The dust has started to clear, a week after peaceful protests by Nigerian youths under the banner #EndSARS directed against police brutality, was met with brutal force at what amature and professional historians are already calling ‘The Lekki Tollgate Massacre.’ Not a few analysts, however, say the counting of economic losses is currently on and that no matter how much counting is done and the value put to it, the economy, Nigerians will feel the heat in 2021 like never before. PAUL OGBUOKIRI takes a look on the unfolding development
An economy at the point of recession
Before the outbreak of the COVID-19 pandemic, Nigeria’s economy was in a fragile state due to the low prices of crude oil. Then came the pandemic that led to the shutdown of the global economy. Oil prices fell and recorded 18-year low trading at less than $22 dollars per barrel around March 2020.
Nigeria’s inflation went out of control. A loaf of bread which is for the common man, formerly sold between N300-350 increased to between N400-N450.
A basket of tomatoes that was sold for N500-N600 before the coronavirus pandemic now ranges between N2, 000 and N2500.
To salvage the situation and enable ease of business in Nigeria despite the pandemic, the Central Bank of Nigeria (CBN) had announced policy measures such as the additional moratorium of one year on CBN intervention facilities, interest rate reduction on intervention facilities from 9 per cent to 5 per cent; the activation of the N1.5 trillion InfraCo Project for building critical infrastructure; the strengthening of lending to deposit ratio policy, additional N100 billion intervention in healthcare loans to pharmaceutical companies; and the N1 trillion loan to boost local manufacturing and production across critical sectors.
However, as Nigerians were warming up to government’s policy measures expected to bring succor, the nation woke up to protests by youths against police brutality early this month.
Triggered by a leaked video of the brutal killing of a young man fleeing from men of the State Anti-robbery Squad (SARS), the protest, which commenced in Lagos, quickly spread to other states in the country.
Deficit in essential items
Sequel to protests, it is expected that majority of Nigerians are at risk of acute food shortage next year in view of the floods that ravaged that food producing belts of the country and the Federal Government’s halting of foreign exchange on food importation has led to scarcity of some food items in the market.
The result is a deficit of over 9.54 million tonnes of essential four food items from the country’s supply list. President Muhammadu Buhari had said that the directive to the Central Bank of Nigeria, (CBN) to stop providing foreign exchange for food importation was to improve agricultural production in order to attain full food security.
However, findings revealed that the forex restriction has affected essential food items such as rice, frozen products, wheat and sugar.
For instance, the effect of the directive and closure of Nigerian borders has already affected the price of local rice and some frozen food because of the acute deficit. The country’s rice deficit has reached 2.2 million tonnes as production reaches 4.9 million tonnes. Also, the country is in deficit of 5.1million tonnes of wheat, while production stands at only 60,000 tonnes.
It was gathered that only importation of the items could bridge the deficit. Nigeria’s sugar deficit, according to Index Mundi, a trade portal on the volume of imports coming into the country, has attained 1.89million tonnes, while production nosedived from 80,000 tonnes in 2018 to 75,000 tonnes this year.
Also, Palm Oil deficit is 350,000 tonnes, while production remained at 1.02 million tonnes. A bag of 50 kilogrammes of locally produced rice has gone up from N13, 500 to N25, 000 in the market within the last few weeks.
Also, a carton of frozen fish has jumped from N10, 000 to N25, 000 or by 60 per cent, while a carton of frozen turkey, which was N13, 000 as at August 19, 2019 has shifted by 27.8 per cent to N18, 000. Similarly, a carton of chicken, which was N9, 500 has also increased by 32.1 per cent to N14, 000. Nigeria is currently experiencing a deficit of 9.54 million metric tonnes on the four essential food items.
IMF may further review Nigeria’s GDP growth downward
Owing to the damage done by the protests, the International Monetary Fund (IMF) has also shown an inclination to review the economic growth decline projections of Nigeria, which was previously pegged at -5.4 per cent.
This came as Uche Uwaleke, a professor of capital market at Nasarawa State University has said “one of the impacts of the protest is that it may attract downgrades by rating agencies, as the crisis has potential to roll back gradual progress being made in economic recovery. Also, a bearish stock market is likely to result.
The curfew and more restrictions will disrupt supply chains, induce panic buying and worsen inflation rate.” However, IMF said it had already finished collecting its data but the projection of the decline of Nigeria’s GDP will depend largely on how the protest evolves.
The Fund’s Director, African Department, Abebe Selassie, said this while responding to questions during the October 2020 Sub-Saharan Africa Regional Economic Outlook Press Briefing, on the sidelines of IMF/World Bank virtual annual meetings in Washington D.C.
In its October 2020 regional economic outlook, the Brettonwoods institution projects a modest growth of 3.1 per cent for economies of sub-Saharan Africa in 2021. “The entire region is not expected to return to its 2019 level of output until 2022, and for some of the region’s largest economies, real GDP will not come back to the pre-crisis level until 2023 or 2024.
This growth will translate into quite significant decline in standard of living, as measured by real per capita GDP, over 2020-21, a contraction of around five percent, which is significantly larger than most other parts of the world, “the Fund said. IMF said growth expectation for the region this year is broadly unchanged from June. It had in June forecast the regional economy to contract by 3.2 per cent, double the contraction predicted in April.
The Fund said Sub-Saharan Africa faces significant financing gaps of $290 billion in three years. Much it said would depend on how private financing flows behave. “If they were to remain below pre-crisis levels, and even taking into account existing commitments from international financial institutions and official bilateral creditors, the region could face a gap of as much as $290 billion, between 2020 and 2023,” Selassie said.
Closing this financing gap, the IMF said, would require a combination of additional concessional financing, timely debt relief in those countries where debt is unsustainable, and transformative reforms to attract private investment.
“On the growth projections in Nigeria, I mean, these protests happened of course, after we had closed, after the period where the data we looked at in making the growth projections for this economic outlook. And much will depend really on how these protests evolve.
“Lagos of course is a very important economic hub and contributes quite a bit of economic activity to overall Nigeria activities. So, if these persist and are showing significant effects on economic data, we will internalise them in due course,” he said. He also said the economic condition of Nigeria for the past four years has been poor due to the decline in oil prices.
“It has been a lot of pressure on standards of living, so there has been this dislocation and you know, as always when you have these kinds of economic difficulties, you know, social protests are not uncommon. “I think this is exactly why we have been on the record in Nigeria about how really critical it is to get all of the policy-induced barriers out of the way to facilitate stronger economic growth,” he said.
Quantifying losses and payment of claims by insurers
Ekerete Olawoye Gam-Ikon, a management strategy-insurance consultant, told Sunday Telegraph that it will be very premature to mention any amount whatsoever because, with insurance, the reports on damage estimate might continue coming in within the next 30 days.
“It will be difficult to guess the quantum of insurance value but the level of damage has already been indicated in billions of naira according to industry reports. “Insurance is the most tested risk management mechanism and non-monetary financial instrument that addresses losses of this nature, often both financial and emotional. However, we have not imbibed the culture of insurance because we are ignorant of the value it offers and delivers per time.
Let me say that all insurance policyholders with policies that have Riots, Strikes and Civil Commotion (RSCC) extensions will most likely receive compensation from their insurers. For insurance of vehicles and properties, that condition exists and once fulfilled the policyholders will have their claims settled,” he said Ekerete, however, warned those that will receive claims payments to fix their properties that they should expect upwards adjustments of their premium, saying insurance companies will appoint loss adjusters to go and verify the extent of damage before the magnitude of claims can be determined.