Coronavirus: Global economy on trial, impact and the Nigerian factor

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The effect of coronavirus pandemic on global economy has continued to generate rapid trepidation among governments, corporate organizations and businesses across the world, including Nigeria. Nigeria, being an imported dependent economy, relies on China for most of its manufacturing goods.

More than half of its imports such as clothes, healthcare products, construction materials and, even, household products come in from China. Sadly, a larger percentage of major projects in Nigeria also rely on foreign loans and constriction workers. This calls for a urgent action.

The recent outbreak reveals the national economic insecurity facing Nigeria; perhaps if the global economy falls into a stop as a result of a pandemic, country like Nigeria will face untold hardship. Experts across the world have expressed fear that the rapid spread of coronavirus (code name COVID-19) could bring the global economy to a recess. The epidemic that originated in China’s Wuhan city has affected 98 countries and territories around the world and has claimed at least 3,661 (March 08, 2020) lives globally while more than 107,732 (March 08, 2020) cases have been confirmed worldwide, according to Johns Hopkins University report. The World Health Organization (WHO) has declared the new coronavirus outbreak a global health emergency.

There is also strong evidence that it can be transmitted by people who are just mildly ill or not even showing symptoms yet. This means COVID-19 will be much harder to contain than Middle East Respiratory Syndrome or Severe Acute Respiratory Syndrome (SARS), which were only spread by those showing symptoms and were much less efficiently transmitted. The severe acute respiratory syndrome (SARS) outbreak was the first epidemic of the 21st century that posed a global threat to the international communities, spreading across some 26 countries around the world in a matter of weeks, infecting around 8,500 people with a mortality rate of around 11% (912 deaths). But COVID-19 has already caused 10 times as many cases as SARS in just a quarter of the time.

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In a 2018 Global pandemic simulation podcast, Bill Gate called for global leader to increase the level of preparedness to tackle future pandemic. He opined that the 1918 global influenza flu which infected 500million people killed between 50-100 million people in just 12 months. When rate of epidemic spread is compared side-by-side, recent outbreaks indicate indicates an urgent need for action. Experts suggested a possibility of a global pandemic which could kill 20 million people and the world should prepare for it.

It is an indisputable fact that as far as the world is concerned of a source of supply of manufactured components and financial markets, China matters a lot to the rest of the world. Considering many of the uncertainties that surround the trajectory of the widespread, especially on global economy, experts have projected that the economic fallout of COVID-19 could cost the global economy $2.7trillion. If China’s factories, being a world’s manufacturing hub, shut down, it is undoubtedly that its ripple effect will spread across many factories in the world, leading to shortage in the supply chain of production capacity while construction machinery become harder to access.

The world’s 10 biggest economies have begun to suffer retardation as the fight to contain the domestic spread of the COVID-19 intensifies. The U.S., the U.K., Germany, France, South Korea, Canada, Japan, Italy and Brazil are experiencing economic shock. According to reports, the global growth for 2020 slides to 1.2%. Also, in China, “automobile sales have plunged 80%, passenger traffic is down 85% from normal levels, and business surveys are touching record lows. The economy, in other words, has practically ground to a halt.” Bloomberg Economics estimates that GDP growth in the first quarter of 2020 has slowed to 1.2% year on year, which is the weakest on record.

Since the outbreak, China economy has suffered decline in foreign trade. According to report, “China’s economy is expected to slow to 4.5% in the first quarter of 2020 down from 6% in the previous quarter. The global demand for oil has also been hit by a reduction in the demand of oil from China as the world’s biggest oil importer. OPEC is expected to cut production quota amongst its member countries as the global demand for oil is expected to fall by 435,000 barrels for Q1 2020.” The OECD cut its expectation for global growth to 2.4% from 2.9%, and warned that it could fall as low as 1.5%. Goldman Sachs expects a global contraction in the first half of the year. Recent forecasts for first-quarter GDP growth in China range from 5.8% all the way down to -0.5%, underscoring the high degree of uncertainty.

READ ALSO:COVID-19 threatens Lagos-Ibadan rail completion deadline

Reports (SB, MORGEN) have it that as of April 2019, “China’s non-financial investment in Nigeria stood at $3 billion while China-Nigeria’s bilateral trade volume soared to $15.3 billion in 2011, 0.8% higher than the previous year. According to data from the Nigerian Bureau of Statistics, Nigeria’s imports from China hit ?1.9 trillion in the first half of 2019. The country almost doubled total imports from China, rising by 88% in half-year (H1) 2019. These are likely to take hits as China struggles to contain the spread of the virus. Also, following the lockdown of much of the Chinese mainland (up to 150 million Chinese nationals are under mandatory movement restrictions), production of goods and services will continue to slow, and in some cases, shut down completely, affecting exports to Nigeria.”

“If oil demand continues to fall with no OPEC intervention in the form of production cuts, tightening supply, a country like Nigeria will be negatively impacted by the downward price trend. It only gets worse for Nigeria as oil is the biggest revenue generating sector of the economy; expected revenue to be generated from the oil sector in the 2020 budget is ?2.64 trillion, with the rest of the non-oil economy contributing a further ?5.5 trillion. Oil prices do not only affect the revenue generated from this sector but also disrupt prices in other sectors such as manufacturing and production, thereby causing inflation to go up.”

“The virus is at least in part a supply shock—closing factories, and forcing workers to stay at home. That’s not something policy makers can do much about. Rate cuts and higher spending will help put a floor under fragile financial markets, and revive demand once the crisis is over. In the heat of the outbreak, stimulus risks stoking inflation without accelerating growth—making the problem worse, not better.”

Also, the Coronavirus has been cited as a major factor responsible for the delays in Nigeria’s Chinese-built rail project. The 150km railway line, Lagos to Ibadan, which is being built by the state-owned China Civil Engineering Construction Corporation has suffered a major delay by the coronavirus outbreak as Chinese workers had not returned to the country.

According to Bloomberg’s prediction, China’s exports would fall by 15.2 per cent and imports by 16.6 per cent, respectively. In total, China’s foreign trade was US$591.99 billion over the two months, down 11 per cent on last year. However, according to the recently released data by the General Administration of Customs China’s exports shrank by 17.2 per cent in January and February combined due to coronavirus’ impact. Exports fell by 17.2 per cent in January and February combined compared to the same period a year earlier. This was down from 7.9 per cent growth in December 2019. Imports dropped 4 per cent from a year earlier, down from 16.5 per cent growth in December 2019. Consequently, “China ran a trade deficit over the first two months of the year, of US$7.09 billion, compared to the surplus of US$41.45 billion over the same period in 2019.”

According to the report by the National Bureau of Statistics (NBS), “the official manufacturing purchasing managers’ index (PMI) slowed to an all-time low of 35.7, having slipped to 50.0 in January when the full impact of coronavirus was not yet evident.” China’s non-manufacturing PMI has also dropped to a new low of 29.6 from 54.1 in January 2020.

Also, research firm Gavekal Dragonomics “estimated that the outbreak could cost China’s migrant workers a combined 800 billion yuan (US$115 billion) in lost wages, an amount that will be impossible to recoup by working longer hours when business is back to normal. This loss, in turn, will dampen consumer spending, which Beijing is counting on to help support growth this year.”

The increase in the quest for knowledge and competition has seen world super powers lifted bans on research on virus. For instance, recently, the United State government lifted the ban on the practice of engineering viruses to make them more deadly. Experts believe that this type of effort could help prepare for the threat of deadly viruses, but it could also increase the risk that such a disease escapes into the wild.  An engineered super virus or new pathogen that we do not know how to treat could be a far bigger threat than a deadly flu.

As the spread of the virus continues to rise across the world, the coronavirus is not just costing lives, but also costing livelihoods. The U.S. government has approved an $8.3 billion emergency spending bill to fight the virus. In like manner, the Nigeria Federal Government has approved the sum of N620m to fight the virus. The Chinese economy has been virtually paralysed as a result of the virus. The fact remains that China makes up “about 16 per cent of the global economy. This will have a deep and profound effect on the global economy”—Tenpao Lee, a professor of economics at Niagara University.

According to the World Bank estimation, the 2014 Ebola outbreak cost Africa billions of dollars to contain. Although Nigeria was the first country to defeat the virus, eight lives were, including Dr. Stella Amayo Adedavho, a valiant woman who sacrificed her life to curb the spread of the virus. It cost the Nigerian government $180 million to fight the virus. But the Italian index case that visited Lafarge Plc in Abeokuta has led to the quarantining of the entire facility.

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It is encouraging that the federal government of Nigeria has been responding very well, putting in place proactive measures since the outbreak of the virus in China in January 2020. It is also encouraging that both Federal Government, through the Nigeria Centre for Disease Control (NCDC) and the Lagos state government, through the Virology Laboratory of the Lagos University Teaching Hospital (LUTH), which is part of the Laboratory Network of NCDC, has continued to step up measures to curb the spread of the virus.

Since the first index case was reported in the country on Wednesday, 26th, February 2020, through an Italian citizen who arrived Nigeria on 25th, February 2020, from Milan, Italy for a brief business trip. It was reported that the Italian was transferred to Lagos State Biosecurity Facilities for isolation and testing. It was reported that the patient was clinically stable and is being managed at the Infectious Disease Hospital in Yaba, Lagos.

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While strengthening further proactive measures, the Nigeria Centre for Disease Control (NCDC) activated the Corona Virus Preparedness Group and its incident command system for the Virus, just in case any suspected case arises. The World Health Organisation (WHO), through its officer in Nigeria, commended the Nigerian government’s efforts for its timely response to the first case of Covid-19. Dr Clement Peter, the Officer-in-Charge of WHO in Nigeria, expressed that: “It is commendable that Nigeria speedily detected the case and is addressing the matter in Lagos. We have been working with the Nigeria Centre for Disease Control (NCDC) to provide support on how to control spread. I am proud to say that NCDC is one of the best control centres in Africa and we will continue to partner with the centre to address the situation.” Nonetheless, it is expected that the government should increase its efforts in this regard, especially to be able to handle future occurrence proactively and professionally in accordance to best global practices.

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