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Prospects of Nigeria’s economic recovery post-Covid-19

The economy needs stimulus packages that will revive jobs and raise purchasing power fast.



Nigeria’s prospects post-Covid-19 came under intense scrutiny by a panel of experts last week during the Nigeria outlook review organised by Deloitte Nigeria. One of the key problems identified as Nigeria’s Achilles heel is the structure of its economy. Nigeria is facing an acute concentration risk in terms of revenue. From 1962 to date the economy has become concentrated towards the oil and gas business.

Just recently, the World Bank Outlook for Africa in light of the pandemic, was a mere 3%, compared to a bullish projection for the Asia economy led by China. In fact, China seems to have shrugged off the pandemic with a minimum of a scratch. When you add that to the fact that they have been in a trade war with the US for the past 3 years, it is clear the Chinese economy is remarkably resilient.

While Asian economies such as Singapore, China, S.Korea and Vietnam have become diversified and naturally more able to resist shock and overcome global economic downturn. Similar stories litter the African continent with a similar pattern of over-concentration on raw material, or mineral resources such as diamond, gold, oil, etc.

Currently, Nigeria derives about 93% of its income from the petroleum sector. Government effort to achieve diversification especially through Agriculture has not done enough to change this narrative. You will recall that the government locked the border to support local agric businesses. There is some green shoot of success (especially with rice production and many mills springing up, even if the price in the market is still high) but still far from where we need to be.

In the short term though, two things are acting as a wind in the back of a Nigerian sail.

Firstly, with the gradual recovery of the world economy from the brink of the global pandemic, and return of activities, the price of crude oil is over $60pb. Recall that at the height of the pandemic the price went sub-zero.

Secondly, the success story of the Coronavirus vaccine worldwide giving hope that life will be back to normal soon, coupled with the stimulus package expected to pass in the US soon, Nigeria can heave a sigh of relief.

But for how long…?

With the issue of climate change back to the center stage (with the US joining the Paris Accord and the appointment of John Kerry as climate Czar in the US), and many auto companies embracing electric vehicle and phasing out fossil fuel cars, Nigeria may find it difficult to offload its sweet crude in the long term.

Also, it is expected that Iran oil will soon enter and glut the oil market with a resultant drop in the price of oil. The new US president, Joe Biden is far more favourable to the Iranians than the Trump administration. The key officials that negotiated the initial agreement such as John Kerry are back at the helms.

There are some developments that might help too. One of such is the new African Continental Free Trade Area (AfCFTA). It could provide a much-needed boost for Pan African trading. Another is the current infrastructural drive of the present administration in areas of rail and transportation. It might be able to unburden some critical bottlenecks in food, and goods distribution and reduce agricultural wastes.

The exchange rate is another critical area of attention. Recently the World Bank wanted the Naira to be devalued – a clear sign that the bank perceives Naira to be overvalued. For now, the CBN and the Nigerian government are resisting the pressure to devalue the currency. The question is for how long?

If they buckle, with CBN not focusing on curbing inflation, the inflation situation might worsen dramatically.

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Expectedly, the Nigerian Finance Minister painted a rosier picture with various government policies targeting post-pandemic recovery, increased revenue, and improved ease of doing business, but the successes of these policies are yet to be felt.


The country is still laden with too many structural constraints of power provision and transportation lapses, aside from the issues of security affecting lives and livelihood, especially in the North East.

The speed of economic recovery post-Covid-19 is also tied to the issue of access to the relevant vaccines and their distribution. Even with the second wave and various reports of Covid-19 variants, it is not expected that lockdown will come into the conversation.

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Ultimately, the current surging oil price has papered over the crack for now, but with high unemployment contributing to the youthful restlessness (as seen in the #ENDSARS protest this weekend), the economy needs stimulus packages that will revive jobs and raise purchasing power fast.

But with the state of our public finances, can policymakers still manage to do so?

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Why there is a massive sell-off of US stocks



Nigerian stocks record worst quarterly drop since 2009

The United States 10-year Treasury yields rose to a new one-year high of  1.5% on Thursday sending the equities market on a bearish run. The US Dow Jones Industrial Average was down 1.5% as of 7.30 pm on Thursday falling by a whopping 500 points. The S&P 500 and NASDAQ were both down 2% and 2.75% respectively ad the sell-offs intensified.

Global bond prices also fell lower on Thursday and investors around the world sold off massively as they feared higher inflation could erode bond yields.

What is going on?

Investors are worried that massive injection of stimulus in the US and in most European countries could trigger higher inflation which will erode profits on bond yields assuming their fears materializes.

US inflation rate for the month of January 2021 was 1.4% the same as the month of December 2020. US inflation was as high as 2.3% a year ago yet investors remain worried. In response to this fear, bond yields have hit multiple one-year highs. This fear is has now spread to the US equities market.

US President Joe Biden is seeking a $1.9 trillion stimulus package which many had hoped will please the market. However, it appears investors are rather afraid that it could trigger a “reflation” eroding whatever positive jolt it could have had on the wider economy.

What this means for your stocks

A rise in interest rates is triggering a massive sell-off in US stocks ad investors fear a return to higher inflation could signal the market could be entering a bearish era. Stocks have hit multi-year highs since January as investors poured in billions of dollars into stocks. If this sell-off persists then investors in US stocks could see the value of their portfolio plummet.

Tech Stocks are particularly affected by the sell-offs with investors dumping heavyweights like Netflix, Tesla, Amazon, Microsoft, Facebook, Google all falling. Meme stocks, an acronym for stocks popular with Reddit and Twitter retail investors have also suffered losses.

Nairametrics SSN  subscribers are advised to track their portfolios accordingly.

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Buharinomics: In Stagflation we trust

We explain why President Buhari is synonymous with stagflation and what he can do to get us out of it.



Military located bandits in kankara, Q1 2020 National Debt report, Buhari finally speaks on NDDC probe, urges NA to act with a sense of urgency,National Human Rights Commission,Presidency bows to pressure, agrees to demand made by EndSARS protesters, Our economy is too fragile to bear another round of lockdown-Buhari, Zarbarmari: Massacre by Boko Haram is nothing short of senseless, barbaric, gruesome and cowardly- Buhari

Economists define stagflation as a period of slow economic growth, high unemployment rate and higher inflation. It is one of the worst kinds of economic state of affairs that often leads to poverty, insecurity and social-economic crisis. It is a sticky economic conundrum that is incredibly difficult to escape from.

The latest data from the National Bureau of Statistics reveal Nigeria barely slipped out of a recession in the 4th quarter of 2020 with a 0.11% GDP Growth rate. Despite being a welcome news, it is the slowest GDP Growth rate on record at least since 2011.

Earlier on, in the same week, the Statistics Bureau also released inflation data for the month of January revealing an inflation rate of 16.47%, the highest since April 2017, and affirming Nigeria’s galloping inflation status.

Nigeria is in a protracted state of stagflation and has been in the state since the Buhari administration came into power in 2015. Nigeria’s Gross Domestic product per quarter has averaged 0.18% in the last 6 years since this administration got elected into power. The Buhari government has also presided over a consumer price index change of 108.6%, meaning that prices of nearly every measurable item have doubled in the last 6 years.

Flashback to the first installment of General Buhari and the story is all too familiar. Nigeria’s GDP Growth rate for 1983, 1984 was -10.92% and -1.12% respectively. Annual inflation rate in the same period was 17.2% and 23.8% respectively.

Buharinomics is synonymous with Stagflation.

How did we get here?

While it all started from the drop in oil prices in 2014, a cocktail of economic policies from the Buhari-led administration is largely blamed for Nigeria’s economic quagmire. Since it came into power, the government has adopted economic policies that are centered around defending the local currency, import substitution and social spending.

For all its good intentions, these policies are pregnant with side effects that potentially erase its positives, turning into cancer of cataclysmic proportions.

For example, while the policy of defending the exchange rate stabilized the naira between 2016 and 2019, it cost the CBN trillions in interest payments and high cost of borrowing.

The high cost of borrowing is associated with higher inflation and stunted economic growth as small businesses cannot secure the funding required to expand and even when they do it is expensive.

The policy of promoting locally made goods over their foreign alternatives has also led to multiple bans of access to forex to imports, higher customs duties and taxes on imports and a crushing border closure all of which have combined to send inflation off the roof.

Nigeria’s inflation rate conundrum can also be traced to supply-side challenges such as insecurity, logistic gridlocks, corruption and inefficiencies at the Nations ports and an overall bitter experience in the nation’s ease of doing business.

How to get out of Stagflation

There is no clear-cut set of rules that can end stagflation however a rethink of the government’s approach to policymaking and implementation could be a good first step to control it, especially if the target is one of the major causes of stagflation, supply-side inflation.

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To address Nigeria’s challenges with Stagflation, the Buhari Government will have to swallow its pride and relinquish trust in moribund policies that have not worked. Wholesome of Nigeria’s economic challenges are out of its control (like fall in oil prices) a huge chunk of it is self-inflicted and as such within its control. For example, it must fix the spate of insecurity around the country by being more deliberate with dealing with bandits, militant herdsmen and terrorists.


It must declare a national emergency in the nation’s ports and reduce the lead time to clearing goods for import or export. It must address the logistics issues affecting the distribution of farm produce from a place of planting to the destination of consumption.

Monetary policy restrictions stifling trade must be loosened and replaced with a reward policy system that encourages exports as against imports without banning cheap substitutes that have no local production advantage. We need new regulations and laws that favour private sector investments, protect property and enable capital formation. A case in point is the perennial PIB Bill that gets debated year after year.

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These are not novel ideas within economic circles and as such cannot be that difficult to conceive and concede to doing. The challenges have always been the will and courage to act in defiance of snags such as vested interests, political ideology, endemic bureaucracy, and corruption. This government has shown in the past that it can roll back on unpopular policies except that it does it too late with not enough time to create a positive impact.

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