The global pandemic which resulted from an unknown virus that originated from Wuhan, China has in no doubt taken a huge toll on the economies and territories it has affected.
The Corona Virus Disease 2019 (COVID-19) like every other epidemic or pandemic that has ever occurred has currently infected over 3 million people across the globe and has taken over 200,000 lives based on statistics, despite many efforts to curtail and curb the spread.
The deplorable health hazards are not the only consequences. It is quite impossible for there to be a pandemic that does not affect economies or disrupt economic operations and depending on the level of such pandemic, the world economies are hit in various ways.
Beginning from the monetary expenditures in relation to the outbreak which has been estimated at 2 trillion US$ by The United Nations Trade and Development Agency (UNCTAD).
Banks, economic experts, and finance ministries around the world have predicted its impacts to hit hard but for a short period before economic activities will be restored.
It has been likened to the thinking when the 2007 global financial crisis that started in the United States occurred and affected many regions but asides it being just an economic phenomenon, it was described as quite minor and easily manageable.
The COVID-19 which has spread across the world has impacted every aspect of life and the consequences may last longer. The situation has led to a lockdown in many regions, Nigeria inclusive and a general downturn in the global economy.
Nigeria has experienced a drastic reduction in the demand for oil which has caused a fluctuation and fall in oil prices. The effects are different across sectors, e.g tourism, aviation industries have experienced a decline in operations because of little or no travel.
The virus is also taking effect on the health sector because of the pressure in the effort to contain the spread, hospitals are being forced to operate below their capacity if they cannot handle the virus cases.
The lockdown has also resulted in the shutdown of businesses, manufacturing industries, financial institutions, etc making production in the country relatively low.
The Central Bank in a bid to ease the economic impact has given policies such as lower borrowing cost and interest rate, tax cuts, etc.
The crisis has its effects on both the supply and demand capacity of the economy because of reduced production and consumption, reduced exports, social distancing (workers and potential customers forced to stay home), etc. Households will only spend on essential items because of lower-income expectations. Investment by firms will also drop as it is not certain when the pandemic will end or how effective policy measures will be.
This is also because there has been a decline in stock prices around the world. The Government, on the other hand, has no choice but to spend more.
Nigeria, being a developing economy is expected to experience a serious impact from this outbreak and the pressure it has caused.
The country’s economy still struggles to recover from the 2014 oil price shock and the economic recession which happened in 2016 that caused oil price crashes and inadequate foreign exchange earnings.
The 2020 budget was prepared with revenue estimations very high (at an increase of about 20% from 2019 figure) which was based on high oil demand expectations and price stability.
However, the emergence of this crisis has inevitably brought about a need to review the revenue projections. Oil prices have already dipped and it is expected to go low further.
This calls for an urgent need to turn to non-oil sources of revenue and for more attention to be channeled to those areas. The Nigerian government must lead the drive for economic diversification.
It is one way to saddle through the current economic turmoil and volatility. What the implications of the COVID-19 pandemic will bring more to Nigerian economic managers and policymakers is that the one-tracked, monolithic reliance on oil is not yielding maximally.
Diversification goals should be expanded to alternative industries, such as forestry, solid minerals, manufacturing, and services. In likewise manner, the expenditure would have to be cut significantly.
A positive change is the decision to slash the retail petrol price in a demand control system. The cut is expected to curb increasing inflation, particularly inflation in food prices that will help the poor.
The government is expected to take this opportunity to completely deregulate the petroleum industry in line with existing suggestions and reports.
If the global economy is healthier, and crude oil prices increase, the government may return to the Nigerian National Petroleum Corporation (NNPC)’s under-recovery of the oil price shortfall.
A strategy that annually costs the NNPC huge revenue from the government, and repeated losses. The International Monetary Fund (IMF)’s revised Gross Domestic Product (GDP) growth rate from 2.5% to 2% and the country’s debt portfolio is of major concern.
These will make it more difficult for the economy to salvage this crisis and recover soonest.
In conclusion, fiscal policies can save lives, shield people, businesses, and most vulnerable people from the pandemic’s economic effects and prevent the health crisis from transforming into a severe long-lasting recession.
Fully supporting spending on health and emergency care is a crucial concern. International cooperation is expedient for a universally low-cost vaccine and assisting countries with limited resources in terms of safety, such as Nigeria.
Wide, immediate, and tailored assistance for affected workers and businesses are desperately needed before the emergency comes to an end.
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As the shutdown ends, broad-based and organized fiscal stimulus – where financing conditions permit would become more successful in promoting the recovery.