Nigeria may go into economic recession if the coronavirus pandemic persists for months and with the potential loss of N2.27 trillion worth of trade and significant job losses across sectors.
Verraki Partners, a business solutions company for Africa, which revealed this in a report titled: “COVID-19 and Nigerian Businesses: From Survival to Thriving in a Changing World,” stated that the social, economic and financial challenges of the COVID-19 will lead to a global economic recession in 2020 and potential lost output of $2.7 trillion.
According to the firm, employee productivity is expected to drop especially for companies that were not designed for and have not made remote working a part of their processes.
While the global challenge persist, Verraki Partners, said business leaders should expect different recovery speeds for different sectors and locations, adding that leaders must also be flexible to spot and pursue the opportunities presented by this crisis including reserving 90 minutes (10% of 15 hour day) per day for work focused on preparing the organisation for the future.
Furthermore, the six-pages report made available to The Guardian, yesterday further explained that there has been a quake on the world economy caused by the Severe Acute Respiratory Syndrome coronavirus2 (SARS-CoV-2). It said the coronavirus disease 2019, code name COVID-19, has plagued nations, leading to over 600,000 cases and an excess of 30,000 deaths globally as at March 28.
While nations are struggling to weather the storm, the report disclosed that there has been collapse in national development indices of Nigeria.
Specifically, it noted that four of Nigeria’s top trading partners and import sources including China, USA, Spain, and the Netherlands, which accounted for an estimated 45 per cent of the country’s imports have implemented lockdown strategies to contain the spread of COVID-19.
According to it, the attendant effect on trade, if this continues for another two months, “is a potential N2.23 trillion loss from Nigeria’s top five import nations which would lead to domestic scarcity. From the top five export figures, another estimated N2.27 trillion worth of exports which should drive economic activities will also be lost to closed borders, social distancing, lockdown in destination nations, and lockdown in Nigeria.”
Verraki Partners noted that while the exchange rate will be significantly challenged from the loss of exports proceed, this pandemic will be responsible for the attendant decline in revenues, reduction in profits, and erosion in asset value for non-essential services, consumer-facing, and export-dependent firms, which may then have to downsize.
Furthermore, it stressed that market scenarios are likely to get worse if the naira is devalued, as the Central Bank of Nigeria has set a $30 billion foreign reserves threshold for devaluation.
According to it, with a 19.83 per cent drop from $45.175 billion in June 2019 to $36.221 billion as at March 5, 2020, amidst a falling oil price, the nation’s reserve is dangerously close to this threshold and it is not surprising that the CBN has made an adjustment of the Naira/USD exchange rate to N360 per dollar for bank transactions from prior N306, and to N380 per dollar in the I&E window from prior N365.
The report noted that there has been significant drop in the populace purchasing power. On this, the report said although only 21 per cent of the 99.6 million adult population in Nigeria have savings, “this period will particularly be a trying time for about 78 million Nigerians who are without savings.”
According to it, most of these people wait on the monthly salary, daily income, or erstwhile generous relatives who remit money home. It said that has been and will be some panic buying and stocking “but overall, there is likely to be a decline in discretionary spending and producers of luxury and nonessential goods and services will need to brace up for the times ahead.”