The Effect of COVID-19 on the Nigerian Economy (And How It Affects You)

What started as a couple of pneumonia cases caused by an unknown virus in Wuhan, China, has exploded into a global pandemic. Coronavirus disease 2019, shortened to COVID-19, has spread to 210 countries, with over 1.9 million confirmed cases, and over 120,000 deaths.

The pandemic has caused health hazards and loss of life, and it has also caused economic uncertainties and significant disruptions in the global economy. Nigeria presently has, at the time of this writing, over 600 confirmed cases and at least 20 reported deaths (NCDC).

Even before the pandemic, Nigeria was struggling to recoup from the 2014 oil price crash. We had a worrisome debt profile, which is expected to get worse due to falling oil prices because of the pandemic, making Nigeria’s slow recovery even slower.

How COVID-19 Affects the Nigerian Economy, and How It Affects You

1. Declining Household Consumption – Lockdowns and movement restrictions around the country have caused consumers to reduce their expenditures. Now, people spend money only on essential goods and services. Nigeria’s growing gig economy and informal sector have been stalled as a result, even though these economic groups combined contribute close to 70% of Nigeria’s economic output.

How This Affects You – Sadly some of you will lose your jobs or have lost them already. If you are in the gig economy or the informal sector, your business would have taken a blow. How do you turn this around to your benefit? For the freelancers and those looking to set up businesses, now is the time to find a way to diversify your offerings to add value to people. Make sure you pay close attention to current purchasing patterns.

2. A Decline in Exports – Movement restrictions and border closures have halted exportation and importation, disrupting global supply chains. This has influenced a hike in commodity prices in the country, as well as scarcity since only essential traffic is encouraged between countries. We’ve effectively devalued our currency which means foreign currency based purchases will now need more Naira to conclude the transaction.

 How This Affects You – The upside of this is that more people will look for local alternatives. Even within states, people want something that can easily and consistently be accessible. What area can you be of service? Is it in logistics value chain or providing digital solutions to existing providers to make them more effective? What about customer service training to the increasing number of delivery men who have never been trained in this? There’s always an opportunity to add value.

3. Impeded Investments by Firms – Because of all the uncertainties that go hand-in-hand with a lack of knowledge about the pandemic, negative investor sentiments abound, and stock prices have declined greatly. The Nigerian Stock Exchange has recorded its worst performance since 2008. Most firms and people are waiting to see what will happen before they will consider making any long-term investment decisions again.

How This Affects You – You need to pay attention to stocks of companies you think will survive the pandemic.  Information is gold in these times, so learn as much as you can and take advantage of what is happening to snag some investments. For instance, now would be a good time to buy some blue chip stock as the prices are relatively low, but just make sure you have a fairly long term (beyond 12 months) view. You may want to look into money market funds rather than fixed deposits, and Eurobonds are worth a shot right now too as they offer a higher investment return.

4. Increased Government Expenditure – Low oil prices coupled with low demand for the product have made it necessary for the Nigerian government to refocus its budget with a lot of attention being paid by the Central Bank of Nigeria (CBN) to key areas such as SME businesses impacted by COVID 19, healthcare, agriculture and education. Click HERE for the full details.

How This Affects You – What value can you provide to these highlighted spaces? If you’re already working in any of these spaces, it’s important to explore the various intervention funds and opportunities the CBN is making available. And beyond these funds, look how to create opportunities for yourself.

The Nigerian economy may not look good at the moment, but in the midst of every crisis lies the seed of opportunity. This is why it’s important to pay attention to what’s going on around you and learn how to adapt and flourish in this ‘new normal’. We will talk more on how to do this in subsequent posts.

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