In the just concluded week, the International Monetary Fund (IMF) in its latest edition of World Economic Outlook, predicted that the global economy would contract by 3.0% in 2020 due to the negative impact of COVID-19 on human lives and global economic activities amid lockdown orders in most countries to curb the spread of the virus.
Furthermore, it expects advanced economies to contract by 6.1% while China’s economy was projected to contract by just 1.2%. Sub-Saharan Africa was also expected to contract by 1.6% even as it forecasted Nigeria’s economy to contract by 3.4% in 2020 and South Africa’s economy to contract by 5.8% in the same year.
However, the Bretton Woods Institution was optimistic in its outlook for the global economy in 2021, projecting a 5.8% rebound.
Specifically, it expected the Nigerian and South African economies to grow by 2.4% and 4.0% respectively even as Sub-Saharan Africa was projected to rebound by 4.1% in 2021.
Also, the Chinese economy was projected to rise significantly by 9.2%. In a similar development, the World Trade Organisation (WTO) predicted that world trade would decline by between 13% and 32% in 2020 as a result of the negative impact of COVID-19; although, it was also optimistic in its forecast for 2021, projecting a recovery in trade next year.
According to the WTO Director-General, Roberto Azevedo, exports from Asia and North America would be the worst hit as trade volumes drop by double-digit in nearly all the regions. He stated that “trade will likely fall steeper in sectors with complex value chains, particularly electronics and automotive products” and
that “services trade may be most directly affected by novel coronavirus through transportation and travel restrictions”.
According to the report, the U.S dollar value of world merchandise exports moderated by 3.0% to USD18.89 trillion in 2019.
Meanwhile, Nigeria has reportedly been finding it difficult to sell its crude oil at the international market despite the reduction in official selling prices by the Nigerian National Petroleum Corporation (NNPC).
Accordingly, Nigeria’s glut of unsold crude oil was around 60 cargoes for April and May despite the reported cut in official selling prices for Bonny Light and Qua Iboe, in March by NNPC, by USD5 per barrel each to dated Brent minus USD3.29 and minus USD3.10 per barrel respectively.
Given the numerous headwinds associated with the COVID-19 pandemic, the Central Bank of Nigeria (CBN) designed a policy response timeline, in addition to the stimulus packages it had already put in place, to guide the management of the crisis and reboot the economy.
According to the CBN Governor, Godwin Emefiele, the apex bank’s immediate-term policy response would include, inter alia, granting regulatory forbearance to banks to restructure terms of facilities in affected sectors and improve FX supply to the CBN by directing all oil companies (international and domestic) and all related companies (oil service) to sell FX to CBN and no longer to the NNPC.
CBN’s short-term measures would include the establishment of a world-class Infrastructure Company (InfraCo Plc) and world-class hospitals.
Finally, its medium-term policy measures would aim to support mass employment and wealth creation in the country by focusing on electricity, manufacturing, affordable housing, renewable energy, and cutting-edge research.
We commend the CBN for taking proactive initiatives to manage the negative impact of the post-COVID-19 pandemic on the economy as this should help Nigeria get out of the imminent recession as soon as possible.
Nevertheless, we expect FG to ramp up its testing capacity in order to speedily flatten the COVID-19 transmission curve and ease restrictions as Nigeria’s speedy recovery from recession is quite dependent on how soon the stay-at-home order is lifted.