“When will this economic paralysis, ocassioned by the Covid-19 come to an end? I am in pain and dying with my children as staying at home order or banning of interstate movements have made life miserable for me and my children.
“I prefer to die from this Coronavirus than die of hunger. Neither has the partial relaxation improved my lot as the checkpoints mounted by the combined team of police and army has really become toll gate, making the operators to be smiling to the banks as well as their families being assured of three square meals daily. ”
These were some of the lamentations of Adebayo Yusuf. (not real name), the head of a family of six leaving at the Lagos outskirt, Mowe, a neibouring town in Ogun State.
The frustrations and lamentations are similar to those of many Nigerians even those living in Lagos and other states, who are being impoverished by the handling of the Pandemic.
In fact, Bismarck Rewane. Chief executive, Financial Derivatives Company, in the current Economic Bulletin said, “Many analysts expected domestic commodity prices to fall back to normal as the lockdown was partially relaxed. In reality, prices have continued to climb because of a combination of factors including the supply disruptions caused by checkpoints, bottlenecks and fear of infection.“
Also, Rewane, in the current edition of the LBS Breakfast Session, said, ”Lockdown fatigue and anxiety are a potent mix for social unrest. The key question therefore is “What is the alternative?”
According him, “Government has no choice but to tread the mid-path between a gradual reopening on the one hand and monitoring the infection rates closely on the other. The economic recovery curve is a treacherous path of difficult options and hard choices. It is one that requires honesty of purpose and execution transparency.
The inevitable negative GDP growth that could reach -2.5% in Q2, the yet to be released unemployment figure estimated by some analysts at 35% and the multidimensional poverty rate of 51.4% (98million) are warning signals that the worst may yet be ahead.“
He further said that,“After all is said, the Nigerian market is not a Robinson Crusoe economy. It has to trade, relate and invest with the rest of the world.
“Nigeria’s share of global investment flows are down to 0.23% ($3.2bn) while its share of global exports has fallen to 0.19%. So it is important to see the current crisis through the prism of Rana Foroohar, the celebrated Economist and FT Columnist, who says that unfettered globalization is over. This is because of the retrenchment of complex international supply chains and the decoupling of the US & China. She predicts that after this crisis, the world would be a tripolar universe of rising nationalism, resilient and inclusive local economies and almost paranoid economic patriots. This is what we see as part of the new economic order.“
In fact, Foreign Direct Investment (FDI), is usually used to describe when a foreign entity invests in or acquires a business asset in a country like Nigeria and this has often been put forward as the panacea to our nation’s economic underdevelopment
But, when an economy is bleeding like Nigeria’s currently does, what is required are expansionary tactics that increase consumption, production and increase in jobs creation. In fact, this is the thinking that has made quantitative easing a fanciful economic theory despite its tendency towards inflation.
Besides the dearth of foreign direct investments, Banks have commenced some decisions which are leading to either downsizing of Staff or some business decisions in response to some policies of the Central Bank of Nigeria. (CBN).
For instance, Zenith Bank Plc said last week that it expects the volume of Nigerian Treasury Bills (NTBs) issuance to reduce in the short to medium term.
This was disclosed in the tier-1 bank’s weekly economic intelligence report recently published.
The report is coming just days after the CBN released its Treasury Bills calendar for the third quarter (Q3) of 2020.
Zenith Bank Plc has said it expects the volume of Nigerian Treasury Bills (NTBs) issuance to reduce in the short to medium term. This was disclosed in the tier-1 bank’s weekly economic intelligence report that was published earlier today. The calendar showed the CBN’s projection to raise about N822 billion between June and August this year.Some 91-day tenured bills valued at N109.65 will be auctioned, along with 182-days bills worth N149.44 billion and another set of 364-days instrument worth N562.71 billion projected reduction is because of the Federal Government’s decision to reduce the issuance of short-term financial instruments.s
Despite the total value of capital inflows into Nigeria of $5.854 billion in the first quarter of 2020, representing a 53.97 percent increase compared to $3.802 billion recorded in Q4 2019, some analysts fear that the impressive numbers would see a huge reversal in coming quarters as the impact of COVID-19 pandemic begins to set in.
More worrisome is the fact that according to the National Bureau of Statistics’ report released Tuesday, the largest amount of capital importation by type was received through Portfolio investment at $4.309 billion, accounting for 73.61 percent of total capital importation.
But the analysts insist that the portfolio investments are monies that would fly away easily and as soon as the rates are are not favourable to them.
Friday Ameh, energy analyst says although the recorded increase in the quarter was commendable, but of less importance to the economy as the portfolio investments add no substantial effects to economic growth.
” Only FDIs contribute to economic growth, while PIs, which are liquid money that can fly any day. ”
Besides, he further argued that the uncertainties of covid-19 would lead to a huge decline.
Even then, some other analysts believe that the increase was as a result of depreciation of Naira within the period which aided more capital inflows but really does not lead to a positive economic growth considering the direction of the investments.
According to them, the CBN must live up to its responsibility through the right monetary policies because the economy might witness dearth of capital inflows in the nearest future.
Looking ahead, Johnson Chukwu, chief executive of Cowry Asset management limited corroborated earlier arguments saying it may not be possible to see such an increase in the second quarter due to the Pandemic.