‘Nigeria needs strategic coping mechanisms as global recession looms’
Though some initiatives are being undertaken by the Federal Government to mitigate the impact of the coronavirus pandemic on the economic system, members of the Organised Private Sector (OPS) have requested financial managers to deploy far-reaching coping mechanisms as international recession looms.
According to the stakeholders, if the outbreak persists within the brief and medium time period, the financial outcomes for Nigeria could be seen within the decline in oil income resulting from decreased demand from key overseas clients, fall in foreign exchange reserves on account of a fall in oil export oil income, which could affect foreign exchange stability.
Furthermore, they envisaged that the price of imports from key buying and selling companions similar to Italy and China are more likely to spike, leading to cost-push inflation, whereas the speed of unemployment could enhance resulting from decelerate in financial exercise.
They added that the potential fall in tax income and hovering debt, which might affect developmental outcomes is inevitable, whereas potential decline in combination GDP resulting from decelerate in financial exercise ought to be anticipated.
The President of the Lagos Chamber of Commerce and Industry (LCCI), Mrs Toki Mabogunje, whereas talking on the chamber’s discussion board on the implications of covid-19 outbreak on the Nigerian economic system, mentioned the Covid-19 outbreak has dealt a extreme blow to the worldwide economic system and if the unfold isn’t curtailed no less than within the close to time period, the worldwide economic system may slip into recession.
According to her, the illness has disrupted and nonetheless disrupting companies, financial and monetary actions throughout the globe.
“Businesses are shutting down operations. Factories are closing. Schools are on recess. Conferences, sporting occasions, soccer matches, music live shows and enterprise conferences have all been suspended. Countries are imposing wide-range journey restrictions. Trade actions are on maintain.
“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.
Partner, Tax, Regulatory & People Services, KPMG in Nigeria, Ajibola Olomola, urged the federal government to accentuate efforts in the direction of constructing home capability throughout important sectors similar to manufacturing and be sure that tax enforcement practices don’t stifle enterprise development.
He recognized many susceptible factors within the economic system stating that greater than 90 per cent of the nation’s overseas alternate earnings are from crude oil and fuel, including that the large hole between the overseas alternate provide and demand results in value distortions and elevated demand within the parallel market.
He added that regardless of the introduction of a number of home windows in 2017 that led to a rise in overseas alternate provide from $21.four billion in 2017 to $38.1 billion in 2018, overseas alternate demand nonetheless exceeds provide.
Indeed, the parallel market fee hit a low of about N390/$1 in mid-March 2019 on account of panic shopping for triggered by Covid-19.
Furthermore, Olomola said that crude oil accounts for over 70% of Nigeria’s export, and with the outbreak of Covid-19, the demand for oil merchandise have decreased considerably.
“China is the world’s second largest shopper of oil and its demand for oil alone has decreased by 20%. Goldman Sachs forecasts Crude oil costs to stay at $30/barrel for the second and third quarters of 2020. The estimate will enhance Nigeria’s deficit to an estimated ₦3,197.54 billion from N2,175.20 billion.
“Nigeria imports over 70% of its manufactured items and China represents Nigeria’s greatest buying and selling companion, with about 19% of its imports are sourced from China. The outbreak of Covid-19 can have important affect on retailers and shoppers in Nigeria.
“The impact on agricultural products and raw materials may be minimal as total trade for these materials is less than 5%”, he added.