#EndSARS Compounds Recovery of Ailing Covid-19 Stricken Nigerian Economy
Nigeria, Africa’s largest economy and most populated country in the African continent has been battling serious economic crises even before the outbreak of the COVID-19 pandemic.
The African Development Bank (AfDB) Group stated that Nigeria is facing rapidly weakening macroeconomic conditions, triggered by the sharp decline in the price of oil to below $30 a barrel in March 2020, from more than $60 at the start of the year. The pandemic has also had a cascading impact through reversed investment flows, volatile financial markets, and disruptions in travel and tourism.
Real GDP growth was estimated at 2.3% in 2019, marginally higher than 1.9% in 2018. Growth in 2019 was mainly in transport, an improved oil sector, and information and communications technology. Agriculture was hurt by sporadic flooding and by conflicts between herdsmen and local farmers.
Manufacturing continues to suffer from a lack of financing. Final household consumption was the key driver of growth in 2019, reinforcing its 1.1% contribution to real GDP growth in 2018.
The effort to lower inflation to the 6%–9% range faced structural and macroeconomic constraints, including rising food prices and arrears payments, resulting in a rate estimated at 11.3% for 2019.
Poverty remains widespread. The poverty rate in over half of Nigeria’s 36 states is above the national average of 69%. High poverty reflects rising unemployment, estimated at 23.1% in 2018, up from 14.2% in 2016. Low skills limit opportunities for employment in the formal economy.
Nigeria’s economy is forecast by the International Monetary Fund (IMF) to contract by 4.3 percent in 2020. The IMF attributed the downgrade to low oil prices, reduced production under the Organization of Petroleum Exporting Countries and other major oil producers (OPEC+) agreement, and declining domestic demand from the lockdown.
Growth is projected to recover to only 1.7 percent in 2021, responding to firmer oil prices and increasing oil production.
The AfDB Group also forecast real GDP to contract by between 4.4% and 7.2% depending on the gravity and duration of the pandemic, wiping out gains from the three consecutive years of growth since the 2016 recession.
Despite the likely improvement in farm produce as the wet season starts, subdued consumer demand, and lower than expected growth in bank credit, the AfDB Group forecast inflation to increase to 14% in 2020 from the 11.1% projected before the crisis. The IMF also indicated Nigeria’s inflation will rise from 11.4 % in 2019 to 12.9% at End-December 2020 and declined slightly to 12.7% in 2012.
Debt & Deficit
Crude oil and gas account for an estimated 90% of total export earnings and more than 50% of fiscal revenues. The government projects oil revenues to decline by 90% in 2020 due to the decline in oil prices triggered by low demand.
Coupled with growing expenditure pressures to mitigate the COVID–19 health and socioeconomic impacts, the budget deficit is projected to widen to 6.7% in the baseline scenario, with the potential to deteriorate to 7.8% if the pandemic persists beyond the second half of 2020.
The AfDB Group stated that the lower oil exports are expected to deepen the current account deficit to between 4% of GDP in the baseline scenario and 5% in a worst-case scenario, wiping out the pre-COVID–19 projected marginal surplus.
The Government Debt as a percent of GDP is forecast to rise to 35.0% in 2020 from 29.1% in 2019. Public debt is expected to continue its upwards trajectory and rise to 35.5% at the end of 2021. Additionally, data from the IMF indicates that Nigeria’s debt stock averaged 17.7% between 2010 and 2016 and then rose to 25.3% in 2017 before rising to 27.7% in 2018.
The COVID–19 pandemic has morphed into a socioeconomic crisis with far-reaching implications on jobs and poverty. The Brookings Institution estimates that 10 million people could slip into poverty in Nigeria, which is among the countries likely to record an increase in poverty of more than three percentage points in 2020 due to the pandemic.
According to the National Bureau of Statistics, as of the second quarter of 2020, the unemployment rate in Nigeria stood at a staggering 27.1 percent and the underemployment rate at 28.6 percent. Of the 21.7 million unemployed, young people between the ages of 15 and 34 accounted for a whopping 34.9 percent. They also accounted for 28.2 percent of the 22.9 million underemployed Nigerians.
The above indicators spurred anger among Nigerians especially the youth which culminated in the EndSARS protests that resulted in damages to properties and loss of lives in Nigeria.
The discontent among the youth was already simmering given the economic crises sparked by the fall in global oil demand and compounded by the outbreak of the COVID-19 pandemic, institutionalized corruption, and state profligacy that have drawn more Nigerians into poverty.
The foregoing coincided with eight months of the closure of educational institutions due to strikes held by university lecturers, leaving many young people alienated and angry. Worsening economic conditions and bleak projections for the future have only fanned the flames.
“The protesters are also demanding a revival of the educational and health systems and stronger efforts toward job creation. In short, the message of the #EndSARS protest is that the young Nigerians want to take back their county from the entrenched political order that they believe has not served their interest”, said Brookings.
End SARS was a decentralized social movement and series of mass protests against police brutality in Nigeria. The slogan called for the disbanding of the Special Anti-Robbery Squad (SARS), a notorious unit of the Nigerian police with a long record of abuses. The protest which took its name from the slogan started in 2017 as a Twitter campaign using the hashtag #EndSARS to demand the disbanding of the unit of the Nigerian government.
The second wave of the outcry resurfaced in October 2020 when two young Nigerians were alleged to have been killed by SARS police.
On Saturday 3rd October 2020 when a video showing a SARS police officer shooting a young Nigerian in front of Wetland Hotel, Ughelli, Delta State trended on the Internet, it was alleged that the police officers took away the young man's vehicle – a Lexus SUV. The trending video caused a public outcry on social media, especially on Twitter, with the #EndSARS hashtag trending.
And on Monday 5th October 2020, another report surfaced of SARS officers killing a 20-year-old upcoming musician named Daniel Chibuike, popularly called Sleek in his neighborhood.
On Thursday 8th October 2020, nationwide protests on #EndSARS started after weeks of outrage and anger with videos and pictures showing police brutality, harassment, and extortion in Nigeria.
Solidarity protests and demonstrations by Nigerians in diaspora and sympathizers occurred in many major cities of the world. The protest is notable for its patronage by a demographic that was made of entirely young Nigerians.
On Wednesday, 14th October 2020, what started as a peaceful protest turned bloody when protesters in Lagos were attacked with cutlasses, sticks, and charms. In Abuja, protesters were attacked by people with cutlasses and cudgels at Berger roundabout. Cars were destroyed and some of the protestors were injured.
There were protests in Lagos and in at least ten states including Delta State, Anambra State, Abia State, Osun State, Rivers State, Ogun State, Enugu State, Ebonyi State, Edo State, and Plateau State. The protests resulted in the imposition of curfews in most of the states that curtailed movements of people.
Nigerian Stock Index performs amid prevailing challenges
Investors in the Nigerian Stock market are surely having good returns amid prevailing macroeconomic disruptions in the global financial market.
Data retrieved from Bloomberg terminal, according to Nairametrics, reveals that the Nigerian Stock Index ranked third globally concerning stock index performances. Consequently, the year to date (YTD) performance improved to stand at 13.43%.
Just in October alone, investors made a gain of about N1.934 trillion as the Nigerian bourse recorded its best monthly gain since 2018.
“It’s no surprise seeing the Nigerian equities market among the top three best performing index year to date after the outlier performance we had in October. The NSEASI was up 13.79% MTD in October, its biggest monthly gain since January 2018, which was largely driven by the robust system liquidity coupled with low yields at the fixed income space”, an Emerging market/Fixed income trader Emmanuel Orji, told Nairametrics.
“Nigeria now ranks as the third best-performing stock market in the world out of a basket of 93 indices tracked by Bloomberg. This performance is majorly driven by local investors given the low yield environment and the continued, albeit slow-paced, and uneven rebound in economic activities which has bolstered the third-quarter earnings of major Corporates on the NSE”, said Managing Director of Afrinvest Research, Abiodun Keripe.
Oil Price Slump Threatens Nigeria’s 2021 Budget
The Minister of Finance, Budget and National Planning, Zainab Ahmed, has said the resurgence of COVID-19 in Europe, which has caused oil prices to decline in the international market, may affect the 2021 budget estimate.
The 2021 budget is predicated on $40 per barrel but the current price in the market stands at $37.
The chairman of the panel, Senator Adeola Olamilekan (APC, Lagos) asked the minister when she appeared before the Senate Committee on Finance to defend her ministry’s budget about the contingency plans the federal government has put in place to insulate the budget from the shocks of falling oil price.
In her response, she said “the actual projection was $40 per barrel and that is the average price that we projected for the year. Some of the institutions that are responsible for tracking the price of crude oil, actually have crude oil prices going as far as $50, $52 per barrel.
“We took a safer path. It seems the second wave of COVID-19 in Europe is affecting us. We are hoping to have clarity as to which direction to take in the next week or two”.
The minister, however, dismissed insinuations that the federal government may increase Value Added Tax (VAT) again by 2.5% in 2021.
“As for the finance bill, we have the draft. There will be no increase in VAT or any form of taxes because we see 2021 as a year of recovery”, she said.