The Negative Impact of The Corona Virus Pandemic on Nigerian Businesses
Novel Coronavirus of 2020, now being termed as COVID-19, has continued to infect people all over the world, claiming more than 100,000 lives already in early April, 2020. The virus, which is believed to have originated from Wuhan, China, has been disrupting the world’s economy with countries quarantining their entire nation, some selected cities, states and regions to curb the spread of the virus.
Apart from China, cases are being reported from most of the Asian countries, The United States of America, Europe, South America, and also Africa. In Europe, Italy and Spain have been the hot-bed with number of fatalities far surpassing that of the initial epicenter, Wuhan. In the case of the Middle East, Iran is the most affected nation.
Nigeria’s Coronavirus Status
The first case of COVID-19 was reported in Nigeria on 27th February 2020. The patient was an Italian citizen working in Nigeria who had flown in from Milan to the commercial capital Lagos on a Turkish Airlines flight on 24th February. The worker was isolated only two days later, and his test results were confirmed positive by the officials of the National Centre for Disease Control and Lagos State Health Ministry. The worker has since recovered and had been discharged but there have been scores of other infected persons largely from those who returned from oversea trips and had locals exposed dangerously to them. According to Professor Akin Abayomi, the Health Commissioner of Lagos, the Nigerian health officials are facing challenges in tracking down passengers who were on the same flight with most of these returnees. The government have had to impose lockdown on hot spots including Lagos State and the neighbouring Ogun State as well as the Abuja Federal Capital bringing all commercial activities to a halt. Exclusions were only given to essential services providers.
Dependence of the Nigerian Economy on China
Prior to February, 2020, the Nigerian economy was dealing with the most massive epidemic of Lassa fever, which is considered to be more dangerous than coronavirus. The emergence and spread of coronavirus in China warranting lockdown was another big blow to the Nigerian economy because China was her most important trading partner. Chinese imports, which account for a quarter of Nigeria’s import profile, have been cut down in an attempt to contain the virus. Small businesses are suffering as they have not been able to import any Chinese goods for the past two months.
It would be recalled that the Nigerian economy relies heavily on the earnings from oil exports with China and India being her biggest customers. The outbreak of Covid – 19 and the resultant lockdown in these countries cut down their demand for energy, and in effect crude oil, by close to half. This imposes certain risks on the economy, making it susceptible to external shocks that could negatively impact its already fragile state. The weakening demand occasioned by the current outbreak in China as well as a temporary trade feud between Russia and Saudi Arabia have brought down oil prices to $19 per barrel, which is lower than the $57 per barrel budget benchmark set by Nigeria. If the prices keep dwindling, OPEC shall have no option to back the decision to cut production quota, which will worsen the situation for Nigeria.
Nigeria Stock Market Losses
The Nigerian economy was on its road to recovery, albeit slowly, after suffering a recession in 2016. The GDP growth rate of the country stood at 2.27% in 2019 which was slightly better than in 2018. This growth rate was possible due to stable oil export demands. With oil prices taking a hit, the Nigerian GDP could well be in trouble. As of the last week of February 2020, the global stock market has lost $6 trillion in value due to coronavirus. With hundreds of cases being identified in Nigeria and the hold on business activities, the local stock market lost more than $980 million in value and the end is unpredictable. Also because most citizens operate in the informal sector ranging from small to medium enterprises, restriction of movement has dealt a huge blow on their ability to either get stocks or open shop for transactions. Massive job losses and pay cuts are being feared in the days ahead. Reports have it that about 2500 expatriates have equally left the shores of the country shutting most operations in the manufacturing as well as the oil and gas sectors. No doubt, the impact is going to be heavily negative in the short to medium term for the private sector.
Strain on Social Welfare Provision and External Reserves
Amid the economic chaos, the major concern for government remains how to contain the spread of the virus and provide medical assistance to the infected persons. The government is also having an herculean task in providing palliatives for citizens placed under lockdown. Food reserves are being emptied, assistance is being received from philantropists and government is looking at recalling some of her past savings to cushion the effect on the states and the masses. It is left to be determined how this will impact on the nation’s financial status in the coming months. The WHO has called upon all nations to pull all stops to aid containment. This is perhaps is one of the ways in helping weaker nations defeat coronavirus.
The road to recovery might be a long one but as it is said, “Self preservation is the first law of nature.” Nigeria must first survive this threat and then deal with her issues later. Businesses will also vicariously bear part of the brunt but will somehow adjust in the new few quarters. It will not be an easy one though.