The Coronavirus Disease (COVID-19) pandemic has launched the global community into a health crisis of an unanticipated magnitude, with far-reaching socio-economic consequences. The vulnerability of the Nigerian economy to global shocks and the country’s suboptimal level of preparedness and response to epidemics was exposed by the associated economic and health impact of the COVID-19 pandemic. Although a considerable transformation has been witnessed in the country’s health security system in the last few years, the impact of the crisis shows that the country’s health security system needs to be further strengthened to increase its capacity to adequately prevent, detect, control, and manage epidemics and pandemics. Building a more resilient health system including the health security system in Nigeria will require strengthening health security policy, institutional and financing frameworks.
Although many countries have witnessed various levels of economic and health systems devastation, Nigeria is particularly susceptible to the impacts of the outbreak due to some underlying social and economic issues, which include fragile macroeconomic indices and weak health systems. Also, high population density in some major cities which makes physical distancing difficult, limited access to basic social amenities and hygiene materials in some areas, information gap, and low adherence to disease control protocols contributed to Nigeria’s susceptibility to the impacts of the crisis. The impact of the COVID-19 pandemic on the economy was triggered by shocks in global supply chains due to border closure in many countries; oil demand shocks resulting in a sharp decline in oil prices; borrowers’ inability to repay loans thereby leading to increased bad debts in the banking sector; and a plunge in the stock market indices occasioned by pulling out of funds by investors.
The COVID-19 pandemic placed an excruciating financial burden on many Nigerians as unemployment, which was already a major cause for concern before the pandemic, was worsened by the lockdown imposed in some parts of the country at the onset of the pandemic. This made many workers furloughed or laid off, and some business outfits shut down due to low or no patronage and the lack of profit. A survey conducted by the National Bureau of Statistics (NBS) and the World Bank showed that over 80% of households had one form of work or the other before the pandemic, but this figure dropped to 33% among urban households and 47% among rural households between April and May 2020 (Figure 1).[i]
Figure 1: Household Employment Rates (pre-pandemic and April-August 2020)
Source: National Bureau of Statistics and World Bank
Another study revealed that 89.5% of households did not work in April/May 2020 for reasons related to the COVID-19 pandemic which reduced to 64.4% and 47.8% in June and July 2020 respectively, when the lockdown was eased.
The informal sector accounts for about 60-65% of the Nigerian economy and a substantial number of the informal workforce relies on a daily wage for survival, therefore, a significant proportion of Nigerians suffered a huge financial burden due to the restriction of movement imposed at the onset of the pandemic. According to the NBS, 81.2% of households experienced a reduced or total loss of income in April and May 2020 when the lockdown order was imposed. Also, many households that rely on remittances were greatly affected by the reduction in remittances occasioned by the lockdown imposed in many countries.
Although the inflation rate in Nigeria was already on an upward trajectory before the pandemic, the enforcement of the lockdown and the restrictions in the movement of goods across international borders led to the obstruction of supply chains and a consequent increase in prices of essential commodities. A progressive increase in inflation rates was therefore reported as 12.13% to 12.56% from January to June 2020 as against a range of 11.22% to11.37% reported between January and June 2019. While there has always been a gap in local food production in Nigeria which is usually augmented by food importation, alteration in the food supply chain, coupled with the depreciation of Naira resulted in the rise of food prices, making food inflation rise from 14.7% in December 2019 to 15% in April 2020. This plunged additional 3.65 million people into food deficiency with about 68%of people experiencing moderate to severe food insecurity as of August 2020.
As Nigerians counted their losses during the pandemic, the country’s macroeconomic situation was not spared in the devastation that accompanied the COVID-19 crisis. As a result of the slowdown in economic activities after the country resorted to a lockdown in April 2020 and the sharp drop in oil prices due to a fall in global demand for oil, a sharp decrease in GDP growth was inevitably experienced. The NBS estimated that Nigeria’s real GDP contracted by 6.10% in Q2 2020, in contrast to the marginal growth of 1.87% and 2.12% recorded in the previous and corresponding quarters of 2019 respectively(Figure 2). Also, the economy generally retracted with a negative growth balance of -4.3% throughout 2020, compared to the 2.2% growth reported in 2019.[ii]
Figure 2: Real GDP Growth Rate in Nigeria (Q1 2019 – Q2 2020)
Source: National Bureau of Statistics (NBS)
Before the pandemic, many oil-producing economies were already confronted with low demand due to the build-up in crude oil supply resulting from the oil price war between Russia and Saudi Arabia. Consequently, Nigeria’s oil production was pegged at 2.18 million barrels per day with a budget benchmark price of $57 per barrel. With the advent of the pandemic, oil prices plunged due to the shutdown of global supply chains. Consequently, the aggregate demand for oil was suppressed, the oil price benchmark was reduced to $30 per barrel, and crude oil production was reviewed downwards to 1.70 million barrels per day. The resultant effect was the reduction in government revenue thereby weakening the country’s fiscal position. In response to this trend, the government borrowed more funds to finance the budget; worsening the country’s debt position. Also, the national budget for the 2020 fiscal year was reviewed from N10.50 trillion to N10.80 trillion[iii],[iv]to respond to the COVID-19 crisis amidst dwindling revenue. Therefore, a weak budget performance was recorded in the first quarter of 2020 (97.6% performance for expenditure, 49.7% performance for revenue) as funds allocated to capital expenditures were diverted to other areas not initially budgeted for to accommodate expenses for COVID-19 response activities.
Since epidemics are inevitable because of climate change effects and continuous interaction of humans and animals, the capacity of the country to adequately prepare for future epidemics to prevent the country from experiencing this magnitude of havoc needs to be strengthened. To achieve this, there is a need for the following:
- Governments at the national and sub-national levels in Nigeria need to invest adequate resources to strengthen the legal, policy, and institutional frameworks for robust, effective, and sustainable epidemic preparedness and response in the country.
- Considering the centrality of accountability in improving the efficiency of spending, it is pertinent to operationalize extensive accountability and transparency mechanisms for epidemic preparedness and response policy and financing at all levels.
- Access to vaccines for COVID-19 and other vaccine-preventable diseases should be improved by establishing local manufacturing of vaccines, increasing investment in procurement and roll-out of vaccines, and dispelling miscommunication among the populace to promote vaccine uptake.
By Kafayat Abiodun Alawode
DGI Consult Limited, Abuja
[i] NBS (2020). Labor Force Statistics: Unemployment and Underemployment Report (Q2 2020) Abridged Labour Force Survey under COVID-19
[1i] Nordea (2021) Nigeria: Economic and Political Overview. The economic context of Nigeria. https://www.nordeatrade.com/en/explore-new-market/nigeria/economical-context#:~:text=Africa’s%20leading%20economy%2C%20Nigeria%20%2D%20in,largest%20economy%2C%20by%20GDP%20volume
[iii] Andam, K., Edeh, H., Oboh, V., Pauw, K., and Thurlow, J. (2020a). Estimating the economic costs of covid-19 in Nigeria. International Food Policy Research Institute (IFPRI), 63.
[iv] Olurounbi R. (2020) Nigeria: If you thought 2020 was bad, brace yourself for 2021. The Africa Report. https://www.theafricareport.com/48706/nigeria-if-you-thought-2020-was-bad-brace-yourself-for-2021/