Impact of COVID-19 on Nigeria’s Economy
The COVID-19 pandemic is taking a severe toll on Nigeria due to its economic structure. Nigeria, known as the largest economy in Africa, is mainly experiencing a downturn because of an unprecedented fall in demand of its main resource. The demand for oil and consequently the market price are falling rapidly worldwide, leaving the growing economy vulnerable. The Nigeria’s economy has heavily relied on oil imports for years. However, imposing strict lockdowns to stop the virus is pushing growing economies like Nigeria into a recession.
Nigeria’s economy depends mostly on oil imports and feeds the economy mostly from the oil revenue. But now, there is a serious shortage of foreign currency. Half a million jobs have been lost in the last six months, and the deficiency of imports has resulted in accelerating inflation.
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Negative Oil Price
Nigeria’s economy had a low yet positive growth until three years ago. The pandemic is now leading the economy towards the worst hit the state has ever experienced. What has led Nigeria in this excruciating condition is the dependency on oil – over 80% of Nigeria’s oil exports were halted due to the country-wide lockdown.
As governments restrict the free movement of citizens, people were forced to stop traveling, and lockdown on factories resulted in less usage of transports. A major dispute between the largest oil-exporting countries, Saudi Arabia and Russia, threatened the situation further.
To tackle the competition, the prices have been driven to the lowest level for the very first time in history. Realizing the plummeting prices, a historic deal between G-20 countries led to the cut down of oil output. It was estimated that the reduced production would improve prices; unfortunately, the situation worsened.
Nigeria had to cut its output from 2.1 million barrels to 417 thousand barrels a day only. This is leading to the country’s plant closure and job losses, causing harm to the livelihood of many. Experts estimate that Nigeria’s recession is going to continue into next year.
Fighting the Economic Hit
Many developed countries like the USA are distributing trillion dollars to retrieve the economic turmoil. On the other hand, for African countries, it is not possible to lend out massive stimulus packages as the country lacks adequate resources. A ray of hope is the thriving agricultural sector of Nigeria.
The Central Bank of Nigeria or CBN has also disbursed 50 billion Naira, which is around $139 million, in stimulus packages to households as well as small or medium-sized businesses in Nigeria. The International Monetary Fund (IMF) has disbursed 3.4 million dollars to find a way out of the problems. UNICEF has been contributing to Nigeria’s well-being throughout the pandemic as well.
The government is trying to diversify its export basket and move away from its sole dependency on oil. To keep the economy steady and uplift lockdowns, the Nigerian government is building capacity in the health sectors and has taken numerous measures to handle the impact of COVID-19.
Experts are hopeful that Nigeria will get out of this nightmare as soon as the lockdown is eased. Resuming the country’s economic activity will pave the way to recovery.