The Coronavirus pandemic as a global issue has strained the wheels of most economies of the world, leaving it almost at crashing points after a long period of economic inactivity.
Nigeria, -Africa’s most populous country, with a population of over 180 million people; also regarded as the largest economy in Africa-, faces apparent economic strife, even as fears for a looming recession deepens.
Though data emanating from the Nigeria Center for Disease Control (NCDC) does not suggest that the country is becoming a hotspot as the numbers continue to remain relatively low when compared to other countries of the world, it is the COVID-19 impact on the base of the economy; the oil sector seems to be troubling industry players and policymakers.
Speaking on the impact of COVID-19 on the country’s oil economy, one of Nigeria’s oil industry expert, CEO of NEPAS Group (a leading Company in the Design, Engineering, Construction and Maintenance of Facilities, Plants and Terminals in Nigeria), and founder of Marine Diesel Supplier Association of Nigeria (MADSAN), Mr. Jide Afolabi said;
“When the global pandemic was announced, countries began to lockdown, deserting cities and towns, as well as grounding inter and intra air travels heaping heavy losses on oil-producing countries including Nigeria. At the time ships conveying oil barrels were already at the dock in the coastal cities of the customer countries. The increasing docking of oil ships led to an unprecedented glut and then drop in the oil price.”
On Nigeria’s dependency on oil, and the impact it will have on Nigeria in the COVID-19 era, he said, “The global health emergency on Nigeria is expected to leave an enduring imprint that may last till the end of the year. The last few years have not been particularly great for oil, the fluctuating oil prices have been more like a norm and daily keeps industry players like me as well as the government on the back foot. And this has exposed the need to quickly diversify the economy, by investing in human-driven economy as well as agro-allied industries.”
“The revenues made from exporting agro products, and manufacturing agro foods need to be increased. The country has all the trappings of good arable land that can grow rubber, cocoa, cassava, garlic, and sesame. To maximize the production of all these Nigeria need to invest in agro production so as to increase yield. By so doing leverage on the opportunities of the promising African Continental Free Trade Area (AFCFTA) recently signed into law, ‘ he further stated.
Afolabi also culled the past decision as responsible for today’s economic shocks. He said, “Since Nigeria became a republic, and after the exit of the British colonialists, subsequent governments have relied solely on the exportation of crude oil, with zero regards for other sources of revenue.”
He added; “The sharp drop in crude oil prices by 60% at the start of 2020, to a lowly $30 per barrel put hole in government coffers, thereby decimating what remained of the revenue required to fund the 2020 budget pegged at a price of $57 per barrel.”
Concluding, he noted; “The realistic thing to do in this situation is for government, like they have already done, will be to revisit the budget to cut it down to a more realistic figure. What would become the impact of this on the budget would be a reduction in figures. The numbers from the budget office place capital investment at risk with a cut of about 20%, privatization 50%, recurrent 25%, and the total budget cut by 1.5 trillion naira.’