Corona Virus and the Economy of Nigeria. (a Study of Lagos State, 1999-2020)

Abstract of Corona Virus and the Economy of Nigeria. (a Study of Lagos State, 1999-2020)

This study examined coronavirus and the economy of Lagos State.

Qualitative method was used in the study, which involves the use of secondary data for the source of information. The secondary sources was through journals, reports, articles, newspapers, treaties, textbooks and various statutes which was obtained from online sources and as well as data from Nigeria Center for Disease Control (NCDC) for the period of 1999-2020.

The result revealed that; corona virus has effect on business activities of the manufacturing sector in Lagos State; corona virus has influence on business operations of the banking sector in Lagos State; corona virus has affected the business activities of health care sector in Lagos State; corona virus has impact on the commercial activities of the agricultural sector in Lagos State; the measure put in place to curtail the control of the virus spread are high.

The study concludes that coronavirus has negative impact on the economy of Lagos State and Nigeria as a whole. The study further recommended that policy makers should pay adequate attention to the social, structural and economic reform of the country; the federal government and relevant health agency should ensure that the health sector in the country is given adequate attention in the area of infrastructural development, health facilities, building of contemporary hospitals and clinics, research and development, and the employment of competent and skilled health personnel; the federal government of Nigeria should implement fiscal and monetary stimuli package; the government should aid the farmers with modernized merchandized in order to aid the smooth cultivation and harvesting for farm produce; the health sector should be adequately funded with contemporary equipments in order to meet international standard; it is high time the health sector of the country be given top priority by relevant agencies in order to promise a sound health services to the citizens; both private and public stakeholders as well as NGOs to invest heavily in the health sector system of the country.

 

Chapter One of Corona Virus and the Economy of Nigeria. (a Study of Lagos State, 1999-2020)

Background to the Study

Internationally, the search for a vaccine to combat Covid-19 continues, as no single economy of the world is spared from the fall-out from COVID-19 outbreak, (Daud & Leila, 2020). The international community is at the moment experiencing one of its most several health crises in human history, coronavirus or COVID-19. World Health Organization (WHO, 2020), states corona viruses as a large family of viruses that are causing illness, like, common cold, and severe diseases of Middle East Respiratory Syndrome (MERS-CoV) and Severe Acute Respiratory Syndrome (SARS-CoV). The COVID-19 or Coronavirus disease is a new strain that was discovered in December 2019 and hasn’t been previously identified in humans (Epidemiology Working Group for NCIP Epidemic Response, 2020; Bai, Wang & Zhou, 2020). As a result, the coronavirus is a respiratory virus that spreads through droplets from an infected individual coughs or sneezes or droplets of saliva or discharge from the nose. It is believed in medical sciences that corona viruses are zoonotic, that is to say, they were initially transmitted from animals to people, (CDC, 2019; ECDC, 2020).

The World Health Organization (WHO) declared the novel human coronavirus disease (COVID-19) outbreak, which began in Wuhan, China on December 8, 2019, a Public Health Emergency of International Concern (PHEIC) on January 30, 2020 (WHO, 2020). With over ten million cases across the world as of July 7 (2020): United States (over two million cases), Brazil (over 700,000 cases), Russia (over 500,000 cases), Italy (over 250,000 cases) and in Africa, South Africa (over 54,000 cases), Egypt (over 38,000 cases), and Nigeria (over 30,000 cases) bear the greater brunt. Following this WHO declaration, the Coronavirus Preparedness Group was constituted on January 31 in Nigeria (a country with 36 states and a Federal Capital Territory [FCT]). World Health Organization (WHO) categorized Nigeria as one of the 13 high-risk African countries with respect to the spread of COVID-19. Nigeria is as well among the vulnerable African nations, given the weak state of the healthcare system in the country, (Marbot, 2020).

In Nigeria today, there are still communities without healthcare facilities, apart from the scarcity of health workers, (Amzat, 2020). The projection is that Nigeria could bear the final burden of the COVID-19 pandemic if the countries do not institute effective measures to combat the pandemic. Sociologically, the pandemic has led to international social disruption by restricting global social relations. The idea of “social distancing” negates regular social interaction, which is the bedrock of human society, (Amzat & Razum, 2020). A contagious disease of global health importance as well disrupts the usual norms of close physical contacts since the disease is been transmitted through contact with persons who already contracted the disease. COVID-19 deglobalizes the world in terms of human migration with airports closure, and social events (sports, festivals and the like) postponed till further notice. The “stay-at-home” campaign and proscription of (large) social gatherings imply that social interaction has been restricted, (Daud & Leila, 2020).

As the world looks to eliminate COVID-19 pandemic with no result in sight. The world economic outlook is fragile, particularly developing countries like Nigeria which is struggling to find her fit; the global GDP growth is projected to be 2.5 percent in 2020. As of 20th August, 2020, Nigeria has 50,964 confirmed cases, with 992 deaths and 37,569 recoveries. The commercial capital, Lagos, with 17,327 cases, and the Federal Capital Territory, Abuja, with 4,881 cases, are the epicentres of the crisis, (Punch, 2020). Restrictions in Lagos and Abuja, as well as Ogun State, have put close to 30 million people in lockdown. All schools, universities and businesses in these areas and as well as other states in the country remained closed for about 30days, with the exception of hospitals and stores selling essential items such as groceries and medicine. All airports in the country were closed to international flights until at least 23 April 2020.

The crash in the price of oil has exposed major fault lines in the Nigerian economy. Since independence in 1960, the Federal Government has consistently depended on crude oil exports as its major source of revenue, leaving its finances vulnerable to oil price shocks. Before the COVID-19 outbreak, the latest data show government health spending per capita was relatively low, standing at $27.84, far below the comparative figures in other major ECOWAS economies, Ghana and Côte d’Ivoire. However, external spending per capita was also a sizeable contributor to total spending per capita, standing at $21.01. Low overall spending means the health system is likely to be overwhelmed, and, without additional funding, demand for health services, in particular critical care services, will far exceed capacity, (Zubair & Sanusi, 2019).

With crude oil exports generating 76% of Nigeria’s foreign exchange (and 11.8% of GDP), the fall in the price of oil by 60% since the start of 2020 to below $30 a barrel has dramatically reduced export revenues. It is predicted that the reduction will cut export revenues by $5 billion (1.3% of GDP) over three months and $8.6 billion (2.2% of GDP) over six months, (Femi, Adeyemi, Sulaimon, Benjamin, & Bankole, 2020). Across the year, it is projected that the value of exports will fall by 34% due to the oil price shock alone. The International Monetary Fund has cut its projection for Nigeria’s 2020 economic growth to 2% from 2.5% due to plunging oil prices stemming from the coronavirus outbreak. The West African nation is the continent’s biggest producer and depends on crude for 90% of its exports

Other sectors of the Nigerian economy have as well been affected. Cocoa, which dominates the agricultural export sector, has seen prices fall by approximately $292/tonne. Meanwhile, Nollywood, the second largest source of jobs in the country, employing around 1 million people, is facing challenges. Its major production center, Lagos State, has been put on lockdown and cinemas have been ordered to close operation, which will have major knock-on effects on employment, (WHO, 2020). The COVID-19 crisis has led to falling foreign exchange reserves and major pressure on the Nigerian currency, the Naira. Stock markets are as well down. The latest inflation rate in Nigeria for February 2020 was 12.2%, a two-year high, with food inflation at 14.9%. Moreover, Nigeria’s GDP growth implications are worrying and much depends on oil prices. Assuming oil prices stay low, in a contained outbreak GDP growth is likely to decline from 2.5% to -3.4% in 2020.

Further, the restrictions on the movement of people and border closures as well decline the exports of other commodities. With, countries of the world closing their borders and global supply chains for exports have been disrupted. It is expected that exports of countries with devaluing currency as a result of the fall in the price of commodities (Nigeria), will become more affordable, but the limited markets for non-important goods and services crowed-out the envisaged positive effect on net exports, (Femi, Adeyemi, Sulaimon, Benjamin, & Bankole, 2020). Another issue is the floating of the Naira; the Nigerian exchange rate policy reform is an overvaluation of currency that is fixed exchange rate.

Statement of the Problems

COVID-19 is a humanitarian crisis. A lot of people, families, and businesses across the world have suffered greatly from the unexpected crisis which has wreck so many activities globally. Its profound effects have been experienced the world over in the social and political environments and as well on the global business economy, (WHO, 2020). Nigeria is currently experiencing the brunt of corona virus outbreak as the country is in a partial lock down. The corona virus outbreak has resulted into a negative impact on many businesses across the country especially in states where there was total lockdown such as Lagos State, Ogun State, Abuja, among others. As a result of the corona virus outbreak, majority of business activities across several sectors of the economy are experiencing supply chain distortions due to non-regular supply of raw materials and intermediate goods, loss of revenue and lack of liquidity to continue business operations.

The year 2020 has been quite challenging for the international environment, as a result of the spread of corona virus, otherwise referred to as COVID-19, and the resultant effect has led to an unparalleled health crisis and collapse of economic activities among countries across the world, (John, Sarah & Liang, 2020). Furthermore, the corona virus outbreak has had unprecedented and serious impacts on all aspects of human endeavours to how individuals work, communicate, trade, and live. The economic effects of the corona virus outbreak swiftly became obvious and several businesses both small and large scales have been on the front lines, with employees and customers staying at home, while other businesses have retrenched some of their workers, others have collapse, (Chukwuka, & Amara, 2020).

The COVID-19 crisis affects all components of aggregate demand. The fall in household consumption in Nigeria will stem from federal government lockdown order, thus causing consumers to spend mainly on essential goods and services; 2) low expectations of future income, particularly workers of gig economy sector which are engaged on a short-term, and the working poor of the informal sector of the economy; and 3) the loss of wealth and expected wealth with a decline in assets such as stocks and home equity, (Thelma, 2020). The state governors have again imposed a lockdown of four weeks in all states of Nigeria including Abuja. Nigeria is more of a gig economy and a large informal sector that contributes 65percent of economic output in Nigeria. The lockdown has reduced the consumption commodities in general, and income-generating capacity of the gig and informal sector of the economy, thus reducing consumption expenditure generally, (Marbot, 2020).

The investments of corporate companies and individuals have drastically reduced as a result of the uncertainties that come with lack of knowledge about the duration of the pandemic outbreak, the effectiveness of fiscal policy measures, and the reaction of economic agents to fiscal policy measures, and negative investor believes causes turbulence in capital markets globally, (Temple, 2020). Importantly, the corona virus outbreak has led to a massive decline in stock prices, as the Nigerian Stock Exchange experienced its worst performance ever, since the 2008 financial crisis, which has eroded the wealth of investors, (Thelma, 2020).

Although, the impact of corona virus outbreak is felt across all sectors of the Nigerian economy, however, little or no research has been carried out in this study which is a gap that this study will fill, and so prompted the researcher to conduct this study. However, based on the above backdrop, this study shall examine the effects of covid-19 on the economy of Nigeria, using Lagos State as the study case.

Research Objectives

The primary objective of this study is to investigate corona virus and its impact on the economy of Nigeria, a study of Lagos State. However, the specific objectives of the study will be to:

1. examine the effect of corona virus on business activities of the manufacturing sector in Lagos State
2. find out the influence of corona virus on business operations of the banking sector in Lagos State
3. determine how corona virus has affected the business activities of health care sector in Lagos State.
4. to ascertain the impact of corona virus on the commercial activities of the agricultural sector in Lagos State.
5. to determine the measure put in place to curtail the control of the virus spread.