The Coronavirus (COVID-19) pandemic is arguably the biggest challenge facing humanity today. More than 300,000 cases have been confirmed in 188 countries and territories, and over 14,000 people are below six feet already.
Beyond its health impact, the spread of the virus is hurting the global economy. The impact is already visible in the countries most affected such as China and European countries, where travel restrictions and distancing measures have disrupted global supply chains and resulted in 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 put an end to COVID-19.
Nigeria confirmed the first case of COVID-19 on February 28. It has since increased to 31 cases. While the country is not a COVID-19 hotbed yet, its economy could be one of the hardest hit, should it persist for longer, due to a fragile healthcare system and high dependence on the rest of the world.
Ways COVID-19 could affect Nigeria
Trade and investment disruptions: Nigeria’s investment and trade are mostly with China, Europe, and the US, which are territories currently vulnerable to COVID-19. The slowdown of economic activities in these locations means that trade and investment will decline sharply, raising the risk of an economic recession.
Manufacturers relying on imported inputs will face production challenges while reduced importation of food and pharmaceutical products would put a heavy burden on households and the healthcare system.
Lower government financial capacity: Nigeria could lose up to US$20 billion from crude oil sales-which represent 85% of its export- as fuel prices continue to fall.
As oil revenue accounts for one-third of expected public revenue in 2020, governments will have limited capacity to support the economy. Revenue shortfall will worsen Nigeria’s debt burden as around 60% of the federal government’s (FG) 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.
Lower social spending: Typically, Nigeria underfunds social sectors (health, education, and social safety net). Around 4% and 6% FG budget for 2020 went to Health and Education respectively, far below the recommended thresholds of 15% for Health and 20% for Education.
Lower revenue means less money would be available to spend on health, education and critical infrastructure, as overhead and debt payments are usually prioritized during crises. The outcome could be very bad for a country that already has one of the worst health outcomes worldwide, and with 4 out of 5 persons aged 15-24 unable to read a full sentence.
Elevated poverty: Nigeria currently has the largest number of extremely poor people in the world today at 95 million and an average of 4 people join them 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 households, may also fall and worsen economic hardship. Around $25 billion of remittances – equivalent to the Federal Government of Nigeria budget – came into the country in 2019.
How govt 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.
Adequately support the healthcare system: Prior to COVID-19, healthcare institutions were already overburdened with many ailments given 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, the healthcare sector must be supported through adequate funding, incentives for health workers, and health care 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.
With the adoption of social distancing measures to limit the spread of the virus, the government should partner with informal groups such as trade associations, who have a wider reach, to deliver support to people in vulnerable employment.
Enable vulnerable sub-national (state) governments: Sub-national governments have improved their resilience to oil-related crises by improving Internally Generated Revenue (IGR) but many would struggle to pay salaries given the crisis. Therefore, the FG and the CBN can 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 changing its ways in the incurring of administrative costs and prioritizing the most effective development programs. This will free up more money for social and infrastructural spending and improve its 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.
Written by: Razaq Fatai from ONE Campaign and Adedayo Bakare from Afrinvest
FG yet to purchase Covid-19 vaccines – Minister of State for Health
According to a disclosure made by the Minister of State for Health, the FG is yet to purchase any COVID-19 vaccine.
The Federal Government has said that it is yet to purchase any Covid-19 vaccines as the country is still assessing the prices of different shots, their availability and the logistics required for a nationwide roll-out.
This is coming at a time when developed economies are rolling out the vaccines in their countries and concerns have been raised about the availability of the Covid-19 doses in the African continent.
This disclosure was made by the Minister of State for Health Adeleke Olurunnimbe Mamora, during a telephone interview with Bloomberg.
What the Minister of State for Health is saying
Mamora said that once the government determines which vaccines are accessible and affordable, authorities then have to consider storage and distribution issues as they prepare to give shots to 200 million people.
He said, “We haven’t made any purchases at this point in time.’’ He added that the government expects to have a definitive plan by the end of January.
Nigeria is working with the World Health Organization backed COVAX programme and hopes to receive its first doses in January. The Minister for Finance, Budget and National Planning, Zainab Ahmed, had said that the country is working on what type and quantity of Covid-19 vaccines to procure and financial provision will be made in the 2021 budget for the vaccines.
COVAX is a global initiative backed by the World Health Organization which aims to provide equitable access to Covid-19 vaccines, especially to poor countries.
What you should know
- It can be recalled that Bloomberg had reported that experts and a state governor had expressed doubts about the ambitious plan by Nigeria to vaccinate as much as 40% of its population this year due to lack of resources and infrastructure.
- The Chief Executive Officer of Nigeria’s National Primary Health Care Development Agency, Faisal Shuaib, said on Thursday the country expects to receive 100,000 doses of Pfizer Inc’s shot at the end of January through the Covax initiative.
- Nigeria has officially reported 107,345 Covid-19 cases, with 1,413 casualties, but testing is not easily accessible for most people, with only about 1.1 million tests conducted so far.
Nigerian government spends equivalent of 83% of revenue to service debt in 2020
The Federal Government of Nigeria achieved a debt service to revenue ratio of 83% in 2020.
The Federal Government of Nigeria achieved a debt service to revenue ratio of 83% in 2020. This is according to the information contained in the budget implementation report of the government for the year ended December 2020.
According to the data seen by Nairametrics, total revenue earned in 2020 was N3.93 trillion representing a 27% drop from the target revenues of N5.365 trillion. However, debt service for the year was a sum of N3.26 trillion or 82.9% of revenue.
Nigeria’s debt service cost of N3.26 trillion has now dwarfed the N1.7 trillion spent on capital expenditure of N1.7 trillion incurred in 2020. This is also the highest debt service paid by the Federal Government since we started tracking this data in 2009.
The total public debt (External and Domestic) balance carried by Nigeria as of September 2020 stood at N32.22 trillion ($84.57 billion). Included in the total debt is a domestic debt of about N15.8 trillion.
What this means: Nigeria’s debt to GDP ratio is estimated at about 22%, one of the lowest in the world and much below what is obtainable in most emerging markets.
- However, the challenge has always been the debt service to revenue ratio, a metric that reveals whether the government is generating enough revenues to pay down its debts as they mature.
- Since the first recession experienced in 2016, Nigeria has struggled with higher debt service to revenue ratio as revenues slid in direct correlation with the fall in oil prices.
- Nigeria’s government spent about N2.45 trillion in debt service in 2019 out of total revenue of N4.1 trillion or 59.6% debt service to revenue ratio.
- At 83%, 2020 ranks as the highest debt service to revenue ratio we have incurred. Before now it was 2017 with 61.6%.
Breakdown of what debts were serviced
The following amount was spent on debt service during the year
- To service domestic debt, the government spent N1.755 trillion in 2020 as against a budget of N1.87 trillion.
- For foreign debts, a sum of N553 billion was spent against a target budget of N805.47 billion. The drop here is likely a result of lower interest rates on foreign borrowing as well as very limited borrowing from the foreign debt market during the year.
- The government only contributed N4.58 billion into its sinking fund instead of the budgeted N272.9 billion.
- The sinking fund is required to set aside funds that will be used to pay down on other loans such as bonds when they mature in the future.
- Finally, a sum of N912.57 trillion was spent on servicing CBN’s loans, granted via its Ways and Means provisions.
- Nairametrics reported last week that a total sum of N2.8 trillion was extended by the CBN to the FG as Ways and Means.
What happens next: In 2021, the government projects a debt service of N3.1 trillion against revenue of N6.6 trillion or a debt service to revenue ratio of 46.9%.
- The government plans to spend N4.3 trillion on capital expenditure during the year.
Top 10 Nigerian tech companies and capital raised in 2020
These are the top 10 tech companies and the capital they raised in 2020.
These are the top 10 rankings of the highest fundraisers for 2020.
The startup provides digital payments infrastructure and services which enable global merchants, payment service providers, and pan-African banks to accept and process payments across various channels.
It raised a $35M Series-B round led by US venture capital firms Greycroft and eVentures in January 2020. The funding was invested in technology and business development to grow market share in the countries it operates in.
The startup is equalizing precision medicine by including underrepresented Africans in global genomics research. It raised $15M in a Series A funding round in April 2020 led by Adjuvant Capital – a life sciences fund backed by the International Finance Corporation, Novartis, and the Bill & Melinda Gates Foundation.
These new funds will be used to address the gap that exists in precision medicine for people on the African continent.
The startup is a one-stop app for all your financial needs. Aella makes it super easy for anyone to borrow, invest, and make payments. It secured a $10 million debt financing round from a Singaporean company – HQ Financial Group.
The new capital raised from Singapore is expected to facilitate the credit company’s effort to provide financial inclusion to many more of the people who are currently unbanked across Nigeria, West Africa, and other emerging markets.
The startup has become the leading provider of full-service technology solutions for healthcare stakeholders in Africa. It raised a $10 million Series A round in April 2020.
Global Ventures and Africa Healthcare Master fund (AAIC) co-led the investment round. Helium plans to use the latest funding round to hire and expand to North and East Africa, including Kenya, Rwanda, Uganda, and Morocco.
The startup provides a full banking service on your smartphone. It secured a US$10 million seed round in November 2020 – the biggest seed round ever to be raised in Africa, led by Target Global with participation from Entrée Capital and SBI Investment.
The funding will be used to help accelerate its growth plans and keep up with customer demand. Specifically, funds will be used for key hires, product development, and to expand operations across Africa.
The startup is a Nigerian B2B eCommerce company that utilizes an end-to-end distribution platform aimed at connecting the world’s top consumer goods companies directly to retailers in Africa.
It raised $10-million in a pre-Series B equity round co-led by Partech, International Finance Corporation, Women Entrepreneurs Finance Initiative (We-Fi), and MSA Capital in July 2020.
The new investment will enable Trade Depot to continue connecting international brands with small businesses in Nigeria, expand into other African cities, launch a suite of financial products, and credit facilities aimed at supporting its retailers.
The startup is helping governments and businesses make good on the promise of healthcare in the fastest-growing parts of the world by making the pharmaceutical supply chain radically simple, affordable, and easily accessible.
It raised a $3.6 million Series A round in March 2020, led by Blue Haven Initiative, with investors including Newtown Partners via the Imperial Venture Fund and Accion Venture Lab.
The investment will be used to scale Shelf Life expansion throughout Nigeria and Kenya, as well as the development of additional services for Shelf Life clients and their patients.
The startup connects suppliers to hospitals and pharmacies directly to make the pharmaceutical supply chain more efficient. The health start-up raised $3.5M in a seed funding round in December 2020. It will use this funding to expand to other African countries.
The company is an automotive technology company that aims to build solutions for the African market. It raised $3.4 million in pre-seed funding round in November 2020, co-led by TLcom Capital and 4DX with inclusion from Golden Palm Investments, Lateral Capital, Kepple Africa Ventures.
Auto Chek will use the investment to grow its Nigerian and Ghanaian markets, invest in its tech, and grow its team.
Despite the ravaging impact of Covid-19, Nigerian tech start-ups raised millions of dollars in funding. We hope to see more investors in the first quarter of 2021.
The startup allows qualifying companies throughout Nigeria and West Africa to start selling Power-as-a-Service (PaaS) to their customers.
It raised $3 million from Proparco, with the support of the European Union under the Africa Renewable Energy Scale-Up facility (ARE Scale-Up). The funding will be used to contribute to facilitating energy access in the context of a significant and growing energy gap in Nigeria and support the development of innovative solar energy solutions.