Impact of COVID-19 on the Nigerian Economy
As a registered member of the Teachers Registration Council of Nigeria and member of the Nigerian Union of Teachers, Oyo State Chapter, I am well aware of the sacrifice and selfless service rendered not only by teachers but all workers in Nigeria. It is a sad reality that the coronavirus pandemic has barred workers from going about their daily activities. Howbeit, not only workers are affected but also economic activities with great effect on our economy. Unquestionably, the coronavirus pandemic has greatly affected Nigeria’s external revenue and foreign exchange earnings. This is happening after Nigeria is trying to mitigate the effect of the 2016 recession. Nigeria, as a mono-economy, relies on petroleum for over 80% of her foreign exchange earnings. In 2016, the price of oil fell to $50 per barrel from $112 per barrel thus resulting in a decline in oil production from 1.69 million barrels per day to 1.42 barrels. However, as at April 20, 2020, due to the effect of the pandemic, the Brent crude oil price has gone negative. Indeed, this is just like when a couple loses their only child, grief, sorrow and pain will surely follow. Consequently, due to low oil prices and fiscal complications, there has been a tremendous fall in Nigeria’s Gross Domestic product with the international monetary fund announcing a drop in the growth rate of the GDP from 2.5% to 2% in the first quarter of 2020. Likewise, Nigeria’s debt profile keeps increasing due to the negative impact of the pandemic. This might be due to genuine governmental concerns or the “kleptocratic” tendencies of our avaricious politicians. It is no news that several countries, agencies, companies and philanthropists have contributed to the government in support of the fight against the pandemic. Despite no clear meritorious use of these funds, our government still keeps soliciting for loans with our equally scrupulous legislature giving them rubber stamped approvals. Recently, the Federal Government got a $3.4 billion loan from the International Monetary Fund which according to the Finance Minister is to be serviced for 5 years. In light of low oil prices and revenue, Nigeria’s debt service currently gulps 50% of our revenue. Nigeria’s debt service ratio to revenue, according to experts is expected to increase to 70% before the year runs out. Furthermore, as a civil servant and astute educator, I equally have a booming poultry business.
Nigeria’s debt profile keeps increasing due to the negative impact of the pandemic. This might be due to genuine governmental concerns or the “kleptocratic” tendencies of our avaricious politicians.
However, since over a month ago, sales of my broiler chickens have been disrupted due to the lockdown proclaimed by the government. I currently run at loss as I continue to feed chicken due for sale. This short story leads to the third point which is decline in consumer consumption. Sequel to the various lockdown measure put in place by federal and state governments, there has been a decline in consumer consumption of non-essential goods. This has deeply affected the interplay between the forces of demand and supply with sellers of non-essential goods counting losses. According to the International Monetary Fund, Nigeria’s informal sector, such as vendors, marketers, hawkers and so on, makes up 65% of the economy and needs resuscitation if our economy is to avoid rising inflation and if it is to get back on its feet. Similarly, Decline in exports has led to an acute decline in demand for global commodities such as oil which is the major source of Nigeria’s wealth. The 2020 fiscal budget was meant to run on the assumption of oil being sold $57 per barrel. However, these estimations are no longer feasible given lockdown, ports closure and ban on importation by many countries even before the coronavirus degenerated into a full fledge health crisis, crude oil sold for $26 per barrel as at February 2020. Exportation of other non-essential goods has also taken a hit due to the effect of the pandemic. Simply, during a pandemic induced situation such as this, exportation of goods is a hard task in light of the lockdown, not only in Nigeria but other nations as well. With the global oil price at an all-time low and rising government expenditure, the 2020 fiscal year is surely headed towards a huge deficit. In fact, the International Monetary Fund has predicted that Nigeria’s economy will enter a recession more brutal than 2016’s after the health crisis. In conclusion, as my pen gives its last kiss to the paper, it is important to render solutions to the economic problems posed by the ravaging coronavirus pandemic. Our leaders should steer clear of borrowing for a certain time. Currently, Debt servicing gulps 50% of our erratic revenue. If we keep on borrowing, our revenue may become entirely dedicated to debt repayment. Just like Okonjo Iweala during the Obasanjo administration, Federal government should find a way to solicit for debt forgiveness. To solve the problem of consumer consumption, I will recommend that the decision of the CBN to increase cash reserve ratio from 22% to 27.5% should be paused in order to allow banks create credit facilities for the public to keep businesses running. Tax refund and waiver should be given to businesses to help them regain their losses after the pandemic. For the informal sector of the economy, a corrupt-free and efficient distribution system of cash transfer policy should be adopted to help those in this category. Finally, Diversification of the economy, which has been a subject of chit chat by many administrations with no positive action, should be embraced to break our sole reliance on oil as the only means of revenue generation. If we adopt these measures, there is surely light at the end of the tunnel in which our economy is about to slip into.
Born in 1969, I was christened Kehinde Adekeye by my parents. I am a level 14 civil servant in the service of the Oyo State Teaching Service Commission. Since my youth, I have always had a penchant for impacting knowledge on others. As a teacher in the humanities, I endeavor to employ easy-to-comprehend techniques to teach my students.