pace of development in the country due to essential roles played by capital projects in promoting the development of the economy.
The aviation industry has also been severely hit by the Covid-19 outbreak, local airlines are being forced to reduce their fares to prices below operational cost. Airpeace reported a loss of 2.1billion Naira in the past three weeks. The Airline Operators of Nigeria (AON) warned that if this trend is continuous over 20,000 jobs will be lost in the aviation sector, adding to the unemployment problem in Nigeria.
The Nigerian Stock Exchange market (NSE) has also received it’s own share of bashing from Covid-19 pandemic, A loss of 2.3trillion was reported by the NSE three weeks after reports of the first Nigerian case of Covid-19. The loss of money by Investors and business owners is never good for the development of any nation.
Coronavirus throttled demand from China, Nigeria’s largest trading partner. The President of Phones and Allied Dealers Products Association (PAPDAN), Ifeanyi Akubue, said huge stocks, especially phones and computers worth $100million are stuck in China. The Original Equipment Manufacturers (OEMs) supplying this market are based in China, and have not supplied since the outbreak of the virus, he said.
Nigeria’s construction, manufacturing, and agricultural sectors are running dangerously low on intermediate goods needed for building projects and farming because her container ships are docked in Chinese ports. Construction on the 2,000 km Niger-Benin pipeline and the nearly-done Lagos-Ibadan in Nigeria have stopped completely. One after another, workers are being idled across the country due to the escalating COVID-19 crisis on account of lack of materials or Chinese personnel.
Farmers will have to cope with movement restrictions and paralyzed supply chains. That is, the transport restrictions and quarantine measures are likely to impede farmer’s access to markets, curbing their productive capacities and hindering them from selling their produce.
Farmers might be hindered from working on their land and buying seeds or other essential inputs from the markets. Due to lack of access to feed inputs and consumer fears, the livestock farmers are at risk as demand of animal and animal by-products are affected. shortages of labour could disrupt the production and processing of food, especially for crops that are highly labour-intensive.
The stay-at-home policies and reduced income, have caused some firms to lay off off employees in order to cut cost since there is a reduction in their income. This invariably has increased the unemployment rate in Nigeria. With an unemployment rate of about 23.1% in the last unemployment report released by the National Bureau of Statistics (NBS), Nigeria ranks 21st among 181 countries. The country has also been rated as the poverty capital of the world with an estimated 87 million people living on less than $2 a day threshold.
Although the federal government has been exploring various means of generating revenue to buffer the effect of unstable oil prices through increment in VAT and review of extant legislation, among others, the Nigerian government essentially must lead economic diversification drive.
It is one practicable way to saddle through the current economic uncertainties and instabilities. Diversification priorities to alternative sectors such as agriculture, solid minerals, manufacturing and services sectors, should be further intensified.