The crisis is another wake-up call to restructure the economy
Even when the numbers are open to broad interpretation, the figures released recently by the National Bureau of Statistics (NBS) only confirmed the deteriorating situation of things. According to the NBS, the country’s unemployment rate rose to a record 27 per cent in the second quarter of 2020, from 23 per cent in the third quarter of 2018. In effect, about 22 million Nigerians, twice the population of neighbouring Benin Republic, are unemployed. The underemployment rate is much higher, put at 28 per cent. As expected, the majority of the unemployed are young men and women in their productive age.
For decades, the nation has been unable to provide sufficient jobs for its growing population. As a result, millions of Nigerians – trained and untrained, young or old – are consistently exposed to large scale economic hardship and poverty. This state of affairs is further worsened by the prevailing Covid-19 pandemic ravaging the entire world. The attempts to contain the spread of the virus have impeded economic activities across the world, disrupting trade and chain of supplies, and much more. Nigeria is one of the countries hardest hit because of its overly dependence on oil. Oil accounts for 80 per cent exports, 30% of its banking-sector credit, and more than 60% of the overall government revenue.
Indeed, the sharp fall in oil prices has almost brought the nation to its kneel. The $57 per barrel benchmark earlier earmarked for the 2020 budget had since been slashed to $30 per barrel. Last week, Finance Minister, Zainab Ahmed, said the economy could plunge into another economic recession. “Nigeria’s Q2 GDP growth is in all likelihood negative and unless we achieve a very strong Q3 2020 economic performance the Nigerian economy is likely to lapse into a second recession in four years with significant adverse consequences,” she said. She was proved right with the figures recently released as the country suffered the worst contraction in a decade. The COVID-19 containment measures, although necessary, have inhibited domestic economic activities with grave negative impact on taxation and other. Furthermore, the disruption in local agri-food supply chains and higher transaction costs, aggravated by insecurity, are likely to result in substantial decline in agricultural production. Besides the human cost, the COVID-19 shock alone is projected to push about five million more Nigerians into poverty in 2020.
This is more so as the country has no form of savings to act as a buffer against the economic onslaught. The Sovereign Wealth Fund is almost depleted. The uncertainty caused by the pandemic has led to a fall in private investment while remittances from Nigerians abroad have dwindled to a trickle. The country is highly indebted, spending more than 60 per cent of its income to service debts. Besides, foreign direct investment and overseas development assistance are more or less at a standstill. In response to the developments affecting the supply of foreign exchange to the economy, the Central Bank of Nigeria (CBN) recently adjusted the official exchange rate to N360, and more recently to N379. But on the parallel market, about N480 exchange for one American dollar. This has enabled spiral inflation which hit a record 12.82 per cent in July. In a report titled, “Through the Roof: A legacy of high inflation and unemployment,” SB Morgen, an African focused-research firm, said annual inflation in Nigeria rose for the 11th straight month in July 2020 as Covid-19 took its toll on imports and logistics.
As this newspaper has said repeatedly, the economic crisis should serve as a wake-up call for restructuring the economy and putting it on a new path of rapid growth and development. There is urgent need to reduce the overwhelming dependence on oil, strengthen the budget and service delivery, and above all give more than a half-hearted attempt to agriculture.