…Proposes 4 ways to mitigate economic impact
Dalberg, a leading international development advisory group, said in a report Thursday that Nigeria could contract by as much as 23 percent this year if the Covid-19 outbreak and global economic malaise deepen.
In a moderate scenario, however, where there’s “a quick and efficient COVID-19 response and an oil price war détente,” then the economy is estimated to contract by 4 percent, Dalberg said.
The International Monetary Fund expects the Nigerian economy to contract 3.4 percent this year while Mckinsey & Co. is projecting a 3.5 percent slump that will see Africa’s largest economy contract by the most since 1987.
In arriving at its forecast, Dalberg employed a comparator methodology based on both the sector-disaggregated experience of Guinea, Liberia, and Sierra Leone during the Ebola Virus outbreak from 2014 to 2016 and Nigeria’s economic performance during past recessions and slowdowns (triggered in the past 20 years by global recession or oil price
dynamics).
Tracking COVID-19 in Nigeria
Total Coronavirus Cases, April 30
1,728
Total Coronavirus Deaths, April 30
51
Change in NSE ASI year to date
-15
Balance in Excess Crude Account, Dec 2019 (million)
$70
Brent Crude ($ per barrel)
23
“Nigeria’s economy is still in recovery from the last recession; thus COVID-19, the likely global recession, and the low oil price will put further pressure on the economy,” said Nneka Eze, Partner and Nigeria Director at Dalberg Advisors.
“Past analyses may have underestimated the potential economic impact of COVID-19 in Africa. For Nigeria, we quantify the potential impacts of both COVID-19 and the global recession, using recent examples from the West Africa (Ebola) and Nigeria (past recessions and slowdowns) experience,” Eze added.
“Our analysis focuses on the role of and potential impacts on MSMEs as they contribute to 50% of Nigeria’s GDP and employ nearly 80% of the country’s workforce.”
The report also included a section on micro, small, and medium enterprises (MSMEs), and highlighted the structural inequality in Nigeria that suggests COVID-19 will differentially affect the poor, and groups such as women and youth.
The report highlighted that while sectors such as agriculture and healthcare might record increased focus and investment to secure food security and to increase healthcare capacity, increased strain on the economy could leave sectors such as trade, and arts and entertainment without economic recovery support.
Further, interventions may unwittingly exclude women and low-income individuals when they require access to bank accounts, identification, or collateral, or do not take into account the hardest to reach groups in their design.
To help mitigate the economic impacts in Nigeria, Dalberg proposes priority actions that are sustainable and inclusive.
The proposed actions include:
• Addressing the usual suspects. These actions include investing in infrastructure and high-potential sectors to support local productivity.
• Addressing the unusual suspects. These actions include closing the inequality gap for women and low-income communities, addressing the mental health risks that healthcare workers and the broader society face, and endowing a fund for the arts to maintain Nigeria’s role as a global influencer of art and culture.
• Delivering short-term actions. These actions include providing cash/food aid, securing food supply chains, and expanding credit facilities to reach women and other marginalized groups by revisiting collateral requirements.
• Delivering medium-term actions. These actions include improving disaster preparedness by investing in healthcare, education, and infrastructure, and providing access to more credit lines to MSMEs.
A contracting economy is looming for Nigeria given the dual threat of COVID-19 and falling oil prices14.
COVID-19 has caused a decline in oil demand given restrictions in movement and reductions in travel. China has witnessed a 20% decline in demand for oil.
That has seen prices tumble to a three decade low.
Nigeria’s economy is highly reliant on the oil and gas sector—90% of foreign exchange reserves is from oil exports and the Naira’s valuation is tied to oil sales. The oil slump will have dire impacts on the Nigerian economy, particularly on government spending as the sector provides three-quarters of government revenues.
Nigeria had recorded 1728 cases of the Covid 19 as of April 30.
The actual number of cases is most likely higher, due to limited testing capabilities and the way the virus spreads in part because many who may be infected and contagious are likely to be asymptomatic.
Source:BUSINESS DAY
