TUE, MARCH 17 2020-theG&BJournal- ‘’Nigeria is in a big mess’’ observed one economists theG&BJournal showed the take of key speakers at a forum facilitated by the Lagos Chamber of Commerce and Industry (LCCI) Tuesday on the implications of the coronavirus (COVID-19) outbreak for the Nigerian economy. His summary reflects the dire pictures painted if the Covid-19 outbreak persists in the short and medium term.
The Forum featured Mrs. Toki Mabogunje, President, LCCI as host, Dr. Ayo Teriba, CEO Economic Associates and Ajibola Olomola, Partner Tax, Regulatory & People Services KPMG in Nigeria.
Mabogunje, set the tone, seeking answers given that crude oil is now trading well below Nigeria’s budget benchmark of $57 a barrel in the international market for the past seven weeks, and seeking as well the most appropriate policy responses that would help mitigate the impact of the virus as well as subsequent shocks on the economy of Nigeria.
The scenario she painted is what is playing out globally, and what is spooking investors and world leaders as well: Businesses are shutting down operations. Factories are closing. Schools are on recess. Conferences, sporting events, football matches, music concerts and business meetings have all been suspended. Countries are imposing wide-range travel restrictions.
Trade are on hold. Global airlines have cancelled flight to affected areas. Global equities and commodities markets have been severely affected. Oil prices have been hit hard due to drastic cut in global oil consumption, compounded by the on-going price war between Saudi Arabia and Russia. Putting these together, the outlook for the global economy looks bleak.
Dr. Ayo Teriba, CEO Economic Associates reinforced Mabogunje’s bewilderment, looking specifically at the country’s vulnerability.
‘’Nigeria is also on the receiving end of one of the key economic fallouts as the collapse of the global oil price threatens to derail the budget and inflict another devaluation of the Naira, both of which would certainly combine to precipitate another recession, largely because the absence of adequate foreign reserve buffers makes Nigeria’s economy particularly vulnerable to oils price contractions that last up to a month,’’ he said.
With these scenario already priced into capital market, analysts are warning that the government revenue looks vulnerable at current levels.
‘’There is Potential fall in tax revenue and soaring debt, which would impact developmental outcomes,’’ says Ajibola Olomola.
‘’ In the short and medium term, we should expect to see decline in oil revenue due to reduced demand from key foreign customers, fall in FX reserves as a result of a fall in oil export oil revenue, which might impact FX stability, cost of imports from key trading partners such as Italy and China are likely to spike, resulting in a cost-push inflation, rate of unemployment may increase due to slow down in economic activity and potential decline in aggregate GDP due to slowdown in economic activity,’’ he added.
Dr. Ayo Teriba Nigeria spoke to the social fallouts, including anxiety and panic buying of nose-masks, sanitizers, chloroquine-based antimalarial that have been taunted as remedies for the virus as the public take precautions ahead of a possible outbreak.
Nigeria is also at the receiving end of some of the political fallouts like impact of the breakdown in the OPEC efforts to cooperate with OPEC+ countries on oil price, the travel bans across the world, and the bans imposed on the export of some medications and face masks by some countries as they fear they may not have enough for their residents as the pandemic spreads within their countries.
‘’How long the adverse social and economic fallouts for Nigeria would last depends on how long it takes before the world can bring the pandemic sufficiently under control for the restrictions of movement and public gathering to be lifted,’’ Teriba said.
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