COVID 19 – A Brief Synopsis Of The Impact On Nigeria’s Economy By Okechukwu Ebuka

Developing economies, of which Nigeria is one, face a titanic struggle against the economic fallout of the current Covid 19 pandemic. Even before the outbreak the world’s economy was in a parlous state. Growth of GDP globally for 2020 was estimated to be around 2.5%, although this was considered an over generous assessment by the World Bank. Nigeria’s growth prediction was downgraded from 2.3% to 2.0% by the IMF as a result of low oil prices and restricted fiscal space.

Contagion rates

At the time of writing, Nigeria has 238 confirmed cases and ‘only’ 5 deaths. Compared to the many thousands of confirmed cases and deaths in European countries such as Italy, France and the United Kingdom, Nigeria seems to have escaped the worst – or has it? Nigeria does not have as sophisticated health care infrastructure as does the aforementioned nations of Europe. Neither does Nigeria have such a mobile population as is the case in Europe. The worst may yet be coming as the infection spreads as lockdown eases abroad and international travel resumes.

Tax revenues

The Nigerian government had for some time been wrestling with a weak economy, the recovery from the oil price shock of 2014 is still underway. In recent months there has been an escalation of the rift between Saudi Arabia and Russia which has seen the spot price of crude drop as low as $20 per barrel. Considering the price per barrel on 21^st February 2020 was $53, the price has fallen off a cliff. With exports of crude stalling, the tax revenues from producers and the support infrastructure industry have fallen sharply.

Industry and fallout

One sector of the economy which, although in its infancy compared to its European counterpart, is the NIGERIAN GAMING industry, has been hit hard. It is an industry which operates unseen but generated some $2 billion in 2019, the last complete set of figures which are available. Recently the industry has seen year on year growth. This growth has come not just from the younger generation in Nigeria which has been driven in part by increased and improving internet penetration. The Nigerian sports betting industry has been making strong inroads in to Europe and the rest of the world.

With the curtailment of professional sport around the world, few people are placing bets as nothing is moving. The growing tax revenue from the casino industry has been halted in its tracks. No-one is sure when professional sport will resume, but when it does, the industry may well be hit as the Corona virus cases and subsequent deaths increase in Nigeria. Rates vary from country to country, and are dependent on many factors but one thing is guaranteed for Nigeria – the contagion will accelerate sharply in the coming weeks.

Consumer buying

Household consumption will fall and potentially retrace to lower levels. If a partial or full restriction is placed on movement of the entire population, as has happened in Lagos and Ogun states as well as Abuja, it will hit the economy still further. Nigeria has a rapidly increasing ‘gig’ economy which generates some 65% of its economic output according to the IMF.

Consumer spending will fall on non essential items as and when the gig economy goes in to freefall. This will have a knock on effect to the infrastructure which supports it. Vehicle sales combined with maintenance of vehicles, the volume sales of petrol, diesel and generated power usage as examples will all suffer as a result of the downturn. All will have a knock on effect on government tax revenue. How long it will take to recover is an unknown quantity at this time.

In summary

The oil industry is the backbone of the modern economy of Nigeria. However, there are many diverse sectors of the economy which will be hit. The effect will be a trickle at first but it will build to a torrent as contagion and death rates begin to multiply. Nigeria may suffer the consequences for much longer and may experience a more pronounced downturn than will the more developed economies of Europe and the rest of the world.

Okechukwu Ebuka, javanebuka35@gmail.com