When you are faced with health-related adversity such as COVID-19, you think of survival first before the economy. This at least is what any right-thinking government should do. But it appears after the calm then comes another storm.
Nigeria’s Minister of Finance, Zainab Mohammed has said that the government wants to raise N500 billion ($1.39 billion) Coronavirus fund to help support the country’s health care infrastructure. “This crisis intervention fund is to be utilised to upgrade healthcare facilities,” she said in a statement.
Unfortunately, this may not be enough to rescue the economy when the threat of the virus is eventually contained. It will take significantly more to calm the second storm.
Nigeria’s economic and political capital, Lagos and Abuja respectively have been in a lock down since last Monday night after the President Muhammadu Buhari led-government declared a 14-day stay at home order.
READ MORE: COVID-19: Lagos discharges 11 patients
Before then, most businesses had grounded operations to essential duties rolling out whatever business continuity plans they had in the cooler for years. The government now more than ever needs to implement its own business continuity plans and it could be very costly.
A recent report from the London Business School indicates countries hard hit by the shutdown caused by the COVID-19 virus may need as much as 15% of their Gross Domestic Product if they are to exit en impending recession as soon as possible and get their economy back in motion. According to the report “assume only a temporary drop in economic activities: 50% for a month and 25% in the two following months. Then, GDP drop of almost 10% of annual output” will be recorded by most countries.
The report also suggests that the longer the COVID-19 induced lock down, the more money governments will need to put aside if the economy is to heal faster. “Make the countries lock down longer and add the supply/demand downward spiral, then the actual costs (without policy interventions) could exceed 15% of GDP.”
At Nigeria’s GDP of N144trillion, the lock down could cost the country a whopping N21 trillion or $50 billion. Thus, to plug this hole it will surely need more than the $1.39 billion mooted by the Finance Minister. Acknowledged, the CBN along with the bankers committee had promised an intervention fund of about N120 billion while the government is considering a stimulus package.
Virus hit advanced economies in the West (like the UK and US) have similarly announced stimulus package, which they hoped will stem the negative effect of the virus on their economy.
For instance, the US passed a stimulus package of about $2 trillion nearly 20% of its GDP. The United Kingdom also announced an unprecedented stimulus package that is about 15% of its GDP. The situation is that critical.
A recent report from Mckinsey on the effect of the Coronavirus on the Nigerian economy explains it rather starkly.
“Across all scenarios, Nigeria’s economy looks to be pushed towards a contraction. The oil effect is the biggest driver of GDP impact (40-70% of total, disruption impact across scenarios) and also funds 65% of budgeted revenue and 90% of foreign reserves accrual.
“Uncontained, GDP growth could fall to -8.8% (USD ~40Bn) with oil effect and disruption to way of working – particularly consumer spend in F&B, clothing and transport account for >90% of the total impact.”
Where will government get the money from?
The Nigerian Government has major revenue challenges, which are further compounded by the crash in crude oil prices.
To raise cash, it will have to resort to a combination of Eurobonds, local bonds and asset sales. It planned to fund its outsized N10 trillion 2020 budget via loans but the urgency cannot be over emphasized.
Public debt hawks will complain bitterly and rightfully so. Nigeria’s external debts is about N27 trillion as at end of December 2019. Prepare for it to get higher.
Senate calls for the liberalization of cement policy to crash the price of the commodity
The Senate also tasked the FG on providing more industrial incentives to bring new players into the cement industry.
The Nigerian Senate has called for the liberalization of Nigeria’s cement policy to boost production and subsequently crash the price of the commodity in the country.
This motion was raised by Senator Lola Ashiru at today’s senate plenary, the senator also tasked the Federal Government on providing more industrial incentives to bring new players into the cement industry, in addition to the liberalization of the cement policy in Nigeria.
Ashiru explained that to reduce the price of cement and in extension, other building materials in the country, the Federal Government needs to provide an enabling operating environment that will encourage new entrants in the country.
The Senate in conclusion called on the FG to provide more industrial incentives and protections such as concessionary loans and larger tax incentives to encourage new entrants and expand the national cement production infrastructure, as this boost in production will lead to a downward review of cement price in Nigeria.
What industry leaders are saying
Earlier this year the founder of BUA Group, Abdulsamad Rabiu, called for the liberalization of Nigeria’s cement policy to boost production and reduce the price of the commodity.
The billionaire philanthropist faulted the belief that Nigeria is self-sufficient in terms of cement production, noting that recent statistics and figures on Nigeria’s population and cement production do not support this status of sufficiency in cement production as stated by some individuals.
He attributed the high price of cement products in the country to the supply gap which exists in the country, as the few producers who currently operate in the country are unable able to meet the country’s huge and growing demand.
The Group Executive Director, Strategy, Portfolio Development and Capital Projects, Devakumar Edwin, explained that the demand and consumption of cement in the nation currently outstrips supply, and this can be pegged on the growth in the country’s population, and the strong appetite for real estate investment and construction in the country.
He revealed that a supply gap of about 40% exists in the country’s cement market and that all players in the industry are working hard to level production with the rising demand in the country.
Paypal’s Venmo now permits cryptocurrency trading
Venmo will support four different cryptocurrencies: Bitcoin, Ethereum, Bitcoin Cash, and Litecoin.
Venmo, a mobile payment service owned by PayPal has announced that it has started allowing users to buy, hold and sell cryptocurrencies on its app. Just like PayPal, Venmo will support four different cryptocurrencies: Bitcoin, Ethereum, Bitcoin Cash, and Litecoin, and users can carry out transactions with as little as $1 on the app
Founded in 2009, Venmo has over 70 million users and it is one of the most popular payment channels in the US. The payment platform processed around $159 billion in payments last year.
Since the app functions like a social network, adding cryptocurrency will offer a more user-friendly feel for people who love buying and selling crypto.
As bigger companies show more interest in cryptocurrency, there will be wider adoption of virtual currencies in future. Venmo is the latest payment app that is offering support for cryptocurrency on its platform.
Paypal, the parent company of Venmo is one of the most active companies in the crypto space as it allows users to buy, sell and hold cryptocurrencies in their digital wallets. Paypal users can also spend their coins at millions of merchants globally.
Crypto on Venmo is enabled through PayPal’s partnership with Paxos Trust Company, a regulated provider of cryptocurrency products and services.
What they are saying
Darrell Esch, Venmo’s Senior Vice President and general manager said “Our goal is to provide our customers with an easy-to-use platform that simplifies the process of buying and selling cryptocurrencies and demystifies some of the common questions and misconceptions that consumers may have.”
Nairametrics | Company Earnings
Access our Live Feed portal for the latest company earnings as they drop.
- 2020 FY Results: Unity Bank Plc posts profit after tax of N2.09 billion.
- Guinea Insurance Plc reports a loss of N142.13 million in 9M 2020.
- Unilever Nigeria Plc set to hold Annual General Meeting on 6th of May.
- UBA Plc posts profit after tax of N38.16 billion in Q1 2021.
- PZ Cussons Nigeria Plc appoints Ifueko Okauru as Independent Non-Executive Director.