The Nigerian economy is one that has been described by both the IMF and the World Bank as stable but with slow growth prior to the outbreak of COVID-19. The IMF in 2019, said that Nigeria recorded a growth rate of 2.2%. In an updated forecast on 14th April 2020, as a result of the outbreak of COVID-19, the IMF projected the growth rate to fall to -3.4% in 2020 and recover in 2021 with a growth rate of 2.4%, depending on the aftermath of the pandemic.
Nigeria earlier this year have had some challenges in the financial market. Stock volumes in Nigeria have been declining since 2006. However, the issue has become worse as data from the Nigeria’s securities and exchange commission indicated that no single individual or firm registered on the Nigerian stock exchange market in 2019. In 2006, 19 brokers were accredited but the numbers continue to decline due to the banking industry’s upheaval and global financial crises. Blomberg reported on Tuesday 28th January 2020 that
“shares changing hands on Nigeria’s benchmark index last year fell to the lowest level since at least 2009. Investors also have less equities to choose from, with the number of listings down to a 15-year low, as the economy struggles to recover from a drop in oil prices”.
These challenges in the Nigerian economy were however accelerated, exacerbated and made worst by the outbreak of the coronavirus. Coronavirus cases continue to rise despite stringent measures put in place by the Nigerian government to contain the spread of the virus.
Nigeria, just like any other African country, requested for emergency funding from the International Monetary Fund to deal with the pandemic. In April, the IMF approved USD3.4bn as emergency fund for Nigeria, the largest loan to an African country from the IMF during the outbreak of the coronavirus.
Discussions are however under way to cut basic healthcare budget by almost half, so as to enable the government tackle other sectors worst hit by the pandemic.
Finance Minister certain about Nigeria's Recession
The Minister of Finance, Zainab Ahmed, stated while speaking with journalists after a virtual National Economic Council (NEC) meeting, that Nigeria’s economy will go into a recession at an average of -4.4 per cent.
“The National Bureau of Statistics (NBS) has made an assessment. So, it is the NBS assessment that Nigeria will go into a recession measuring at an average of -4.4%. But with the work that the Economic Accessibility Committee is doing bringing stimulus packages, we believe that we can reduce the impact of that recession. And if we applied all that have been proposed and we are able to implement it, we may end up with a recession that is -0.4 per cent. In any case, we will go into recession but what we are trying to do is to make sure that it is shallow so that we will quickly come out of it come 2021,”
the Minister of Finance indicated.
On the gradual easing of lockdown in the country, she said,
“this is a very difficult time because the challenges we have now are double. There is health challenge, there is an economic challenge. Even as we are addressing the current health challenge, we still have to look at how we can support the economy so that the economy does not fall into a depression”.
Impact of COVID-19 on Oil-Dependent Nigeria.
The disruptions in the global supply chain due to the lockdown in China and also due to the falling oil prices have hurt oil-dependent African countries such as Nigeria. For instance, during the coronavirus crisis, Nigeria was exposed to a significant drop in oil prices which hit the economy hard as it could not sell its oil to foreign buyers, and this led to loss of oil revenue to the country. Also, Nigeria’s 2020 budget which was planned at an anticipated oil price of USD$57 was no longer sustainable and the budget had to be revised downward to USD$30 per barrel.
Impact of COVID-19 on tourism
One of the hardest hit sectors of the global economy due to the outbreak of the coronavirus is the tourism sector. The sector has been affected due to closure of borders as well as restrictions on international travel in many countries.
According to the World Trade Organization (WTO), the current disruptions caused by the coronavirus might lead to a decline of 78% in international tourists and lead to over 100million jobs loses. The global travel and tourism industry have lost an equivalent of $300-$400 billion in international tourism receipts. The Nigerian travel industry lost more than N180 billion, according to the Independent.
Adetutu Adedeji, CEO Zeriah Travel and Tours Limited, in an interview said,
“Nigeria is a beautiful nation blessed in human and natural resources. We are a country-rich in an abundance of mountains, culture, beaches, and history well enough to attract any tourist. Unfortunately, Nigeria’s tourism is underdeveloped and facing security and infrastructure challenges. There is an urgent need for the government to create an enabling environment to revive the tourism industry. Time for the state government to start generating income from their asset as this will only not contribute to the revenue but will create job opportunities”.
Effect of COVID-19 on Micro, Small and Medium Enterprises (MSMEs)
The outbreak of the coronavirus has stifled and crippled businesses in Africa’s largest economy. PWC data indicates that businesses in the segment are expected to employ about 84 percent of its working population, and rake in as much as 48 percent of national GDP. However, disruptions in business activity will result in loss of revenue to the federal government, loss of employment and income and as well worsen the poverty situation in the country.
A new survey conducted by FATE Foundation in partnership with BudgIt Nigeria, dubbed “the impact of Covid-19 on Nigeria MSMEs”, designed to give insight into the prolonged impact the COVID-19 pandemic is having on MSMEs in the country said 30% of MSMEs in Nigeria won’t survive from coronavirus pandemic. Specifically, the survey showed that three out of every 10 MSMEs operating in Nigeria will not survive the coronavirus pandemic. The survey covered a sample size of 1,943 businesses, 80 percent of which were micro businesses sampled across various sectors in the country. The findings of the survey showed that the impact of COVID-19 on businesses in the segments have been fierce with 94.3 percent of them reporting they are worse-off on all financial fundamentals from sales, to revenue down to their cash flows.
The survey further showed that, about 80 percent of businesses reported that they were likely to lay off employees. Those employees that will survive lay-offs will experience salary cuts. Reasons that necessitated retrenchments according to the survey are prolonged periods of the pandemic, inability to pay staff, poor sales and restrictions on movement.
The Africa International Trade and Commerce Research in partnership with the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), O-analytics Research and Development Initiative (ORADI) and International Trade & Research Centre (ITRC) also undertook a national survey from March to April, 2020, to ascertain the effect of the COVID-19 on the Nigerian private sector.
The result of the survey evidently revealed that 97 percent of businesses that participated in the study suffered revenue loss due to COVID-19 outbreak and the subsequent lockdowns. More than 66 percent of the businesses that participated in the study are micro businesses employing less than 10 staff.
On the impact on job creation, The Africa International Trade & Commerce Research said “Our findings on the impact on job creation reveals that 72 percent of the private sector businesses surveyed experienced a contraction in job creation, due to COVID-19 outbreak as majority are rattling for new ways to be in business. The only strategy most of the businesses are adopting is to cut down their staff strength”.
It is clear from the findings of both surveys that the already bad unemployment situation in Nigeria will worsened.
According to a report by the Business Day, unemployment was already at record high of 23 percent as of third quarter of 2018 when official data on unemployment was last published. One thing that is clear from both surveys is that, poverty and unemployment situation in Nigeria will worsen drastically. The current outbreak of COVED-19 is calling for the need to embrace technology in doing business, be it small or large. Firms should therefore seize this opportunity to look for more innovative ways of promoting their businesses since social distancing and lockdowns may not permit face-to-face interactions among market players.
The Economic Sustainability Plan
As a result of the impact of the coronavirus on the Nigerian economy, the government set up a Committee on Economic Sustainability Plan, led by Vice-President Yemi Osinbajo. This committee is charged with developing Nigeria's economic recovery plan from the coronavirus. On Thursday, June 11, the committee presented its economic plan to President Muhammadu Buhari.
According to the committee the pandemic could leave about 39.4 million people jobless by the end of 2020 if the government fails to put proper measures in place to revive the economy.
The Committee on Economic Sustainability Plan also said restrictions imposed to prevent the spread of Coronavirus had mainly affected agriculture, manufacturing and tourism sectors. According to the committee, the dip in the nation's oil earnings would result in a $473m (£375m) shortfall every month. The Committee recommended among others the need to roll out mass programmes that create jobs and utilise local materials in agriculture, housing and road construction.
Nigeria’s president Muhammadu Buhari says the pandemic has had a moderate effect on the Nigeria economy compared to other economies around the world. Even though many citizens are complaining of massive job losses and extreme poverty, Mr Buhari, in a televised address to mark Democracy Day, said the government is employing 700,000 people under a Special Public Works Programme to build roads and clean up the environment.
The outbreak of COVID-19 has also presented avenues for Nigeria to repair the public health system, use legislation to create a national welfare system, create a well-functioning digital economy and also establish digital learning platforms that will enhance the development of human capital.
It is now clear that Nigeria needs to diversify her economy and should not only depend on oil which is characterized by frequent price changes. It’s time for government to prioritize other sectors such as the tourism sector. Tourism if well-developed will contribute significantly to revenue and also create more jobs to reduce the unemployment rates in the country.
Nigeria closed its land borders to curb the spread of coronavirus when the country recorded its first death from the pandemic. Nigeria had closed parts of its borders in August 2019 to fight smuggling of rice and other goods, but people had still been permitted to cross both ways.
Even though the aim of the earlier border closure was to curb smuggling of goods and services especially oil to neighbouring countries and to boost domestic production, it has resulted in supply shortages especially rice which led to price increases.
It is therefore recommended that Agriculture should be made a priority so as to ensure continuous supply of food from domestic production. This will reduce the imports, stabilize the exchange rate and also reduce poverty and shortage of food.