4 ways the Nigerian government could minimize the impact of COVID-19
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4 ways the Nigerian government could minimize the impact of COVID-19

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The COVID-19 pandemic is arguably the biggest challenge facing humanity today. More than 440,000 cases have been confirmed in 196 countries and territories, and almost 20,000 people have died.

Beyond the health impact, the spread of the virus is hurting the global economy. The impact is already visible in China and across Europe, where travel restrictions and distancing measures have disrupted global supply chains and reduced economic activity. But the good news is that world leaders are working hard to contain the virus. Infection rates have dropped drastically in China, while many other countries are responding smartly to minimize the impact of COVID-19 through social distancing and isolation efforts.

COVID-19’s potential impact in Nigeria

In Nigeria, there are currently 46 confirmed cases of COVID-19 since the first confirmed case on 28 February. While the country is not a COVID-19 hotbed yet, its economy could be one of the hardest hit. Nigeria has fragile healthcare system and high economic dependence on the rest of the world.

COVID-19 could affect Nigeria in four major ways:

1. Trade and investment disruptions

Nigeria’s investment and trade are mostly with China, Europe, and the US, which have all been hit hard by COVID-19. The slowdown of economic activities in these locations means that trade and investment globally will decline sharply, raising the risk of an economic recession. Manufacturers relying on imported inputs in Nigeria will face production challenges, while reduced importation of food and pharmaceutical products to the country would put a heavy burden on households and the healthcare system.

2. Lower government financial capacity

According to our calculations, Nigeria could lose up to US$20 billion from crude oil sales — which represent about 90% of its export — as fuel prices continue to fall. Oil revenue is expected to account for one-third of public revenue in 2020, and with the decrease, governments will have limited capacity to support the economy. A revenue shortfall will worsen Nigeria’s debt burden — around 60% of the federal government’s revenue already funds debt obligations. Sub-national governments will struggle to pay employee salaries and related costs, similar to what happened during the 2014-16 oil price crisis.

3. Lower social spending

Typically, Nigeria underfunds social sectors, such as health, education, and social safety nets. Approximately 4% and 6% of the 2020 federal budget went to health and education respectively, far below the recommended thresholds of 15% for health and 20% for education. Lower revenue means less money available to spend on health, education and critical infrastructure, as overhead and debt payments are usually prioritized during crises. The decrease in spending could be very bad for a country that already has one of the worst health outcomes worldwide, and where 4 out of 5 persons aged 15-24 are unable to read a full sentence.

4. Elevated poverty

Nigeria currently has the largest number of extremely poor people in the world today at 95 million — and an average of four people fall into poverty every minute. Unemployment and poverty will worsen as workers in trade-sensitive businesses — particularly tourism, transport, hospitality, and non-essential manufactured goods — are disengaged due to restricted movement of goods, services, and people. Remittances from abroad, which support many households, may also fall and worsen economic hardship. Around US$25 billion of remittances — equivalent to Nigeria’s federal government budget — came into the country in 2019.

How the Nigerian government should respond

The government’s response should come in two approaches: focusing on immediate priorities and implementing reforms to boost resilience beyond the crisis. Beyond international travel restrictions and stimulus for businesses, more must be done to protect vulnerable households.

Here’s how the government should respond to minimize the impact of COVID-19:

Adequately support the healthcare system

Prior to COVID-19, healthcare institutions were already overburdened and struggled to cope with poor medical supplies, shortage of medical workers, and poor infrastructure. To have a fighting chance against COVID-19 and in treating those requiring intensive care, Nigeria’s healthcare sector must be supported through adequate funding, incentives for health workers, and healthcare subsidies for the most vulnerable people.

Provide incentives and safety nets to the most affected

Through targeted tax incentives, social transfers, and regulatory support, the Nigerian government could help minimize the impact of COVID-19 on the most vulnerable businesses and citizens. The adoption of social distancing measures and lockdowns in the most affected cities are crucial to limit the spread of the virus. In addition, the government should partner with informal groups such as trade associations, which have a wider reach, to deliver monetary support to people in vulnerable employment.

Enable vulnerable sub-national governments

Sub-national governments have improved their resilience to oil-related crises by improving internally generated revenue. But even still, many would struggle to pay salaries given the crisis. Therefore, the federal government and the Central Bank of Nigeria should expand loans to states to enable them to pay workers and support the healthcare sector.

Reduce cost and improve transparency

The government should reduce the cost of governance by reducing administrative costs and prioritizing the most effective development programs. This will free up more money for health and education spending, as well as infrastructural spending and the build-up of fiscal buffers to improve the country’s resilience. Similarly, reducing the misuse of public finances through commitment to transparency, opening up budgets, and strengthening anti-corruption institutions should be a priority during and post COVID-19.

Now more than ever, policymakers must be responsive to lessen the effects of the impending social and economic crises and better prepare Nigeria for the future. The United Nations Economic Commission for Africa is currently coordinating African finance ministers to mobilise US$100 billion financial support across Africa.

This is a step in the right direction and we hope to see more efforts to tackle the pandemic proactively

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