Governments all over the world have been launching salvos of fiscal relief to several sectors of their economy. Nigeria has also been active in this respect.
It is a right wake-up call for Nigeria on economic diversification and therefore there is an urgency to counter the economy-wide threats of the coronavirus pandemic. Curiously, the industry that lays the golden egg, which unfortunately appears to be the centre point for the transmission of the disastrous effects to the rest of the economy is seemingly missing from the list of fiscal intervention beneficiaries.
In his op-ed, the central bank governor marshalled out a relief plan for the SMEs, pharmaceutical industry, manufacturing industry as well as the transport infrastructure provision strengthening.
All three sectors – SMEs, manufacturing, pharmaceuticals, and transport – are to enjoy fiscal reliefs to the tunes of N50 billion, N500 billion, N100 billion and N15 trillion respectively within the next 36 months.
Intriguingly, the oil sector seems unremembered in this scheme of palliatives. Yet, this sector apart from being the critical revenue provider and foreign exchange source to the government is also the worst commercially hit by the pandemic.
Both the banks and oil companies will experience substantial levels of financial discomfort except with generous extensions of relief interventions to them. Since year 2000, bank financing of the oil and gas sector had grown fourfold from 6% to approximately 24% in 2010.
For some banks, it is as high as 40% of the total portfolio. In general, the banking sector concentrated more than 25% of its balance sheet in the oil and gas sector. Much scholarly research has shown a strong inverse relationship between banking industry concentration in the oil sector and its profitability.
Based on the Nigerian banking industry data between 2007 and 2019, banks’ liquidity position on average appears to improve by 45% for every 1% increase in the crude oil export price. On the flip side, a 1% increase in crude oil price leads to about a 67% drop in the banking industry non-performing loans on average.
The upstream oil sector, on the other hand, faces a unique dilemma. The first is running loss position on its products which trades below current production cost. This scenario is likely to last slightly longer pending the resumption of economic activities globally.
The second is the growing size of the unsold inventory; a penalty for global oil production cost leadership. For instance, while our average production cost is approximately $16 per barrel that of Russia and Saudi Arabia are $4 and $5, respectively. These cost advantages give them enormous discount granting capacities.
Accordingly, both Russia and Saudi Arabia can conveniently extend between 25% and 30% discounts and remain profitable per barrel of oil sold. We lack the capacity and are therefore stuck with our wares until these large volumes, and low-cost producers exit the market.
Despite all of these force-Majure induced market disappointments, costs of the bank facilities deployed in the production keep running. Without a deliberate intervention, if this crisis persists for up to six months, indigenous oil firms will have to grapple with financial overloads that may lead to cataclysmic collapses.
The future of oil prices does not look very bright in the short term. It does not appear as if this virus pandemic will quickly vanish unless economic activities return to full blast. That can only happen if there are fully approved and endorsed cure vaccine made available across all the countries of the world. It also does not seem as if that is an immediate possibility.
The implication is that recovery will be in a gradually cautious and stepwise fashion to maintain the balance between mass reinfections and the revamp of economic activity in many countries. So far, the easing of lockdown in many countries have followed that process. What it therefore means is that the oil companies may have to look at a twelve-month horizon for a possible full-scale activity return.
In the interim, their entrepreneurial destinies will unwrap in tandem with the gradual easing of economic activities globally and the consequent oil price improvements. Unfortunately, three months into the pandemic, many indigenous upstream oil producers are already defaulting in their bank obligations. But that is just one of the many potentially bank-specific devastating after-effects.
The other is the threat to the local content policy of the government in the oil and gas sector. The implication, therefore, is that leaving the local operators in the industry who do not possess a comparable level of access to global financing as their foreign counterparts without adequate rescue plan will set the policy back by several decades. And with the previously painted twelve-month picture of slow, and gradual economic recovery, these defaults will most likely get worse.
The drastic consequences of allowing this scenario to play out will be far-reaching not only on the local upstream oil operators and the exposed banks but to the economy as a whole through a host of other indirect channels. There are at least four ways in which banks receive the impact. The first is through the reduction in interest income as well as overall profitability.
READ ALSO: Where next for oil prices?
Other effect transmission channels include the possible adverse effects on bank balance sheets as well as potential increases in their operational costs. Again, it is also possible that if this very-low crude oil price regime lasts for more than six months without significantly sustained interventions in the banking sector, that confidence issues may crop-up.
An initial reduced confidence trigger may take roots among the not-too-strong banks that are also severely exposed. If not properly managed, this may worsen depending on the degree of withdrawals and liquidity mismatch experienced by such banks. It is needless to state that the indirect transmission channels can be as devastating as the direct impact points.
Furthermore, allowing this crisis to considerably hurt local operators in the upstream segment of the oil and gas sector will deal a devastating blow on the local representation in that industry. Nigeria has come a long way to have a foothold in the oil and gas sector, which is a supposed exclave economy that consequently determined our domestic economic success for several years.
The local content policy, which is a complementary feature of that foothold, will be disastrously affected without a consciously mapped out plan to save the local operators in that sector. The policy enhances local participation and capacity development of the Nigerian people and their resources.
Since its implementation in the oil and gas sector, it has expanded the value chain of embedded services provided by the Nigerian people. And in the natural order of things, Nigerian owned firms are always more disposed to engage authentically Nigerian businesses as part of the local content policy.
Therefore an error of policy design in a crisis time excluding them from salvific fiscal incentives will cost us a substantial share of the investment ownership and the human resources in the sector. We estimate the loss of up to 40% of economic activities in Nigerian owned firms – mostly engineering, construction as well as training and consulting firms – along the entire upstream oil and gas value chain if that potential faux pass is allowed.
Although the income-depressing effects on government and corporate earnings of the low oil prices are well-known and increasingly provisioned through varieties of interventionist programs to activate other sectors. However, we must know that ignoring, the upstream oil sector in these plans can only make matters worse.
The negative impact on governments income and many corporates with their economic activities embedded in the upstream oil sector’s value chain will, albeit at varying degrees, affect their capacity to repay their obligation to banks. In the same vein, the dilemma of our dangerous dependency on crude oil export for foreign exchange and our huge import dependency and appetite will naturally put pressure on both the exchange rate as well as the supply of foreign exchange.
The adjustments that will ensue will result in spikes on the cost of doing business. Many businesses will close shop as a consequence. These effects will aggravate the size of non-performing loans of the banking sectors. The severity of all of these potential consequences will depend on the extent to which the government’s fiscal interventions facilitate the revamp in the oil and gas sector as well as these other non-oil sectors.
The need for a comprehensive agenda for rebooting the economy that specifically recognises the unique challenges of the local players in the upstream segment of the Nigerian oil and gas sector is vital at this time. The dynamics of the current oil market crash and the attendant harsh economic reality differ from the 2015–17 oil price shock.
It, however, appears as if the central bank of Nigeria is still carrying-over and implementing its controversial ‘aloofness’ policy which it adopted in the 2015–17 situation to this present crisis. It would be very unwise to do so. While the pursuit of economic diversification is critical, it is essential to note that the oil sector is not dead on account of the current market crisis.
All industries occasionally face bumps in their market conditions. Governments always bail banks out, given its strategic importance. Nigeria’s upstream oil and gas sector in some sense possesses the same calibre of value.
What is good for the goose is therefore equally suitable for the gander. It is crucial that the government urgently unrolls a fiscal Marshall plan to address the economic emergency in the upstream oil sector. Of particular importance in the scheme should be the local players’ who lack the kind of leverage that their foreign counterparts have in accessing low costs funds globally.
Such a program should incorporate significant tax reliefs and perhaps up to a six-month suspension of repayments on loans owed local banks in the country. There should also be an articulated set of buffers for the recovery of local upstream oil operators as the global economy recovers.
Article written by Nnanyelugo Ike-Muonso
COVID-19: FG plans safe school reopening, as WHO discloses new guides to contain virus
The best way to reopen schools is once countries succeed in combating the spread of the disease.
The Federal Government has released guidelines for the safe reopening of schools after COVID-19 pandemic closures.
This was disclosed by the Federal Ministry of Education on its official website on Monday, as it published the guidelines and outlined actions, measures, and requirements needed for the safe reopening of schools after the pandemic is contained.
The 52-paged communique, which was signed by the Minister of Education, Mallam Adamu Adamu, and Minister of State (Education), Hon. Chukwuemeka Nwajiuba, was developed in collaboration with the Federal Ministry of Environment, Federal Ministry of Health, and health safety experts in the country.
Adamu said, “Now is the time to plan and address the eventual safe reopening of schools and learning facilities. It will be recalled that at the outbreak of the COVID-19 pandemic in Nigeria, schools and all learning facilities were closed in order to safeguard the health and general wellbeing of our children, youths, teachers, and educational personnel.
“As a responsible government, it is also our duty to provide comprehensive guidelines for a safe and hitch-free reopening of schools and learning facilities. We do so knowing that the health, safety, and security of learners, teachers, education personnel, and families are priorities.”
According to him, the Guidelines for Schools and Learning Facilities Reopening after COVID-19 Pandemic Closures outlines key strategies for implementing safe and efficient and equitable plans for school reopening and operations.
Mr Adamu further noted that the document focuses on attendance, social distancing, hygiene, cleaning, and non-pharmaceutical interventions for safe and healthy school activities and programs.
The minister noted that given that COVID-19 may be with us for a while, the guidelines also highlight the urgent need to maintain and improve upon distance-learning programs, adding that the government’s aim is to identify and strengthen programs that will guarantee the recovery of learning gaps resulting from the pandemic
Meanwhile, the World Health Organisation (WHO) has warned global leaders that Covid-19 will not disappear in the coming months, and it’s unrealistic to expect that a perfect vaccine will become available to everyone immediately.
This was disclosed by Head, Emergencies programme, WHO, Mike Ryan, at a briefing in Geneva, Switzerland, on Monday.
Ryan is optimistic that things won’t return to normal “for the foreseeable future,” as confirmed cases worldwide exceeded 13 million.
He explained that it would be unrealistic to expect that a perfect vaccine will become available to everyone immediately, and it’s not realistic to expect Covid-19 to disappear in the coming months.
— World Health Organization (WHO) (@WHO) July 13, 2020
WHO’s stand on when schools can open
Ryan said, “The best way to reopen schools is to do so once countries succeed in combating the spread of the disease.”
Technical Lead Officer, WHO, Maria Van Kerkhove, said, “Not enough is known about the role of children in transmission, though several recent studies suggest that children over 10 are more susceptible to infection than those under 10.”
She added that WHO has sent two scientists as an advance mission to China to work remotely with local researchers as local rules require them to stay in quarantine.
They are learning how animals transmitted the disease will help in fighting it.
COVID-19 Update in Nigeria
On the 13th of July 2020, 595 new confirmed cases and 4 deaths were recorded in Nigeria.
The spread of novel Corona Virus Disease (COVID-19) in Nigeria continues to record significant increase as the latest statistics provided by the Nigeria Centre for Disease Control reveal Nigeria now has 33,153 confirmed cases.
On the 13th of July 2020, 595 new confirmed cases and 4 deaths were recorded in Nigeria, having carried out a total daily test of 2,046 samples across the country.
To date, 33,153 cases have been confirmed, 13,671 cases have been discharged and 744 deaths have been recorded in 36 states and the Federal Capital Territory. A total of 183,294 tests have been carried out as of July 13th, 2020 compared to 181,248 tests a day earlier.
COVID-19 Case Updates- 13th July 2020,
- Total Number of Cases – 33,153
- Total Number Discharged – 13,671
- Total Deaths – 744
- Total Tests Carried out – 183,294
According to the NCDC, the 595 new cases were reported from 20 states- Lagos (156), Oyo (141), FCT (99), Edo (47), Kaduna (27), Ondo (22), Rivers (20), Osun (17), Imo (13), Plateau (10), Nasarawa (8), Anambra (8), Kano (5), Benue (5), Borno (5), Ogun (4), Taraba (3), Gombe (3), Kebbi (1), Cross River (1).
Meanwhile, the latest numbers bring Lagos state total confirmed cases to 12,583, followed by Abuja (2,675), Oyo (1,867), Edo (1,778), Rivers (1,388), Delta (1,359), Kano (1,314), Ogun (1,091), Kaduna (1,016), Ondo (738), Katsina (669), Ebonyi (616), Borno (591), Plateau (543), Gombe (533), Bauchi (521), Enugu (476), Abia (405), Imo (399), Kwara (330).
Jigawa state has recorded 321 cases, Bayelsa (313), Osun (262), Nasarawa (252), Sokoto (153), Akwa Ibom and Niger (145), Benue (126), Adamawa (110), Anambra (101), Kebbi (87), Zamfara (76), Ekiti (63), Yobe (62), Taraba (30), Cross River (10) 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.
|Date||Confirmed case||New cases||Total deaths||New deaths||Total recovery||Active cases||Critical cases|
|July 13, 2020||33153||595||744||4||13671||18738||7|
|July 12, 2020||32558||571||740||16||13447||18371||7|
|July 11, 2020||31987||664||724||15||13103||18160||7|
|July 10, 2020||31323||575||709||20||12795||17819||7|
|July 9, 2020||30748||499||689||5||12546||17513||7|
|July 8, 2020||30249||460||684||15||12373||17192||7|
|July 7, 2020||29789||503||669||15||12108||17012||7|
|July 6, 2020||29286||575||654||9||11828||16804||7|
|July 5, 2020||28711||544||645||11||11665||16401||7|
|July 4, 2020||28167||603||634||6||11462||16071||7|
|July 3, 2020||27564||454||628||12||11069||15867||7|
|July 2, 2020||27110||626||616||13||10801||15693||7|
|July 1, 2020||26484||790||603||13||10152||15729||7|
|June 30, 2020||25694||561||590||17||9746||15358||7|
|June 29, 2020||25133||566||573||8||9402||15158||7|
|June 28, 2020||24867||490||565||7||9007||14995||7|
|June 27, 2020||24077||779||558||4||8625||14894||7|
|June 26, 2020||23298||684||554||5||8253||14491||7|
|June 25, 2020||22614||594||549||7||7822||14243||7|
|June 24, 2020||22020||649||542||9||7613||13865||7|
|June 23, 2020||21371||452||533||8||7338||13500||7|
|June 22, 2020||20919||675||525||7||7109||13285||7|
|June 21, 2020||20242||436||518||12||6879||12847||7|
|June 20, 2020||19808||661||506||19||6718||12584||7|
|June 19, 2020||19147||667||487||12||6581||12079||7|
|June 18, 2020||18480||745||475||6||6307||11698||7|
|June 17, 2020||17735||587||469||14||5967||11299||7|
|June 16, 2020||17148||490||455||31||5623||11070||7|
|June 15, 2020||16658||573||424||4||5349||10885||7|
|June 14, 2020||16085||403||420||13||5220||10445||7|
|June 13, 2020||15682||501||407||8||5101||10174||7|
|June 12, 2020||15181||627||399||12||4891||9891||7|
|June 11, 2020||14554||681||387||5||4494||9673||7|
|June 10, 2020||13873||409||382||17||4351||9140||7|
|June 9, 2020||13464||663||365||4||4206||8893||7|
|June 8, 2020||12801||315||361||7||4040||8400||7|
|June 7, 2020||12486||260||354||12||3959||8173||7|
|June 6, 2020||12233||389||342||9||3826||8065||7|
|June 5, 2020||11844||328||333||10||3696||7815||7|
|June 4, 2020||11516||350||323||8||3535||7646||7|
|June 3, 2020||11166||348||315||1||3329||7522||7|
|June 2, 2020||10819||241||314||15||3239||7266||7|
|June 1, 2020||10578||416||299||12||3122||7157||9|
|May 31, 2020||10162||307||287||14||3007||6868||7|
|May 30, 2020||9855||553||273||12||2856||6726||7|
|May 29, 2020||9302||387||261||2||2697||6344||7|
|May 28, 2020||8915||182||259||5||2592||6064||7|
|May 27, 2020||8733||389||254||5||2501||5978||7|
|May 26, 2020||8344||276||249||16||2385||5710||7|
|May 25, 2020||8068||229||233||7||2311||5524||7|
|May 24, 2020||7839||313||226||5||2263||5360||7|
|May 23, 2020||7526||265||221||0||2174||5131||7|
|May 22, 2020||7261||245||221||10||2007||5033||7|
|May 21, 2020||7016||339||211||11||1907||4898||7|
|May 20, 2020||6677||284||200||8||1840||4637||7|
|May 19, 2020||6401||226||192||1||1734||4475||7|
|May 18, 2020||6175||216||191||9||1644||4340||7|
|May 17, 2020||5959||388||182||6||1594||4183||7|
|May 16, 2020||5621||176||176||5||1472||3973||7|
|May 15, 2020||5445||288||171||3||1320||3954||4|
|May 14, 2020||5162||193||168||3||1180||3815||4|
|May 13, 2020||4971||184||164||6||1070||3737||4|
|May 12, 2020||4787||146||158||6||959||3670||4|
|May 11, 2020||4641||242||152||10||902||3589||4|
|May 10, 2020||4399||248||142||17||778||3479||4|
|May 9, 2020||4151||239||127||11||745||3278||4|
|May 8, 2020||3912||386||118||10||679||3115||4|
|May 7, 2020||3526||381||108||4||601||2818||4|
|May 6, 2020||3145||195||104||5||534||2507||1|
|May 5, 2020||2950||148||99||5||481||2370||4|
|May 4, 2020||2802||245||94||6||417||2291||2|
|May 3, 2020||2558||170||88||2||400||2070||2|
|May 2, 2020||2388||220||86||17||351||1952||2|
|May 1, 2020||2170||238||69||10||351||1751||2|
|April 30, 2020||1932||204||59||7||317||1556||2|
|April 29, 2020||1728||196||52||7||307||1369||2|
|April 28, 2020||1532||195||45||4||255||1232||2|
|April 27, 2020||1337||64||41||0||255||994||2|
|April 26, 2020||1273||91||41||5||239||994||2|
|April 25, 2020||1182||87||36||3||222||925||2|
|April 24, 2020||1095||114||33||1||208||855||2|
|April 23, 2020||981||108||32||3||197||753||2|
|April 22, 2020||873||91||29||3||197||648||2|
|April 21, 2020||782||117||26||3||197||560||2|
|April 20, 2020||665||38||23||1||188||466||2|
|April 19, 2020||627||86||22||2||170||436||2|
|April 18, 2020||541||48||20||2||166||356||2|
|April 17, 2020||493||51||18||4||159||317||2|
|April 16, 2020||442||35||13||1||152||277||2|
|April 15, 2020||407||34||12||1||128||267||2|
|April 14, 2020||373||30||11||1||99||263||2|
|April 13, 2020||343||20||10||0||91||242||2|
|April 12, 2020||323||5||10||0||85||228||2|
|April 11, 2020||318||13||10||3||70||238||2|
|April 10, 2020||305||17||7||0||58||240||2|
|April 9, 2020||288||14||7||1||51||230||2|
|April 8, 2020||274||22||6||0||44||226||2|
|April 7, 2020||254||16||6||1||44||204||2|
|April 6, 2020||238||6||5||0||35||198||2|
|April 5, 2020||232||18||5||1||33||194||2|
|April 4, 2020||214||5||4||0||25||185||0|
|April 3, 2020||209||25||4||2||25||180||0|
|April 2, 2020||184||10||2||0||20||162||0|
|April 1, 2020||174||35||2||0||9||163||0|
|March 31, 2020||139||8||2||0||9||128||0|
|March 30, 2020||131||20||2||1||8||121||0|
|March 29, 2020||111||22||1||0||3||107||0|
|March 28, 2020||89||19||1||0||3||85||0|
|March 27, 2020||70||5||1||0||3||66||0|
|March 26, 2020||65||14||1||0||2||62||0|
|March 25, 2020||51||7||1||0||2||48||0|
|March 24, 2020||44||4||1||0||2||41||0|
|March 23, 2020||40||10||1||1||2||37||0|
|March 22, 2020||30||8||0||0||2||28||0|
|March 21, 2020||22||10||0||0||1||21||0|
|March 20, 2020||12||4||0||0||1||11||0|
|March 19, 2020||8||0||0||0||1||7||0|
|March 18, 2020||8||5||0||0||1||7||0|
|March 17, 2020||3||1||0||0||0||3||0|
|March 16, 2020||2||0||0||0||0||2||0|
|March 15, 2020||2||0||0||0||0||2||0|
|March 14, 2020||2||0||0||0||0||2||0|
|March 13, 2020||2||0||0||0||0||2||0|
|March 12, 2020||2||0||0||0||0||2||0|
|March 11, 2020||2||0||0||0||0||2||0|
|March 10, 2020||2||0||0||0||0||2||0|
|March 9, 2020||2||1||0||0||0||2||0|
|March 8, 2020||1||0||0||0||0||1||0|
|March 7, 2020||1||0||0||0||0||1||0|
|March 6, 2020||1||0||0||0||0||1||0|
|March 5, 2020||1||0||0||0||0||1||0|
|March 4, 2020||1||0||0||0||0||1||0|
|March 3, 2020||1||0||0||0||0||1||0|
|March 2, 2020||1||0||0||0||0||1||0|
|March 1, 2020||1||0||0||0||0||1||0|
|February 29, 2020||1||0||0||0||0||1||0|
|February 28, 2020||1||1||0||0||0||1||0|
Evacuation: 247 Nigerians arrive home from Malaysia, Thailand
The returnees were evacuated with a chartered Air Peace flight APK-7813.
The Federal Government of Nigeria has safely evacuated and returned home, two hundred and forty-seven Nigerians who were stranded in Malaysia and Thailand.
The returnees were evacuated with a chartered Air Peace flight APK-7813 which arrived the Nnamdi Azikiwe International Airport, Abuja at about 11p.m. on Saturday.
Chartered @airpeace flight APK-7813 conveying 247 stranded Nigerians from Malaysia and Thailand arrived Nnamdi Azikiwe International Airport, Abuja at exactly 2300HRS, 11th of July 2020.
Some passengers disembarked in Abuja..
— Nigerians in Diaspora Commission (@nidcom_gov) July 12, 2020
According to Mr Gabriel Odu, the Head of Media and Public Relations Unit of the Nigerians in Diaspora Commission (NiDCOM) who spoke to NAN, some of the returnees disembarked in Abuja, while the others proceeded to Murtala Muhammed International Airport, Lagos.
In line with the protocols announced by the Presidential Task Force on COVID-19, all of the returnees presented a negative COVID-19 test result before boarding the evacuation flight, and upon arriving Nigeria, are expected to proceed on a 14-day self-isolation.
Since four weeks ago, from the federal government, through the ministry of Foreign Affairs announced the resumption of evacuation flights, hundreds of stranded Nigerians have been returned home to their families from different countries including the United States of America, United Kingdom, Egypt, Malaysia and Thailand.
The returnees bear the cost of their flight tickets and are expected to self-isolate for four weeks, upon their return to Nigeria. Returnees who receive a clean bill of health after the isolation, are given their passports and allowed to go home.