Impact of COVID-19 on the Nigerian Economy
No doubt, the spread of COVID-19 has taken its toll on giant countries in the world of which Nigeria is not an exception. Ever since the index case of COVID-19 was reported in February 2020, so many things have begun to happen that will eventually change the narrative in this nation. In the wake of all these happenings, Nigerians both home and abroad have continued to debate what the fate of the nation’s economy is and what it will become when COVID-19 is over. Nigerians are concerned if normalcy will be restored once COVID-19 is finally over. Maybe our leaders have made enough provision to weather the storm of Post Covid-19 times or everyone will be swept under the carpet and have to start afresh. In succeeding paragraphs, a comprehensive review of “The Impact of COVID-19 on the Nigerian Economy” will be thoroughly assessed and analyzed alongside possible solutions from the perspective of established fiscal and monetary ideas. Following, the sudden crash in global oil price partly due to the pandemic, and with oil being the major source of revenue to the country accounting for about 80 percent of government’s revenue which in turn funds the annual budget, a soothsayer is not needed to tell how much this will negatively hit the economy. The 2020 budget was premised on a benchmark price of $57/bl but was recently revised to $30/bl at a projected output of 2.18 mn bl/d. According to information and statistics on CBN’s official website, the drop in oil price globally has seen Nigeria’s Brent crude trade for $25/bl with a high probability of fluctuation.
To control the emerging menace of the crash in oil price is to diversify the economy towards other sectors such as agriculture, manufacturing …. Even though the government has been moving to diversify the economy, its slow pace in enacting effective policies have been inadequate.
This would drastically translate into a fall in revenue needed to fund the budget, hereby leaving a huge budget deficit, worse than those experienced even in the last 10years. International and Indigenous oil companies in the upstream, midstream and downstream sectors are not left out in this as they would have lost considerable revenues thus reducing the Petroleum profit tax (ppt) and Company Income-tax (CIT) receivable by the government while also incurring losses on their major investments and projects. Moving on, another series of challenges that will and have started trailing this pandemic is the sharp increase in cyclic unemployment due to aggregated inability of many small, medium, and large-scale businesses to operate seamlessly thus losing revenue due to the lockdown. This is evident already in the airline industry- in the past 14 to 21 days, air travels have been restricted to only essential services leaving airline operators with no choice than to downsize staff to make up for the losses accrued due to their redundancy over this period. In like manners, so many other firms are also following in that direction as running cost is greatly overtaking revenue. With the impending high rate of unemployment, crime rate is bound to steeply rise and security challenges arise just like what is currently being experienced by residents of Lagos and Ogun in the past weeks. Consequently, when businesses fail or their continuity is threatened then the overall GDP of the country falls. In a recent report by the International Monetary Fund (IMF) the economy of the nation has been predicted to fall into recession up until 2021 with its GDP projected to shrink by 3.4 percent this year thus countering the efforts of the Nigerian government to achieve a growth of 2.2 percent in the year 2019. Also, according to a statement released by the Finance Minister, if the pandemic continues for the next six months then the country would fall into recession as well. In conclusion, adequate measures to control the emerging menace of the crash in oil price is to diversify the economy towards other sectors such as agriculture, manufacturing, mining, and processing of mineral resources. Even though the government has been moving to diversify the economy, its slow pace in enacting effective policies have been inadequate. Facilitating disbursement of agricultural loans, closing of land borders to prevent importation of food items whilst also improving our local potential and content are among the solutions to salvage the economy. On the other hand, the recurring budget deficit the nation faces can be effectively controlled by taking mid-term to long term loans such as the 850billion naira loan recently approved by the legislators upon their resumption on 28th April, 2020. Again, better strategies for tax collection should be developed and launched to foreign companies who have customers in Nigeria e.g. Zoom (the virtual meeting space made popular with the advent of the pandemic), Netflix (an online entertainment streaming service -which is presently valued more than Exxon Mobil, amidst other measures. Finally, the roll out of seed capital by the government to support entrepreneurs as well as mandating commercial banks to give out loans to small business owners at an affordable interest rate to facilitate their new business thus reducing the problem of cyclical unemployment.
I am ADEGBITE Muyideen Adetunji, a fresh graduate of the Department of Mechanical Engineering- Obafemi Awolowo University Ile-Ife, Osun state. During my undergraduate days, I was known to be at the helms of affairs of prominent societies on campus such as The Nigerian Institution of Mechanical Engineers, Society of Petroleum Engineers, and American Society of Heating, Refrigeration and Air-conditioning Engineers. However, the highlight of it all was when I served as the President of my departmental association; NIMechE-OAU SC in my final year. I launched into the world of writing April 2019 as a freelance web content writer and it has been an awesome experience so far.