As the global community battles the Coronavirus disease otherwise known as Covid-19 that is currently ravaging the economy of over 100 countries, the Lagos Chamber of Commerce and Industry (LCCI) has said that the Covid-19 outbreak has dealt a severe blow to the global economy warning that if the spread is not curtailed at least in the near term, the global economy might slip into recession.
The President, LCCI, Mrs. Toki Mabogunje who gave this warning in a remark at the Forum on the implications of Covid-19 outbreak on the Nigerian economy, held on Tuesday in Lagos observed that the disease had disrupted and was still disrupting businesses, economic and financial activities across the globe.
Mabogunje noted that “businesses are shutting down operations, factories are closing, schools are on recess, conferences, sporting events, football matches, music concerts and business meetings have all been suspended, countries are imposing wide-range travel restrictions.”
“Trade are on hold, global airlines have cancelled flight to affected areas, global equities and commodities markets have been severely affected, oil prices have been hit hard due to drastic cut in global oil consumption, compounded by the on-going price war between Saudi Arabia and Russia. Putting these together, the outlook for the global economy looks bleak”, she added.
She pointed out that with crude oil trading below the Nigerian national budget benchmark of $57 a barrel in the international market for the past seven weeks, participants should seek answers to the following questions during deliberations; are we at the risk of another recession? Will the continued depletion of external reserves constrain the ability of the Central Bank to support the naira? Are we at the risk of another devaluation? What will be medium term impact on Nigeria-China bilateral trade relations? How would the Federal Government mobilize revenue to finance capital expenditure? What is the government doing as regards revenue diversification away from oil? How do we revive investor’s confidence in the economy? How do we make the economy less vulnerable to subsequent global shocks?
Tracing the origin of the disease, she said, “Distinguished Ladies & Gentlemen, as you may be aware, coronavirus codenamed Covid-19, was first identified in Wuhan, Central China, in December 2019. It was declared a global pandemic by the World Health Organization (WHO) on March 11, 2020. According to data sourced from WHO, over 174, 000 cases of the infection have been reported in around 140 countries and territories. More than 6, 600 persons have died from the disease and about 77, 000 have recovered as at Monday, March 16, 2020.
“The virus has spread across continents from mainland China, its roots, to Asia, Europe, America and Africa. So far, there has been one confirmed case of the virus in Nigeria. The victim has recovered and would soon be discharged. The effort of the Federal Government and the Lagos State Government to curtail the spread of the disease is highly commendable.”
Presenting a paper titled, “Impact of Covid-19 Outbreak on the Nigerian Economy”, Partner Tax, Regulatory and People Services, KPMG in Nigeria, Ajibola Olomola if Covid-19 continues to spread, the global economy could be hit with recessionary shocks.
On the impact of the disease on the global economy, Olomola pointed out that the crisis had given rise to both challenges and opportunities with unforeseen events playing a big role in the transformation and reshaping of the retail industry.
According to him, due to the outbreak, many brick and mortar retail businesses, shopping malls and equipment stores have taken a considerable hit in China noting that “on the other hand, emerging community shops and online shops are increasing their trading volume and attracting a mass of new customers.”
He however listed response to the crisis to include; improve supply chain network, investment in digitalization, automation and artificial intelligence, tax relief and loan preferences policies for enterprises e.g. reduced taxes for small and medium sized enterprises, extension of payment period for social insurance.
X-raying the impact of Covid-19 on the Nigerian economy, Olomola recalled that oil price is currently $32 per barrel albeit the dramatic dip in oil is not entirely caused by the pandemic even as he submitted that the Nigerian National Petroleum Corporation (NNPC) has confirmed that 50 cargoes of crude oil were yet to find landing and 12 stranded cargoes of Liquefied Natural Gas have yet to find buyers as the spread of Covid-19 has dampened demand from China and European refiners.
He maintained that if Covid -19 outbreak persists in short and medium terms, Nigeria should expect decline in oil revenue due to reduced demand from key foreign customers, fall in FX reserves as a result of a fall in oil export revenue which might impact FX stability, cost of import from key trading partners such as Italy and China are likely to spike resulting in a cost push inflation, rate of unemployment may increase due to slowdown in economic activity, potential fall in tax revenue and soaring debt which could impact developmental outcomes and potential decline in aggregate GDP due to slowdown in economic activity.
He concluded by saying that Covid-19 pandemic is increasingly putting pressure on the world economy as the momentum across key economies is grinding to a halt noting that from a global perspective, governments and corporates were increasingly devising coping mechanisms both structurally and functionally to deal with the impact of the pandemic.
“In spite of the obvious headwinds, confronting the Nigerian economy (crude oil slump, rising debt level etc), the country needs to prepare for the knock-on effect of the Covid-19 on the Nigerian economy”, he submitted.
Photo: LCCI President, Mrs. Toki Mabogunje.
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