By Marcel Okeke
Without any equivocation, the covid-19 that is practically ravaging the entire world, has pushed the global economy into topsy-turvydom. Every projection or estimation has been messed up; the only certainty now is uncertainty.
Coronavirus (covid-19) which started in a Chinese city (Wuhan) in the last days in 2019, is now overwhelming the scientific and medical sophistication of the most developed of countries on earth. In fact, in those climes, covid-19 has practically shut down their economies; just as people are losing their lives to the virus in droves.
Global supply chain has collapsed irretrievably, as countless production lines and factories are being shut down. People are being compelled to “work from home”. Global energy consumption has plummeted, reflecting in nosedive of demand for crude oil and other commodities.
In consequence, the price of oil has crashed: dropping from about US$70 per barrel early this year to less than US$30 per barrel today. It could still crash further or improve, depending on how soon the covid-19 is contained, among other factors.
Today, even against the rules of AITA and global trade protocols, many countries (developed and developing) have banned airplanes from certain places from landing in their domains. Notably, the US has stopped flights from Europe, UK, Ireland, etc, from landing in the country for a period of 30 days, in the first instance. Many other countries are towing the US line.
Social life has been put on hold in virtually all nations of the world; in most places, even schools, places of worship and recreational facilities are shut down. Tourism is dead, hospitality business, like others, is on ‘suspension’.
For Nigeria, the covid-19 scare or effect is becoming palpable by the day. Our largely oil/import-dependent economy is on tenterhooks. Anxiety is mounting. The fiscal and monetary authorities are woken from some sort of slumber, taking panic measures.
Is this the right time for effective diversification of the economy. For too long, diversification has remained a mere sing song, ordinary slogan to pull the wool over the eyes of the people, as regards economic progress. Now, the reality is here: the economy is not EFFECTIVELY diversified. Crude oil is the mainstay. Period!
Now that oil price is crashing (2020 FGN budget is based on US$57/pb) to about US$30 per barrel, what can sustain the Nigerian economy?
The other day, Africa’s richest man, Aliko Dangote, was reportedly bemoaning the state of the Nigerian economy, when he pointed out huge sums being made from Customs duties (collections). He pointed out that such a scenario underscores the massive dependence on importation, stressing that such huge collections ought to come from FIRS (tax), not Customs Service.
And so, in panic, the Debt Management Office (DMO) is already crying aloud that the country’s debt burden could become unserviceable; the FGN is suspending further borrowing of US$27.29 billion; the Central Bank is reducing interest rates payable on its facilities, etc. The 2020 FGN budget will soon be reviewed (downwards) to factor in the drying income flow from oil and sundry sources.
And we ask: wither the Presidential Economic Advisory Council (PEAC) and their prescriptions for the Nigerian economy? Now, methinks, is the best of times, to put to use, the ‘brains’ of the PEAC members. Let the President summon them to an emergency meeting, and come up with actionable ideas.
The clock is ticking, and the economy is heading for the precipice. And no austerity measures can guarantee any quick turnaround. The extant environment is alreaddy too chocking; the next (lower) level could lead to outright asphixiation.
*Marcel Okeke, is a consulting economist and can be reached at (firstname.lastname@example.org)