The rampaging Coronavirus (COVID-19) may have cost Nigerian investors a whopping N1 trillion in the last 6 weeks. The virus, which originally broke out in China, has spread across the globe with Nigeria reporting its first case two weeks ago.
Over 100,000 cases have been reported with over 3,000 deaths, representing a 3% mortality rate.
The virus is yet to be designated as a global pandemic by the World Health Organization. Despite this, global markets have fallen sharply as investors fly to the safety of gold and risk-free bonds.
Last week, Nigeria’s Minister of Finance, Zainab Ahmed, lamented the effect of the sprawling virus on Nigeria’s 2020 budget. Nigeria’s oil benchmark for 2020 is $57 per barrel of crude compared to current Brent crude oil prices of $45 per barrel, stoking fears of a widening budget deficit.
According to Zainab, “The current crude oil price of $53 a barrel is below the budget benchmark. So what we are doing is studying the situation. We are committed to doing a midterm review. We are concerned about the current drop in oil price because it’s now below our budget. We will do a mid-term review, and if the impact is so much, we will need to do an adjustment in the budget, working together with the National Assembly.”
Assuming prices remain the same, a midterm review could result in a reduction of total revenue expected from crude in 2020.
At the current price of $45, Nigeria’s budget deficit could widen to as much as $10 per share and could cost Nigeria as much as $20 million per day, assuming a daily crude oil output of 2 million barrels per day. Nigeria exports about 85% of crude oil production. The Federal Government relies on crude oil for as much as 50% of its accruable revenue, most of which is used to fund budgetary spending on capital and recurrent expenditure.
Brent Crude crashed to $36 as on Sunday, March 8th, 2020 its lowest since 2016.
It gets worse
According to Wale Okunrinboye, Head of Research at Sigma Pensions, Nigeria faces a perfect nightmare. “If oil averages $45 per barrel in 2020 and Nigeria does not take action to restrain import demand growth as we saw in 2019, then we could see the current account deficit go towards $20-25b. While the fiscal deficit will blow beyond the 3% statutory limit.”
Data from the CBN reports that Nigeria’s current account deficit was at $9.17 billion (as of September 2019) when the average crude oil price was $65 per barrel of crude.
Stock market reels
The Nigerian stock market is down 2.1% year to date, following a turbulent February that reversed all the gains made in January. Since February, when Coronavirus gained global notoriety, the Nigerian Stock market has lost a whopping N1.16 trillion in market capitalization.
The stock market capitalization closed January at about N14.85 trillion and ended the week of March 5th, 2019 at N13.69 trillion.
Investors continued to dump stocks despite stronger than expected results from the biggest companies on the exchange, as fear of a global contagion spooked them. In the US, the Dow Industrial Average Index closed down 970 points, or 3.6%, marking its fifth-worst single-day point drop on record, according to CNN.
European stocks fell by nearly 4% at the end of last week, as investors panicked over the spread of the virus in Italy and other major cities in Europe.
To make matters worse, the Chinese also reported during the week that their exports fell in the first two months of 2020 by as much as 17.2%, blaming this on the coronavirus outbreak that began in the East Asian country.
The outbreak has caused massive disruptions to supply chains around the world as transport restrictions continue to be imposed by government, airlines and shipping companies.
Division in the oil cartel, OPEC, has also exacerbated the fear of a possible devaluation in Nigeria. Saudi-led OPEC and Russia disagreed on output cuts during the week, with both countries now declaring an all-out price war that could see nations like Nigeria suffer its consequences.
Saudi Arabia’s Aramco declared during the week that it was going to crash prices to stimulate demand for its oil across the globe. The Russians, angry at the seeming exploitation of the situation by shale oil producers in the US, made a-turn and are asking for a halt in output cuts.
The Russian Strategy instead is to run the Americans out of the market by pushing for a drop in crude oil prices as Shale oil becomes unprofitable with prices falling below $30 per barrel.
For countries like Nigeria, this means a fragmented crude oil market where price determination and output advantages are no longer within our control. Nigeria already relies heavily on crude oil export to India, but could now face stiffer competition from other OPEC and OPEC+ countries like Russia.
With Nigeria’s oil exports under threat, foreign exchange earnings could be jeopardized, further worsening Nigeria’s current account deficit of $9 billion.
According to Ugodre, Nairametrics Founder, “Several factors could impede the CBN’s ability to continue to defend the naira, but none other than oil is more important. If oil prices continue to drop, further affecting Nigeria’s external reserve position, then the CBN will have no choice but to consider a devaluation.”
Nigeria maintains several exchange rates, with its official rates being N305/$1.
Ugodre explains that the government “could first consider merging exchange rate to the quasi-market driven I&E window of N360/$1 before a full swing devaluation.”
Government revenues and officially benchmarked prices are quoted at N305/$1, an indirect subsidy that feeds into cost inputs for sectors heavily reliant on foreign exchange.
Nigerians may have avoided the Coronavirus, but as Western nations face a possible epidemic, Nigeria remains at risk of an economic contagion which may perhaps be far worse than imagined.
COVID-19: FG to disburse N10 billion for local vaccine production
The Minister of Health has disclosed that Nigeria is exploring options for the licensed production of COVID-19 vaccine.
The Federal Government, through the Ministry of Finance, has announced the sum of N10billion for the production of vaccines in Nigeria, to fight the coronavirus.
This was disclosed by the Minister of Health, Dr Osagie Ehanire, at the daily Covid-19 briefing by the Presidential Task Force on Monday in Abuja.
- “The Ministry of Finance has released N10billion to support domestic vaccine production. While we are working to develop our own vaccines, Nigeria is exploring options for licensed production, in collaboration with recognised institutions. We are also exploring the option of local production of the vaccines in the country.”
He also warned Nigerians to ignore news about vaccines being for sale in Nigeria, as the procedures to acquire vaccines have to pass through due process.
- “I advise all citizens to disregard these claims, as they are criminal. There are procedures for vaccine acquisition and use, which include appropriate regulations and certification by National Agency for Food and Drug and Administration and Control (NAFDAC).
- “I advise against fake vaccines, as there is no one approved for use in the country. The National Primary Health Care Development Agency (NPHCDA) is the only authorised vaccine administrator in Nigeria.”
He also stated that as Nigeria is experiencing the second wave, the FG needs to change its response procedures through infection mitigations and vaccines.
- “There is no doubting the fact that we are deeply into the second wave of the pandemic which requires that PTF and FMoH review our strategies to respond to the challenge. The Federal Ministry of Health has outlined three approaches to confront the pandemic – Infection mitigation, Therapeutics and Vaccines.”
What you should know
- Nairametrics reported in November 2020, that the Health Minister announced Nigeria’s plans to set up a vaccine production company in Nigeria to boost local COVID-19 vaccine production.
COVID-19 Update in Nigeria
On the 18th of January 2021, 1,617 new confirmed cases and 14 deaths were recorded in Nigeria
The spread of novel Corona Virus Disease (COVID-19) in Nigeria continues to record significant increases as the latest statistics provided by the Nigeria Centre for Disease Control reveal Nigeria now has 112,004 confirmed cases.
On the 18th of January 2021, 1,617 new confirmed cases and 14 deaths were recorded in Nigeria.
To date, 112,004 cases have been confirmed, 89,939 cases have been discharged and 1,449 deaths have been recorded in 36 states and the Federal Capital Territory. A total of 1.17 million tests have been carried out as of January 17th, 2021 compared to 1.15 million tests a day earlier.
COVID-19 Case Updates- 18th January 2021,
- Total Number of Cases – 112,004
- Total Number Discharged – 89,939
- Total Deaths – 1,449
- Total Tests Carried out – 1,172,234
According to the NCDC, the 1,617 new cases were reported from 18 states- Lagos (776), Kaduna (147) Kwara (131), FCT (102), Plateau (78), Edo (59), Ogun (53), Osun (45), Rivers (37), Taraba (36), Nasarawa (34), Adamawa (33), Kano (26), Delta (20), Ebonyi (16), Bayelsa (11), Gombe(11) and Borno (2).
Meanwhile, the latest numbers bring Lagos state total confirmed cases to 41,400, followed by Abuja (14,700), Plateau (6,831), Kaduna (6,325), Oyo (4,695), Rivers (4,429), Edo (3,320), Ogun (2,912), Kano (2,617), Delta (2,122), Ondo (2,070), Katsina (1,723), Kwara (1,697), Enugu (1,583), Gombe (1,500), Nasarawa (1,335), Ebonyi (1,275), Osun (1,260), Abia (1,134), and Bauchi (1,107).
Borno State has recorded 867 cases, Imo (857), Sokoto (677), Akwa Ibom (667), Benue (657), Bayelsa (619), Adamawa (573), Niger (547), Anambra (515), Ekiti (473), Jigawa (425), Taraba (294), Kebbi (251), Yobe (211), Cross River (169), Zamfara (162), while Kogi state has recorded 5 cases only.
Lock Down and Curfew
In a move to combat the spread of the pandemic disease, President Muhammadu Buhari directed the cessation of all movements in Lagos and the FCT for an initial period of 14 days, which took effect from 11 pm on Monday, 30th March 2020.
The movement restriction, which was extended by another two weeks period, has been partially put on hold with some businesses commencing operations from May 4. On April 27th, 2020, Nigeria’s President, Muhammadu Buhari declared an overnight curfew from 8 pm to 6 am across the country, as part of new measures to contain the spread of the COVID-19. This comes along with the phased and gradual easing of lockdown measures in FCT, Lagos, and Ogun States, which took effect from Saturday, 2nd May 2020, at 9 am.
On Monday, 29th June 2020 the federal government extended the second phase of the eased lockdown by 4 weeks and approved interstate movement outside curfew hours with effect from July 1, 2020. Also, on Monday 27th July 2020, the federal government extended the second phase of eased lockdown by an additional one week.
On Thursday, 6th August 2020 the federal government through the secretary to the Government of the Federation (SGF) and Chairman of the Presidential Task Force (PTF) on COVID-19 announced the extension of the second phase of eased lockdown by another four (4) weeks.
Governor Babajide Sanwo-Olu of Lagos State announced the closed down of the Eti-Osa Isolation Centre, with effect from Friday, 31st July 2020. He also mentioned that the Agidingbi Isolation Centre would also be closed and the patients relocated to a large capacity centre.
Due to the increased number of covid-19 cases in Nigeria, the Nigerian government ordered the reopening of Isolation and treatment centres in the country on Thursday, 10th December 2020.
US Capitol complex temporarily shut down
The US Capitol complex was shut down temporarily on Monday as a precautionary measure after a small fire broke out nearby.
The US Capitol complex was shut down temporarily for about an hour on Monday as a precautionary measure after a small fire broke out nearby, highlighting the security concerns that are being raised days before the inauguration of President-elect Joe Biden.
The security concerns and the lockdown follows the January 6 attack on the US Capital by supporters of the outgoing US President, Donald Trump, after his encouragement and inciting comments, calling the Presidential election a fraud without any proof of evidence.
Some of them even called for the death of the US Vice President, Mike Pence for presiding over the certification of Joe Biden’s November election victory.
While making the disclosure in a statement, the Capitol Police said that the lockdown has been lifted and the nearby fire contained.
The Acting Chief of the Capitol Police had said that the complex which comprises of the Capitol, its grounds and several buildings were shut down as a precautionary measure.
The US Secret Service in a tweet post on its official Twitter handle said, “Out of an abundance of caution the U.S. Capitol complex was temporarily shutdown. There is no threat to the public.’’
The city’s fire department in its tweet post said that firefighters put out a fire outside near the Capitol complex.
The fire department said, “There were no injuries. This accounts for smoke that many have seen.”
What you should know
- President-elect, Joe Biden is expected to be sworn in at the US Capitol on Wednesday amid an unprecedented cordon of security, with strict physical distancing measures in place due to threats of violent attacks in Washington and the rising cases of coronavirus infections.
- Donald Trump, who is just fresh from a historic second impeachment from the congress had said he would not attend, although his deputy, Vice President Mike Pence, had given an indication that he would attend.