Nigeria stands at the very brink of its own COVID-19 epidemic. However, the country has been in the grips of serious crisis for weeks: the collapse in oil prices has led to brutal budget cuts and provokes a recession in the country, which depends heavily on oil exports. The timing could not be worse in view of the forthcoming pandemic challenges.
An unprecedented crisis for the oil industry
The international oil industry has been particularly hard hit by the knock-on effects of the global coronavirus crisis. Since the start of the year, crude oil prices have crashed from around $60 to at times less than $20, the lowest level in decades. Due to the economic slump in China, together with the high number of curfews in place across the globe and international travel bans, demand for this fossil fuel has dropped dramatically. And to make matters worse, Saudi Arabia and Russia have been locked in a fierce battle for market share.
Although OPEC++ has in the meantime agreed on a production cut to support the oil price, smaller and poorer oil-producing states such as Nigeria are still heading for financial ruin. After more than 60 years of production, Africa’s largest oil producer and leading economy still depends upon this finite resource for around half of its revenue. It owes just shy of 90% of its foreign exchange to oil exports. The budget signed off for 2020 was based on an oil price of $57, production of 2.18 million barrels per day and an exchange rate of 305 naira to the US dollar. Today, those three assumptions are no more than wishful thinking.
For this reason, Finance Minister Zainab Ahmed felt justified in announcing budgetary cuts as early as the beginning of March, pruning around 20% off capital investments and 25% off state expenditure overall.
Terrible starting conditions for budget cuts
These major cuts could not have come at a worse time. Nigeria has been struggling in vain for years to shake off the consequences of a recession from back in 2016. Economic growth in the past year stood at around 2%, whilst the population has been growing at around 2.6% a year for decades. Government debt has grown consistently in recent years and reached new peaks; foreign exchange reserves have been falling since mid-2019.
In the meantime, the Nigerian central bank has corrected the official exchange rate downwards by 15% to 360 naira to the dollar. It is therefore only a question of time until food, medicines and other consumer goods in this strongly import-dependent country are increasingly unaffordable for the population.
Already precarious social and societal conditions will only get worse. Since 2015, unemployment has risen from around 8% to over 23%. Women and young people have been particularly hard hit by the resulting poverty. Around 55% of all young people in the country are either underemployed or out of work altogether.
These social hardships have aggravated or sustained countless societal conflicts in recent years. This is the case in the north-east of the country, for instance, where Islamic extremists have carried out violent attacks and engaged in bitter clashes with the military for ten years. As recently as the end of March, 50 Nigerian soldiers were killed in an ambush perpetrated by the terrorist group Boko Haram. The number of internally displaced persons in the country stands at more than 2 million.
Elsewhere in the country, banditry and kidnapping for ransom have established themselves as a business model, as it is increasingly impossible for a growing number of people make a living by legal means.
The already prevailing scarcity of resources for the country and its inhabitants will be put under considerably more pressure in the weeks to come.
The low infection rates are simply the calm before the storm
With only around 300 reported coronavirus cases, Nigeria is still at the very beginning of the epidemic. Certainly, the first at the end of February, brought in by an Italian, caused panic, but the country soon calmed down, in the belief that the Nigerian Centre for Disease Control was on top of the situation. After all, the government’s swift and decisive action had been able to stop the spread of Ebola in 2014, when an infected man from Liberia flew into the metropolis of Lagos, a city of around 20 million inhabitants. In fact, contact persons were quickly identified and isolated, in the current case as well. International air traffic, however, continued as usual.
In the weeks that followed, countless numbers of travellers infected with coronavirus were able to enter Nigeria. Sufferers not showing any symptoms walked through the controls set up in international airports undetected. Unlike people infected by Ebola, however, they were already infectious. The recommendation made in mid-March for travellers arriving from crisis hotspots to self-isolate was not initially subjected to any checks. And certainly not for senior government members. Many of these have in the meantime tested positive for the virus, including Abba Kyari, the chief of staff of President Buhari.
It was precisely this realisation and the general rise in case numbers that prompted the government to take increasingly drastic measures in the second half of March. Individual governors rushed to close the land and sea borders of their states, even though they did not have the authority to make these decisions. The federal government itself appeared at times to lack a clear strategy. It took President Buhari until the end of the month to make up his mind to address the nation in a televised speech. In addition to the international air traffic ban in force since 23 March, a lockdown has been in place since 30 March for Lagos and the neighbouring state of Ogun, as well as for the capital city Abuja. The Centre for Disease Control is working around the clock to trace hundreds of contacts of all those who tested positive.
A healthcare system that is not up to the challenges
It remains to be seen whether these measures will be able to do much to slow the now unstoppable COVID-19 outbreak. The fact is that the country and its healthcare system are by no means up to the challenge. There are only around 350 intensive care beds available. When asked recently about the number of ventilators, the health minister replied by saying that Nigeria might not need that many, as most of the confirmed cases of coronavirus so far have been relatively mild – a statement that owes more to hope than to rationality. However, the extremely low average age in Nigeria of just 18 could turn out to be a slight advantage, as severe outcomes of the disease are known to affect mainly older age groups.
But not only is Nigeria one of the youngest countries of the world, it is also one of the poorest. Its enormous wealth in oil and gas resources have turned it into a rentier economy in which the elite achieve prosperity not through their personal efforts and productive factor inputs, but through corruption and exploiting state resources. The common good has fallen very much by the wayside in this extractive system. Around 90 million people – almost half of Nigeria’s population – live in extreme poverty.
But even many of those who are not living in extreme poverty have no fixed income, but must earn their living on a day-to-day basis – taxi drivers, market women, street traders, hairdressers, day labourers on building sites and many more. Restrictions on public life are, of course, a useful means of slowing the spread of coronavirus. In Nigeria, as in many other developing countries, however, they are not realistically possible for longer periods of time.
The Minister for Humanitarian Affairs, Sadia Umar-Farouq, was recently pictured distributing a housekeeping allowance of 20,000 naira (around €50) to needy families in Abuja for the next four months. The government has additionally already announced various interventions to relieve the financial burden on the population. However, these programmes will barely meet the needs of the wider population. Just a few days after the lockdown began, there were videos from Lagos doing the rounds on the Internet showing young men calling loudly for protest action and confronting overwhelmed officials with the question: “No electricity. No food. How are we supposed to do as we’re told and stay at home?”
Scenes such as these will play out repeatedly in the coming days and weeks. The government’s reaction seems predictable. According to a leaked memorandum, the military is already preparing to enforce the lockdown, secure food supplies and, if necessary, carry out mass burials. The military has denied the alleged content of the memorandum. Images of security forces smashing up the goods of a trader in Lagos, however, offer quite a different taster of how the state apparatus may react to “uncooperative” citizens.
A glimmer of hope
Given the scale of the challenge facing the country in the weeks and months to come, it is hard to feel greatly optimistic. Yet the two city states of Lagos and Abuja, where most cases have been concentrated to date, have considerably better financial and human capacities to tackle the coronavirus outbreak than the rest of the country. The Nigerian Centre for Disease Control, under the leadership of Dr Chikwe Ihekweazu, is working professionally with the scant resources at its disposal to prepare the country as well as it can for the forthcoming wave of infections, by expanding testing and quarantining capacities. Many of the country’s major banks and businesses have already pledged financial support to the Centre. Billionaires such as Aliko Dangote and Tony Elumelu, plus many politicians, are contributing financial assistance to buy laboratory tests and ventilators.
The greatest hope, however, lies in the fact that it could dawn on the Nigerian elite, amid the oil and coronavirus crisis, that they would also be able to profit from a state that has the capacity to provide public goods such as a functioning healthcare system. The oil wealth turns out to be worthless and the world’s borders are closed. Nigeria’s elite are stuck in the misery they helped to create and hold their breath.