The IMF has projected that Nigeria’s economy will recede by 3.4% in 2020 as a result of the COVID-19 pandemic that has disrupted global supply chains. This would be the worst recession in 30 years, and the second recession in five years, following closely after a negative economic growth of 1.51% in 2016. In 1987, Nigeria’s economy receded by -10.87 and -0.6 in 1991. It is projected that the Nigerian economy will rebound by 2.4% in 2021. This comes as the International Air Transport Association (IATA) says reduced demand caused by the coronavirus outbreak has put 91,380 jobs at risk in Nigeria’s aviation industry. The association said travel restrictions imposed by several countries to control the spread of the coronavirus have resulted in fewer passengers and revenue loss. “In Nigeria, it’s 3.5 million fewer passengers, resulting in a $0.76 billion revenue loss, risking 91,380 jobs and $0.65 billion in contribution to Nigeria’s economy,” the association said in a statement. In a sign of further economic trouble, the monthly allocation from the federation account to the three tiers of Nigeria’s government had a shortfall of ₦413.3 billion within a two-month period of January and February 2020. This stands against the projected monthly Federal Account Allocation Committee’s disbursements of 888.5 billion based on the financial assumptions underpinning the 2020 Appropriation Act. About 20 million jobs are at risk in Africa as the continent’s economies are projected to shrink this year due to the impact of the coronavirus (COVID-19) pandemic, according to an African Union (AU) study.

The FG has sent a new budget proposal to the National Assembly for consideration in view of global economic realities as a result of the COVID-19- pandemic. The new proposal has the reduction of the 2020 estimated budget from ₦10.594 trillion to ₦10.276 trillion. It also reduces the oil benchmark from $57 per barrel to $30 per barrel while the oil production volume was reduced from 2.17 million barrels to 1.70 million barrels. The exchange rate increased from ₦305 to ₦360 to a dollar. Meanwhile, the FG slashed ₦312 billion from projects approved in the 2020 budget in view of the reduced revenue and oil prices as a result of the pandemic. The amount represents a cut of 20% off capital projects. The national assembly and judiciary will determine the cuts to be made to their allocations, according to The Cable. Last month, the minister of Finance, Budget and National Planning, Zainab Ahmed announced the FG’s measures to tackle the consequences of the falling prices of crude oil at the global market, including reducing the country’s ₦10.8 trillion 2020 budget by ₦1.5 trillion. The World Bank’s Board of Executive Directors excluded Nigeria from a $1.9 billion fund designed for emergency support operations for developing countries around the world, using a dedicated, fast-track facility for COVID-19 (coronavirus) response. In another development, Fitch Ratings has downgraded Nigeria’s long-term foreign-currency issuer default rating to ‘B’ from ‘B+, which means the outlook is negative. The downgrade and negative outlook reflected the aggravation of ongoing pressures on Nigeria’s external finances following the recent slump in oil prices and the pandemic shock.

Nigeria’s President Muhammadu Buhari has extended the lockdown in Abuja, Lagos and Ogun states for another 14 days as cases of coronavirus in the country continue to rise. The president said, in a national broadcast on Monday that the country’s approach to the coronavirus pandemic remains in 2 steps; to protect the lives of Nigerians, residents living in the country and to preserve the livelihoods of workers and business owners. Buhari said that it was necessary to extend the current restriction of movement in Lagos, Ogun States and the FCT for another 14 days effective from 11:59 pm on Monday, 13 April after careful consideration of the briefings and Report from the Presidential Task Force on COVID-19. Nigeria’s most populous city Lagos and the country’s capital Abuja, according to the president, accounted for over 71% of the confirmed cases of coronavirus in Nigeria as at Monday. There are currently 323 confirmed cases in the country and ten people have died from the virus while 91 people have been discharged. As at when the lockdowns were announced on March 29, the country had 97 confirmed cases. The restrictions announced do not apply to hospitals and stores selling essential items such as groceries and medicine.

Chad has issued Nigeria and Niger a 22 April ultimatum to reoccupy territories Chadian troops seized from Boko Haram because it will withdraw its forces from those locations by that date. Idris Deby, president of the north-central African country which is a member of the Multinational Joint Task Force against the terrorist groups; Boko Haram and Islamic State’s West Africa Province, said he had warned the two countries that his forces would move out of the bases seized from the jihadists by the ultimatum, regardless of whether their armed forces moved in or not. Deby told national TV in Arabic that his troops deployed to fight jihadists in the Lake Chad region and the Sahel will no longer take part in military operations outside its national borders. Going by the Chadian president’s position, there are cracks in the coalition, which he said was the outcome of poor commitment to the war against insurgency by other coalition partners. Derby had led his troops in a counterattack that decimated about 1,000 Boko Haram fighters, prompting the leader of the terror group, Abubakar Shakau, to appeal to his fighters not to be deterred by the onslaught against them by Chadian troops. The operation was launched after 98 Chadian soldiers were killed in a Boko Haram raid on a base at Bohoma in the Lake Chad marshlands on March 23, the biggest one-day military loss in the country’s history. The four countries bordering the lake – Nigeria, Chad, Niger, and Cameroon – as well as Benin, had in 2015 set up the MNJTF, to fight Boko Haram. This comes as the Nigerian Army has suspended approvals for voluntary retirement requests from soldiers amidst the fight against various terrorist groups in the country. According to an internal memo, the decision was taken due to the recent increase of applications at the Army’s headquarters by the soldiers to quit service. T

Commentary

  • There is a broad consensus that the Nigerian economy will enter into a recession by the end of Q2. The debate is on the scale of the dip and the length of time it will take to exit the recession. The economic impact of COVID-19 will reverberate for a while after the pandemic has been contained. These will be dependent on how long the lockdown persists in Nigeria and across the world. At this time, global demand has tanked and many of the global industries are completely shut down. Perhaps even worse, supply chains have been completely disrupted, and an increasingly likely reaction by many countries after the pandemic is over will be to look inward and take a step back from globalisation. Due to the significant drop in the global oil prices, the monthly disbursements by Nigeria’s FAAC had declined to ₦716.3 billion and ₦647.4 billion in January and February, respectively, and the Minister of Finance has warned that disbursements could decline to below ₦400 billion over the next few months. The CBN has responded by devaluing the Naira to boost revenues, but this will have minimal impact. Another significant factor for the economy is consumer spending which will likely fall significantly as diaspora remittances decrease, workers cannot earn daily wages and contract workers are laid off. Nigeria’s fiscal position is already precarious, and with even less fiscal buffers than it had going into 2016, a recession is only a matter of time.
  • We believe each of the measures in the new budget proposal is absolutely necessary. Whether they will be sufficient in the face of the country’s economic realities remain to be seen. For example, whilst Nigeria has cut down production to 1.70 million bpd, the recently agreed OPEC deal has restricted Nigeria to a 1.4 million bpd quota, which the country has agreed to. On the monetary side, the CBN has made adjustments to the value of the Naira but the market is pricing in additional devaluation. Also, while the CBN has devalued from ₦305 to ₦360 to a dollar, the parallel market is already selling at ₦419 to a dollar leaving a ₦59 arbitrage window per dollar. This is projected to rise. We, therefore, believe that a float, as opposed to this controlled rate mechanism would have been more effective. These policy choices do not exist in a vacuum; rather, they create the context for subsequent policy environments. Intensifying external pressures raise risks of disruptive macroeconomic adjustment given Nigeria’s precarious monetary and exchange rate policy setting and lack of fiscal buffers. On the fiscal side, the FG’s response has been poor, due to lack of financing, corruption and lack of transparency. This poses serious threats to the country as tensions flare and hunger spreads across the land. We believe the full extent of the tough choices based on the realities on the ground should be made now, to ensure we do not waste this crisis.
  • The extended lockdown was not unexpected given the continued rise in the number of COVID-19 cases in the country. However, the realities of the daily lives of most Nigerians fly in the face of an unduly prolonged shutdown. Only 37% of Nigerians have any discretionary income left after spending on food according to an SBM study last year. Many Nigerians subsist from paycheck to paycheck or on the proceeds of small-scale trading, much of which is daily income. Most businesses in the country also live from invoice to invoice, and like the individuals do not have significant reserves to weather long periods of little or no revenue. Already, large parts of Abuja and Lagos have continued to engage in daily economic activities even if at a reduced level. All these taken together mean that an extended period of lockdown is unlikely to be sustainable – people will be forced to choose between inevitable hunger and possible infection, a choice which is sadly very obvious. With this in mind, we believe that the government should plan with the mindset that people in these states will be unable to continue beyond the end of this new 14-day lockdown extension and work out a containment model for the COVID-19 pandemic that will not require a full shutdown. It is inevitable.
  • The MNJTF coalition which was revived in 2015 to fight Boko Haram (it was originally set up in the 1990s to fight cross-border banditry) has lost the momentum it built between 2015 and 2017, mostly as a result of an apparent loss of commitment by Nigeria which had pledged to pick up most of the tab for the forces. This made the Force incur losses against the terrorists, such as the attack on its HQ in Baga, a town on the shores of Lake Chad, in December 2018 which led to a heavy loss of lives and equipment. In addition, some of the countries within the MNJTF are also dealing with their internal security threats, such as Islamist militants in the south-western part of the Niger Republic (which has necessitated the formation of a G-5 Sahel Force along with Mauritania, Burkina Faso, Mali & Chad, with the support of France), while Cameroon which is dealing with separatist tensions in its restive English speaking regions. President Deby’s ultimatum in the wake of his country’s recent successes which was accompanied by a PR blitz is bound to put pressure on the countries to get into action. For Nigeria, the timing comes just as it receives a new delivery of military vehicles including tanks & howitzers, and the declaration by Tukur Buratai, the Army chief, that he was going to be stationed in the North East until Boko Haram is defeated (not his first time making such a declaration). A massive ground assault on the terrorists is very likely to get underway in the coming weeks.