Nigeria’s economy faces Omicron’s hurdle

The new variant of the Coronavirus Disease, known as Omicron, poses a big threat to the global economy, especially in developing countries such as Nigeria that are battling for survival, writes EHIME ALEX

Amid palpable fear that the new Omicron variant could attack the world’s crude oil prices that are already looking up, Nigeria’s National Assembly has passed the country’s budget, raising the benchmark price for crude from $57, submitted by President Muhammadu Buhari, to $62 per barrel.

Global oil price had fallen below $20 a barrel last year with the collapse in demand, arising from COVID-19. This adversely affected the Nigerian economy, punching holes in its 2020 and 2021 budgets.

A report from the Nigeria Centre for Disease Control on Monday, December 21, 2021, showed that 1,368 new cases of the COVID-19 were confirmed across the 36 states and the Federal Capital Territory. This brings the total confirmed cases to 225,255 and death toll 2,985.

Now in its fourth wave, the pandemic has further widened its impact on the world economy. The new Omicron variant is a stark reminder that the pandemic will be with us for a while, the International Monetary Fund warned recently.

In its ‘Weekly Global Economic Update’, Deloitte stated, “The recent rise in COVID-19 cases and the emergence of the Omicron variant pose downside risks to employment and economic activity and increased uncertainty for inflation. Greater concerns about the virus could reduce people’s willingness to work in person, which would slow progress in the labour market and intensify supply-chain disruptions.”

In Nigeria, different national bodies have begun to urge the government to take proactive steps to quickly curtail the spread of Omicron, as it has been noted to spread faster than the earlier COVID-19 virus.

First deep cut

The first deep cut was given by COVID-19. Nigeria, being among the first Sub-Saharan Africa countries to experience Coronavirus-related cases in 2020, witnessed a plunge in oil prices, as the virus caused havoc globally. As the oil sector contributes bulk of the Nigerian government’s revenue, such a fall in price spelt disaster for the economy. Prior to the 2016 recession, the Nigerian economy reportedly recorded about six per cent growth. After the recession, it fell less than three per cent.

It is safe to state that the pre-COVID Nigerian economy was less prepared for shocks, as oil revenue was insufficient to hold the hyper-inflation; no thanks to government’s policies that seem like treating terminal illness with analgesic.

With the new variant, many markets are already pricing in its possible risks and consequences, said CSL Researchers in a publication entitled, ‘The Omicron Variant and the Nigerian Economy’.

While responding to questions on the decision by the Bank of England to not raise rates in November was an example of inaction towards inflation pressures, IMF Managing Director, Kristalina Georgieva, said it was possible that Omicron would add to the supply chain interruptions.

She said, “We know that the pandemic has led to inflationary pressures across the world by straining supply chains, by food inflation in some places going up, by energy prices going up, by tight labour markets in some situations.”

Doom foretold

The World Bank, in January 2021, had predicted that the pandemic would send an additional 10.9 million Nigerians to the poverty region in 2022, the Human Rights Watch noted in a report.

Julius Kekene, a resident, told FS that another lockdown is not an option, as it would not help the economy in any way, considering its current state, even as many had yet to recover from the last edition.

Omicron as ill wind on Nigeria

Following the detection of the Omicron variant, Argentina, Britain, Canada and Saudi Arabia all placed Nigerian airlines on the red list, which almost resulted in retaliation by the Nigerian government.

“We have given our input as aviation that it is not acceptable by us and we recommend that those countries – Canada, United Kingdom, Saudi Arabia and Argentina – be also put on the red list, just like they did to us,” said Nigeria’s Minister of Aviation, Hadi Sirika.

In a recent publication, ‘The Omicron Variant and the Nigerian Economy’, CSL Researchers said, “We expect the global impact, if not nipped in the bud, to adversely affect the country’s fragile economy.

“Already, the forecast for the international price of crude oil going into 2022 appears biased towards a decline, which becomes a major concern for Nigeria, given the concentration of crude oil proceeds in its export earnings, the impact on reserves and the management of FX supply towards exchange rate stability.”

The analysts added that though many issues around the new variant remain unclear, “a fourth wave, if not nipped in the bud, might be a serious concern for the overall economic outlook in 2022.”