Economic Issues
COVID19: The Global Pandemic and its Ripple Effect on Nigeria Economy -By Suliat Dauda
It’s three months into 2020 and we’ve had so much to talk about some 90 days into the new decade. One of the things that has hit humanity so hard is the novel disease called Corona Virus. Since the first set of victims of the disease were identified and isolated in Wuhan, a city in China earlier this year, it has since spread across the globe. Undoubtedly, the world is currently faced with one of the most dangerous viruses that has affected mankind.
With increasing number of victims, deaths resulting from the disease have also surge little high which has prompted the World Health Organization (W.H.O) to declare Corona Virus as a pandemic on Thursday 12th 2020.
The world is smitten by Corona Virus, businesses and shops in China have closed temporarily, schools are on break, international flights and conferences are for the time being on hold. Also, the streets in Italy are scanty, offices in Wall Street are affected and Africa, one of China’s most trusted international trade partners is partly affected. Men worst fears are coming into manifestation, football games
On a micro-level, it is important that we take a cursory look at the ripple effect it has had on Nigeria Economy. Coronaviruses are a large family of viruses that may cause a range of illnesses in humans, from the common cold to SARS detected in Wuhan city, Hubei province, China. It has killed almost 4,000 people and infected over 100,000 across at least 25 countries and territories.
While Nigeria has recorded just two cases of Corona Virus patient, it has had a large effect on the Nigeria economy beyond it being a virus. It also has had a negative effect on the economic activities of the country, from negative effect on the budget to The International Monetary Fund (IMF) cutting its projection for Nigeria’s 2020 economic growth to 2% from 2.5%. Currently, all road and rail projects that are being handled by the Chinese state-owned construction company, China Civil Engineering Construction Corporation Ltd. (CCECC) are on hold.
The virus which sprung up from China which is the workshop of the world, the highest exporter of the world, one of the major buyers of Nigeria crude oil, the country’s biggest trading partner and Nigeria’s biggest source of imports has affected the income from oil exports. Nigeria although insulated from the adverse effect of the virus after corrective measures were put in place by government is grieving as foreign reserve continue to shrink.
A known fact in the business world is the huge Sino-Africa trade. In the aftermath of the Forum of China-Africa Cooperation summit in 2019, a VOA reported that Chinese investment in Nigeria’s oil and gas industry has reached $16 billion, after the head of Nigeria National Petroleum Commission disclosed the new figure to newsmen. Correspondingly, imported Chinese goods which were valued at N1.22tn made into the Africa’s most populous nation in the third quarter of 2019. This figure represents 31.34 per cent of total imports in the 3rd quarter of 2019 thereby making China the largest source of import into the country.
Worthy of note is that majority of imports include cars spare-parts, machinery, raw material smart phones as well as human power in technological advancement and many others. Store owners, producers of most of these products have run out of product thereby reducing their production/stocks and this having effect on the country’s GDP and contributing to the inflation rate.
Knowing fully well that Nigeria imports most of its product from different countries and other countries also depends on China which is the workshop of the world for machines and other technological advancement, this in turn have effect on Nigeria as it cannot import materials for its economic activities.
Nigeria being a mono– cultural economy depending on oil exportation for its revenue is also facing a huge setback as Russia and Saudi Arabia continue to have a trade faceoff. While Coronavirus tearing everywhere down, stock at the global market are shrinking. Nigerians are still healing the wound of the 2015 recession, COVID19 ripple effect on the Nigeria economy through low demand for oil and high supply of crude oil might set the country on another part of economic downturn if the world economy doesn’t dip before it. At present, Nigeria budget of 10.59 trillion naira was based on a 57 dollar per barrel bench mark but has slid by 24.1% to 34.36 per barrel causing over 20% budget deficit.
Consequently, the decrease in the crude oil price which has negatively impacted the oil revenue requires the budget to be reviewed which led to the forestalling of about eleven (11) infrastructural projects which is supposed to take off first quarter of 2020.
Given the volatility of the crude oil, OPEC agreement which has not been agreed on as well as Saudi Arabia increasing its production and giving discount, millions of barrels of unsold barrels of Nigeria crude oil pilling up, dropping foreign reserves, possibility of devaluation of the currency. WHAT IS LEFT OF THE ECONOMY?
What are the plans to made for the pandemic and the aftermath of the virus? Hopefully the virus will not make the country slithered into recession given that the last recession of 2014 was as a result of dwindling oil price. Knowing fully well Corona Virus isn’t just China’s problem but a global phenomenon.
It is high time the country made plans and policies on how the country will move away from over reliance on crude oil. With population of over 200 million people and an increasing birth rate the country must shift her focus towards being knowledge economies rather than her over-dependence on crude oil. This will drive the economy forward knowing that the prosperity of the country will depend on what the country’s population can invent.
