The looming global economic recession

Undoubtedly, almost every country in the world is currently confronted with the challenges of the spreading coronavirus pandemic that has led to the death of many people.  What began as a health crisis in Wuhan, China, has become a major pandemic that could lead to another global economic recession. Many countries are reeling from the effects of the rampaging COVID-19. Nigeria and other African countries affected are also feeling the impact of the disease.

It is, therefore, not surprising that the International Monetary Fund (IMF) has issued a red alert that the global economy might slide into recession that could be “at least as bad as or worse than the 2008 global financial crisis.”  The warning by the global agency is timely to all countries, especially those with vulnerable economy and limited room to increase spending.

According to the Managing Director of the IMF, Kristalina Georgieva, many emerging markets and low-income countries will certainly face significant challenges on the heels of the coronavirus pandemic. Ahead of next month’s growth forecast, the global financial institution has already told countries that depend largely on oil revenue that next month’s regional outlook would be significantly lower, as slowdown will mean that projected revenue would take a hit. Already, the Federal Inland Revenue Service (FIRS) and the Nigeria Customs Service (NCS) have reported far lower revenue than projected in the last three months.

“The human costs of the virus pandemic are already immeasurable and all countries need to work together to protect people and limit the economic damage,” the IMF said. Although the global fund agency foresees a recovery by next year, it however hints that to get there, it has become imperative to prioritise containment and strengthen health systems everywhere. It also warns that the economic impact of the virus will be severe. Nonetheless, it explains that the faster the virus stops, the quicker and stronger the recovery will be.

Now that the pandemic is escalating, we urge all countries to come up with economic stimulus that will check the spread of the disease and revamp their economy. For Nigeria, this is the time to further diversify the economy and move it away from oil. We have paid so much lip service to diversification. This is the time for action. It is also the time to fully develop the agricultural sector and industrialise the country as well. Delay can be dangerous. We cannot continue to depend on one economy and expect better results. We welcome the recent stimulus package announced by the Federal Government. We commend the private sector initiative to fight the pandemic. We laud all Nigerians who have contributed one thing or the other in the war against the pandemic. There is no doubt that so much money is needed to fight the pandemic and we also believe that government alone cannot foot the bill. Although the Central Bank of Nigeria (CBN) Governor, Godwin Emefiele, hinted recently that at least N120 billion is needed to contain the virus, we think that it can be much more than that.

So, the federal and state governments should do more to help vulnerable Nigerians to keep safe at this time. As the IMF rightly pointed out, to mitigate the shock of the virus, the fiscal policy will have to play a leading role with medium-term initiatives that will be consistent with our debt sustainability. The targeted cash transfers to individuals and households should be well coordinated. The problem, however, is that Nigeria does not have a verifiable database to track specific people affected by the virus and a safety net for the most vulnerable in the country. That is why government at all levels should be very careful in managing the crisis to avoid a breach of the peace in an already fragile economy beset by insecurity.

It is commendable that the CBN has been on the frontline, easing monetary policy that can complement government’s fiscal efforts. But it must do more to rein in inflation headwind, which is at 13.2 per cent, and bring it to a single-digit. We believe that comprehensive financial measures can help minimise disruptions to much-needed credit and liquidity for businesses and provision for temporary credit guarantee. Beyond that, financial bailouts should also be targeted at production and supply chains that have been disrupted resulting in increase in commodity prices across the country.

We believe that more testing centres should be urgently established across the country. Altogether, government at all levels should see the Coronavirus pandemic as an emergency situation. Therefore, Federal Government should do all within its powers to ensure that the economy does not witness another recession.