How is Nigeria positioned for the negative economic impact of COVID-19?
For a country like nigeria that is heavily dependent on crude oil for her economy to run. The gains in the price of crude oil could be a huge benefit as it would increase her foreign reserve earnings. But the negative economic impact of the coronavirus pandemic, especially in Nigeria and other African countries, remains a big challenge.
The slowdown in the global economy and lockdown in most countries as a result of COVID-19 has also taken its toll on the global demand for oil.
The current rise in the prices of crude oil is because the inventories are going down in some key industrialised countries like the United States of America and China just as the lockdown in most countries are being eased so that the transportation and industrial sectors that are heavy users of crude oil in those economies can begin to be active again.
Also crude oil production cuts by OPEC+ members that is seeing to the gradual withdrawal of almost 20 million barrels of crude out of the market, this coupled with an end to the price war between Saudi Arabia and Russia with America’s acceptance to also make some cuts, all of these have contributed in no small measure to the positive signals being witnessed as regards the prices of crude oil.
Refinery runs rose by 229,000 barrels per day, the API said, indicating plants are trying to produce more fuel as the United States eases its lockdowns.
“Oil markets have worried about high crude inventories but this week the WTI June contract expired and rolled over to July smoothly as concerns over crude stocks ease and demand has improved in the short-term,” said Kim Kwang-rae, commodity analyst at Samsung Securities in Seoul.
A good price for crude oil is what Nigeria needs so badly to get revenue to run her economy.
Brent crude futures for July delivery were up 10 cents, or 0.3percent, at $34.75 per barrel at 0626 GMT.
U.S. West Texas Intermediate (WTI) crude futures for July were down 2 cents at $31.94 a barrel after closing up 1percent in the previous session.
The June contract expired on Tuesday at $32.50 a barrel, up 2.1percent, as the WTI futures market avoided the chaos of last month’s May expiry, when prices sank below zero.
Oil prices have mainly risen during the past three weeks, with both benchmarks climbing above $30 for the first time in more than a month on Monday.
But the lingering concerns about the economic fallout from the coronavirus pandemic, especially in Nigeria and other African countries remains a big challenge.
Sector-specific implications and impacts could vary. For example, the impacts on the aviation and tourism sectors are a result of the implications of the pandemic on global travel. As discretionary spending by consumers continues to decline, cruise companies, hotels, and hospitality are facing declining demand and patronage.
Also, the pandemic is placing up to 8 million jobs in the leisure and hospitality sector at risk, with travel crashes and cancellations expected to continue.
The emergence of COVID-19 and its increasing incidence in Nigeria has called for drastic review and changes in the earlier revenue expectations and fiscal projections. Compared to events that led to recession in 2016, the current state of the global economy poses more difficulties ahead as the oil price is currently fluctuates between US34-$30.
Unfortunately, the nation has grossly underachieved in setting aside sufficient buffers for rainy days such as it faces in the coming days. In addressing these daunting economic challenges, the government has decided to revise the budget downward and pegged its budgetary benchmark at $20 per barrel.
The economic and growth recovery programme which has the aim of increasing social inclusion by creating jobs and providing support for the poorest and most vulnerable members of society through investments in social programmes and providing social amenities will no doubt suffer some setbacks. Besides, the downward review of the budget and contractions in public spending would be devastating on poverty and unemployment. The last unemployment report released by the National Bureau of Statistics (NBS) ranked Nigeria 21st among 181 countries with an unemployment rate of about 23.1%. The country has also been rated as the poverty capital of the world with an estimated 87 million people living on less than $2 a day threshold.
The U.N. Secretary-general, Antonio Guterres warned last Wednesday that the coronavirus pandemic threatens Africa’s progress and could push millions into extreme poverty.
He also stated that to help address the devastating economic and social consequences of the pandemic, Africa needs more than $200 billion and an acrossthe- board debt standstill for African countries unable to service their debt, followed by targeted debt relief and a comprehensive approach to structural issues in the international debt architecture to prevent defaults.
Guterres further said that in recent years, economic growth in Africa has been strong, the digital revolution has taken hold and agreement has been reached on a free trade area.
The U.N. chief said in a video message launching a policy report on “The Impact of COVID-19 in Africa” that countries on the continent have responded swiftly to the crisis, and as of now reported cases are lower than feared with more than 2,500 deaths.