This year, COVID-19 has disrupted all world economies. Nigeria was no exception. Given the country’s heavy dependence on oil export, the damage has been severe. In the summer, the government started partial lifting on lockdown, but the effects will be felt for years. The country has seen rapid shrinking or revenue, productivity, and job opportunities.
It is clear that Nigeria needs years to overcome the traumatic impact of the crisis. With the looming second wave of contagion, prospects are vague. Easing of restrictions is a trade-off between health risks and economic development. As so many residents get their sustenance from daily activities, the lockdown prompted them to look for alternative sources of income.
Effects of Lockdown Measures
President Muhammadu Buhari has acknowledged the damage. Too many residents lost their only sources of livelihood due to the lockdown, and too many businesses have gone under. The leader admits that a sustained lockdown is too expensive, and no country can afford to maintain it until vaccines are developed.
This was the rationale behind the partial lifting of the measures. Still, the effects are too vast and too deep to fade away. Virtually all sectors of the national economy have been hit hard. The rest are now operating well below their usual capacity.
Before the Crisis
Even before the pandemic, the Nigerian economy was struggling. It was already fragile, according to Zainab Ahmed, the country’s Minister of Finance, Budget and National Planning. The outbreak of COVID-19 caused disruptions of unprecedented scale.
International supply chains were broken, oil prices plunged. Financial markets were in turmoil. Personal incomes and business revenues shrunk dramatically.
Revised Economic Projections
The effects on the Nigerian economy were unsurprising. The global demand for its exports contracted. Consumer confidence plummeted and production slowed down.
The government has made amendments to its budget for 2020, and the changes are dispiriting. The projected revenue is now 60% of what it used to be. Even so, staying within the planned budget is challenging. The country has been seeking support from the International Monetary Fund, the World Bank and the African Development Bank.
Due to the crisis, the aviation industry has slashed 100,000 jobs. Since the grounding, local airlines have been losing almost N17 billion every month. The Hospitality industry has been dealing with cancellations and closure of hotels. The Entertainment sector also suffered, as companies had to halt production for the duration of the lockdown.
The energy sector has suffered substantial damage. Brent, which is the benchmark for the Nigerian grade, collapsed, losing over 60% of the value. This was exacerbated by weak demand worldwide, which also hampered recovery. As a result, in the Nigerian budget for 2020, the reference price of crude oil was decreased from $57 per barrel to $30 and later to $25 per barrel.
The Upside of the Pandemic
Despite the colossal economic damage, the crisis has also spurred the spread of remote technologies. Retailers have adopted e-commerce models to survive. Some customers have found new ways to earn a living.
The online trading segment is now booming. More and more Nigerians access the foreign exchange and the stock market through digital terminals. Brokers like ForexTime are tailoring their services to local needs.
For instance, it is now possible to open an account in the Nigerian Naira. This eliminates conversion fees. Education is free, and entry is affordable — cent accounts can be opened with just $10.
What Should Be Done
According to the Lagos Chamber of Commerce and Industry (LCCI), short-term and medium-term projections are bleak, and a severe contraction of the Nigerian economy by the end of 2020 looks certain. However, there is a silver lining. The crisis may spur structural reforms.
LCCI believes Nigerian policymakers should develop ways to diversify exports and liberalize the downstream sector of the oil industry. It is also important to privatize the government’s redundant assets, securitize its equities in joint ventures, and look at exchange rate convergence. These and other measures are necessary for recovery to begin.
What Lies Ahead
It is now obvious that recovery will be painful. As an oil exporter, Nigeria has been strongly affected by the crisis. Projections that would have looked dire years ago now qualify as positive scenarios. So, what can residents do to survive?
Opportunities like freelance work and online trading can be a lifesaver. Fortunately, there is no shortage of educational material. Anyone can learn to trade currencies, or work on the global stock market remotely. Nigerians who register accounts with trusted brokers can explore a wide array of opportunities.