KPMG Nigeria says the countrie’s vulnerabilities to the impact of the Covid-19 pandemic and oil price shock can be adduced to increased dependencies on global economies for fiscal revenues, foreign exchange inflows, fiscal deficit funding, and capital flows required to sustain the nation’s economic activities.
It would be recalled that Minister of Finance, Zainab Ahmed had disclosed that the country requested $3.4 billion from the International Monetary Fund, $2.5 billion from the World Bank, and $1 billion from African Development Bank.
The multinational professional services firm noted that Nigeria’s imports from China were N4.3trillion (25 per cent of total imports), while imported manufactured goods took up about 70 per cent of total imports.
No doubt, the import figures are expected to go southward by the end of 2020, as China and the rest of the world have shut their factories, imposing travel bans and in most cases total lockdowns.
According to KPMG, crude oil price war between Saudi Arabia and Russia is also threatening Nigeria’s economic stability as the price has drastically reduced. This development, according to the analysts, would put more pressure on inflation numbers which stands 12.2 per cent year on year as at February 2020.
Oil prices have fallen to a level below $30 per barrel, as inventories are accumulated and demand becomes increasingly dampened.
The combination of the impact of COVID-19 and the lockdown policy responses implemented to curb the spread of the disease across the globe and locally has affected the global demand.
For instance, the top 5 major oil export destinations for Nigeria (India, Spain, Netherlands, South Africa, France and Italy) are all battling the pandemic and are under lock and keys.
The disruption caused by oil market wars, which was instigated by Saudi Arabia and Russia, also complicated issues for Nigeria, as it upset the demand and supply dynamics in the global oil markets.
Meanwhile, the demand is expected to crash further due to the increasing cases of COVID-19 across various states, which has led to the restriction of movement and closure of businesses in major cities.
This may worsen as companies adjust to the new economic realities by laying off workers, further worsening the unemployment rate, which was reported at 23.3 per cent according to the latest available data.
According to the analysts at KPMG, the impact of the twin shocks is also expected to disrupt global capital flows to emerging markets, including Nigeria.No tags for this post.