The novel coronavirus continued its devastating rampage across the world as a sizable portion of the globe remained quarantined. In the U.S., total unemployment rose to 4.4% in March 2020 and is expected to rise significantly higher to double digits in April.
However, this number does not paint the full story.
The unemployment figures for March were calculated in the four-week period from mid-February to mid-March. Nearly 10 million jobs were lost in the first two weeks of April as a result of the pandemic which points to a significantly higher unemployment rate by the time the April numbers are released.
Certain sectors were particularly affected as demand for most goods such as travel and leisure were hard hit, almost dropping to zero in some cases. U.S. gross domestic product fell by 4.8% in the first quarter of 2020, the first negative result since the 1.1% decline in the first quarter of 2014 and the lowest since the negative 8.4% recorded in the fourth quarter of 2008.
Consumer spending, nonresidential fixed investment, and exports were gravely affected; federal spending, however, was up by 1.7%. It is important to note that while the first quarter only had two weeks of the shutdown, it had an outsized impact on the performance of the economy. This points to a potentially worse impact in the second quarter even if the quarantine is lifted shortly.
Although the world’s second-largest economy, China, has restarted after an unprecedented shutdown, there are signs that the economy is struggling to attain pre-COVID-19 levels. Factories are at less than full capacity and tens of millions of workers are out of work. In addition, the Chinese are discovering that overseas demand has slumped considerably.
China’s first-quarter GDP contracted by 6.8%, the first contraction since 1992. Retail sales fell 19% in the first quarter, sales of consumer goods fell 15.8% in March, while online sales of physical goods bucked the trend and rose by 5.9%. While all major industrial enterprises have resumed work and smaller businesses are at 80% capacity, business activity has not yet fully returned to normal due to the dramatic drop in exports.
So far, the IMF has responded to emergency financing requests from various countries. The facility now exceeds USD 15 billion and covers over 50 countries in April, especially in Africa with the largest beneficiaries being Nigeria, Pakistan, South Africa and Egypt.
For Nigeria, the IMF approved a $3.4 billion emergency financial assistance package under the Rapid Financing Instrument. The IMF financial support will help limit the decline in foreign reserves and provide financing to the budget for targeted and temporary spending increases aimed at containing and mitigating the economic impact of the pandemic and of the sharp fall in international oil prices.
The IMF facility would be of immense help as foreign investors who sold their securities in the past month have been unable to repatriate the proceeds as a result of dollar scarcity.
The Federal Government also cut down the budget by N317.5 billion to N10.276 trillion. The crude oil benchmark was also slashed to $30/barrel from $57/barrel, oil production volume was reduced to 1.7mbpd from 2.17mbpd, and the exchange rate was revised to N360/$1 from N305/$1. The Nigerian National Petroleum Corporation (NNPC) also announced the end of the era of the petrol subsidy.
According to the NNPC, with the current fluctuations in global crude oil prices, the cost of refined products would be determined by market forces going forward.
In addition, the country began the gradual easing of the lockdown imposed in Lagos, Abuja and Ogun effective May 4th citing the heavy economic costs of the 5-week lockdown. As part of the easing process, authorities will enforce an overnight curfew from 8 p.m. to 6 a.m. and will require individuals who are out during the day to wear a face mask. There is also a ban on non-essential interstate movements.
Excerpts from Nigeria Macroeconomic Markets Report by Comercio Partners