The Impact of COVID-19 on the Nigerian Economy

The Impact of COVID-19 on the Nigerian Economy

What started out as “just another virus” as popularly described by many people at the inception, has ravaged most nations and disrupted the way of life of the global community. It is what is commonly known as the coronavirus, or more technically, Sars-CoV-2 (which causes the COVID-19 disease). Its origins are still widely debated. What is however certain is the impact the coronavirus has had, is having, and will continue to have on the world economy and the more rather defined effects on the economies of many nations.

With unexpected events happening, damages to economic projections and real economic value are certainly expected. Taking a cue from previous pandemics, the 2003 SARS outbreak which infected about 8,000 people and killed 774 cost the global economy an estimated US$50 billion.
The 2015 MERS outbreak in South Korea, on the other hand, infected 200 people and killed 38, and cost the global economy US$8.5 billion. These previous viruses infected and affected far fewer people, and were handled expeditiously, meaning the respective and combined costs to the global economy were relatively small (Scott, 2020).

The novel coronavirus has already far surpassed the numbers of the former viruses with 3.6 million cases worldwide (and exponentially still increasing), killing 249,000 people (Johns Hopkins University, 2020). The virus has stopped trade globally, restricted travel, closed down businesses,
caused high unemployment rates, all of which have affected several economic indicators, such as demand and supply, and consequently other concepts like trade and investment. The UN’s trade and development agency has projected that the slowdown in the global economy caused by the coronavirus outbreak is likely to cost at least $1 trillion (World Economic Forum, 2020). Another analysis from the Asian Development Bank has said the cost of the coronavirus pandemic could be as high as $4.1 trillion, or almost 5% of global gross domestic product, depending on the
disease’s spread through Europe, the U.S., and other major economies, (BLOOMBERG, 2020). A shorter containment period could limit the damage to $2 trillion, or 2.3% of world output. Even before the outbreak, the outlook for the world economy—and especially developing countries like
Nigeria—was fragile, as global GDP growth was estimated to be only 2.5% in 2020, after averaging over 3% in previous years (Ekeruche, 2020). In February, the International Monetary Fund (IMF) even had to revise the 2020 GDP growth rate downwards from 2.5% to 2%. Of course, this economic shortfall will affect every country and Nigeria most certainly will not be left out. In fact, the IMF says Nigeria’s economy is expected to shrink by 3.4% this year and could face a recession lasting until 2021 (Olurounbi, 2020).

So just what have been the effects of the coronavirus on the Nigerian economy? This article highlights certain aspects that serve fundamental purposes to the Nigerian economy, and how they will be impacted by COVID-19.

How Low Can Oil Go

When we mention “oil” and “low” in the same sentence, we hope at the very worst, it’s only with respect to the depths we have to reach in order to get the oil. We never want it associated with the price of oil. We cannot however run from the current reality that while oil is deep underground, so are the current oil prices. The COVID-19 pandemic came with an attendant oil price crash, as demand for oil plummeted. With lockdown in China, which consumes about 14% of the global crude oil daily, and reduction in major economic activities globally, the price of oil went as far down as where the salient resource is gotten.

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