COVID-19 Lockdown, Slump in Global Oil price, and Policy Recovery Options: The Nigerian Experience

International Journal of Research and Scientific Innovation (IJRSI) | Volume VII, Issue IV, April 2020 | ISSN 2321–2705

COVID-19 Lockdown, Slump in Global Oil price, and Policy Recovery Options: The Nigerian Experience

Chukwuemeka Amaefule
Rivers State Ministry of Education, Port Harcourt, Nigeria

Abstract: – The interplay of covid-19 lockdown and a slump in the global oil price is a recipe for a lengthy and costly global recession. The previous recession in Nigeria is deeply rooted in the global slump in global oil prices, a supply-side shock effect. The new phenomenon of demand-shock effect alongside a supply-side shock effect implies that the length and cost of the recession could significantly inflict a colossal economic downturn on the economic outlook in emerging and developing economies. This begs the question, what are the policy recovery options for Nigeria? The paper examined economic recessions in Nigeria from 1981 to 2016. The study adopted a historical-normative approach to study the interplay of factors deepening the impact of the recession. Data collected from the Central Bank of Nigeria (CBN) and the National Bureau of Statistics (NBS) was analyzed. The study identified among other factors such as weak productive base, inconsistencies of macroeconomic policies, the problem of poor policy coordination, heavy dependency on petro-dollar system, insensitivity of the political class to the realities in the economy, wide disconnect between the financial system and the real-informal sectors are factors that would expose Nigeria to the impact of global covid-19 and slump in the global oil price hence a lengthy and costly recession is inevitable in Nigeria. The recession would lead to social insecurity, instability in the currency structure of the country, balance of payment disequilibrium, high debt problem, fragile stock market, financial distress in the banking sector, inescapable stagflation incidence, liquidity problem and capital formation, a decline in capital inflow due to problems in global reinvested earnings losses in MNEs, a decline in general economic activities, and fall in social welfare. Thus, to spur, stimulate and re-diversify the productive base of the nation to reduce the geometry and structure of recession. The government should rethink the cost of governance, drive research base innovation, and develop skill and capacity to improve the sustainability and resilience of the economy to structural and systemic shocks. Keynesian and monetary policy prescriptions must be pursued through the expansionary fiscal approach and manufacturing-informal sector investment financing to jumpstart the economy. These recommendations revolve around coordinated fiscal, monetary and commercial policies required to sustain the post-recession economy. Such policies must be directed strictly on the provision of infrastructure, strengthening the security architecture and reduction of cost of doing business.

I. INTRODUCTION

Shocks from the mix impact of covid-19 and plummeting global oil price threaten global economic stability. The lesson from the impact of lockdown and social distancing due to the health crisis e.g. covid-19 and plummeting global oil prices on the global economy can be premised on the increasingly decline in global productivity and social welfare of the people. Thus in sum, these shocks generates supply shock (GDP decline) and aggregate demand shock (low income from lockdown). The impact of these shocks could be perceptibly operational in the business cycle of the global economy. Thus as contraction in the factors of production, it is likely that the IMF prediction on recession is inevitable. The motivating question therefore becomes could Nigeria experience another recession? Can Nigeria be insulated from the global recession? What are the policy recovery options for Nigeria? These two questions would drive this study. The aim of this paper is to x-ray previous causes of global recessions and recession in Nigeria. Based on the outcome of this paper, this study would provide policy options that could stir the Nigerian economy.

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