COVID-19 and the economy

By Gozie Irogboli

Sir: Different scenarios have been conceived by experts on the possible economic effects of the COVID-19 and they are all frightening. The predictions of industry watchers, concerned citizens and experts have been expectedly gloomy.

The economy has no buffer against external shocks as it is precariously tied to the vicissitude of the international oil market whose price is currently on the downward slide. Nigeria has no developed economic structures and policy levers to fall back on to help contain the damaging effects of the lockdown. The fiscal procedure seems to follow the same monotonous pattern: make budget, sell oil to finance it and when there is shortfall, and there is always shortfalls, borrow. This time, borrowing may be difficult.

With total debt stock at $84.053billion as at the last quarter of 2019, about 30% of GDP and debt/revenue ratio at over 60%, far above the World Bank recommended threshold of 20%-25%, Nigeria would most certainly renege on its debt obligations with dwindling oil price at below $25 dollar per barrel less than half of the 2020 budget benchmark of $57 per barrel. Again, with dwindling revenue and depleting foreign reserve at $36.69billion as at February, from $47billion in December 2018 and as export is expected to decline, Nigeria will experience balance of payment difficulties.

Furthermore, as factories close and those operational expected to work below their installed capacities, unemployment rate, which is put at 23.1% by National Bureau of Statistics, is expected to rise. And with a country that has no social security programmes for its economically vulnerable citizens, dependency burden will increase. There would be hunger and disease in another dimension and this will have unsavory ripple social effects—crime rate will notch up.

The breakdown in the international supply chain following the closure of factories will put a severe strain on domestic supply, Nigeria being an import-dependent economy, will experience a spiraling inflationary pressure. Pensioners, those with fixed income, artisans and those who survive on what they get daily may suffer great hardship. Remittances from overseas are expected to decline significantly as global economy contracts.

In view of the foregoing, it is imperative that the government takes urgent steps to mitigate the effects on the citizens and stimulate economic activities swamped by the outbreak of the killer virus. The government must act fast and avoid the debilitating lethargic response to issues. Quick, pro-active response will be more stimulating. My people have a saying that “the search for the black gold should start early.”

The outbreak of this killer virus disease has shown that health is the most important of all human assets. I enjoin our government at all levels to invest in our health care system.

• Gozie Irogboli, (goziei@yahoo.com)