PwC Nigeria’s Webinar COVID-19: Economic Implication and Policy Responses
Uyi Akpata Country and Regional Senior Partner, West Market Area Opening Remark
Andrew S. Nevin Chief Economist and West Africa Financial Services Leader First Speaker
COVID-19 COVID-19 and the Nigerian Economy Assessing the Impact 8 April 2020
“ “ “ Coronavirus pandemic The eurozone – Coronavirus: Millions will be economic fallout ‘way worse and Europe more widely – is left in poverty, World Bank than the global financial going to suffer grievous warns crisis,’ IMF chief says economic damage as a result of COVID-19 the Coronavirus pandemic has created an economic An early sign of what is to come was provided by the The financial impact of coronavirus will stop almost 24 crisis “like no other,” the top IMF official said. biggest slump in German business confidence on million people from escaping poverty in East Asia and “It is way worse than the global financial crisis “ of record. When the official data comes out for those the Pacific, according to the World Bank. 2008 – 09, Gergieva said during a World Health countries in lockdown – Spain, Italy and France among them – they are going to make for horrific reading Organization news conference. “ “ “The COVID -19 pandemic will have a substantial World Bank sees 'major global recession' economic impact on sub-saharan africa ” -IMF due to coronavirus pandemic NNPC Retail Limited Lubricants Business Plan Presentation Title PwC
Impact on key economic indicators (1 of 2) Average oil price (US$ per barrel) • No economy is spared from the fall-out from COVID-19 outbreak. 72.9 73.3 80.0 68.3 67.8 66.4 65.2 65.3 63.7 62.8 61.4 60.8 60.9 60.0 58.5 • Meanwhile, oil prices have dipped 60.0 38.2 to historical lows, and its support 40.0 levels are obviously not in sight as 20.0 it pared US$20pb on 30 th of March, 0.0 2020 . • Oil production has outpaced demand due to the impasse Source: CBN, PwC analysis between OPEC and OPEC +(Russia) in a bid to rein in threats World oil demand-supply balance (million barrels per day (mb/d) from the surge in the US on oil production • Worse events still ahead as 150.0 2.5 2.0 demand may dip further in half- 99.1 98.6 98.4 100.3 100.0 1.5 year 2020 and beyond, if factories 1.0 50.0 and airlines remain closed, even as 0.5 0.0 movement of people and goods 0.0 -0.5 within and between countries are Q1-19 Q2-19 Q3-19 Q4-19 largely restricted World Production(P) Balance(D-P) Source: OPEC(March 2020 report), PwC analysis COVID-19 and the Nigerian Economy April 2020 PwC 6
Impact on key economic indicators (2 of 2) Most currencies per units of USD have depreciated following the reduction in Selected markets indices declined on year to date basis as investors interest rates, decrease in inflows of USD to external reserves and weak take to safety in gold, which appreciated by 24.9% in March 2020 investors’ confidence 30.6 31.3 26 24.5 22.3 7.11 6.93 19.4 6.69 13.8 14.2 13.6 5.96 5.23 4.22 1.42 1.32 0.91 0.92 0.77 0.80 -24.5 -25.8 -28.4 -31.5 -24.5 -18 -21.5 -38.6 -23.5 China Canada Euro area UK Brazil Turkey Jan-end 2020 March-end 2020 Jan-end,2020 March-end 2020 Interest rates on 10-year government bond are declining in response to Purchasing Managers' index(PMI): As reflected by the contraction in general monetary policy easing/stimulus, and the need to preserve PMI, the disruption to global supply chains and manufacturing activities financial assets from systematic risk heightens the risk of a global economic recession and financial crunch 6.6 6.1 51.7 50.7 50 49.2 47.8 48 48 45.7 44.8 35.7 2.8 2.3 1.6 1.3 0.6 0.6 0.6 0.4 United States China Canada Germany UK India US China Japan Germany UK -0.4 -0.5 Jan-end 2020 March-end 2020 Jan-2020 Feb-2020 COVID-19 and the Nigerian Economy Source: The Economist, PwC analysis April 2020 PwC 7
Impact on key economic indicators Most African financial markets are not spared too • African capital markets are bearish Selected African markets indices( YTD Performance, percent) in March 2020 • The region’s economic trajectory is determined by -45.3 Namibia its fiscal and monetary -36.5 South Africa policy stances, which rely -33.1 Mauritius on inflows from primary -29.1 Egypt sectors and commodity -24.9 Morroco exports. -23.7 Nigeria • Therefore, one could -23.4 Kenya safely predict the -23 Zambia performance of the -17.7 BRVM region’s economy and -15.3 Tanzania markets going forward by -10.5 Botswana taking a cue from the impact of COVID-19 on -10.4 Tunisia the oil sector, tourism and -5.4 Ghana agricultural sectors. -2.6 Malawi Source: CBN, PwC analysis COVID-19 and the Nigerian Economy April 2020 PwC 8
PwC’s COVID -19 CFO Pulse survey A recent CFO survey highlighted global recession, reducing consumer confidence and consumption as key concerns with respect to COVID- 19… Consumption is 48% 80% believed to decline by 42% 48% believe there will be believe there will decline in workforce an impact on the be a Global productivity due to a decrease in Financial sector Recession consumer confidence 34% 6% 14% 4% believe there will be lack a comprehensive believe they don’t have are facing difficulties increased supply company enough information to with funding chain issues preparedness plan make good decisions PwC COVID-19 CFO Pulse Survey, March 11, 2020 Q: What are your top-three concerns with respect to COVID-19? Base: 50 COVID-19 and the Nigerian Economy April 2020 PwC 9
Fiscal responses from major global institutions World Bank IFC IMF ECB AfDB World Bank prepared IFC to provide $8 The IMF has released The ECB governing The AfDB launched its to deploy up to $160 billion to provide relief $50bn through its council introduced a Fight COVID 19 total sum of €870 bn billion over the next aid for private emergency financing Social Bond, which is 15 months to support companies and facilities to help towards its Pandemic a $3 bn bond with a COVID-19 measures employees affected emerging economies Emergency Purchase 3year maturity to that help countries by the pandemic that might require programme, set up to reduce the impact of respond to health additional support. support its member the pandemic on consequences and states African countries bolster economic recovery COVID-19 and the Nigerian Economy April 2020 Source: World Bank, IMF, ECB, AfDB PwC 10
Policy responses from selected countries globally Fiscal Policy Monetary Policy ▪ The UK government plans to inject £200bn into the economy ▪ The BoE has cut its interest rates to 0.1% from 0.25% ▪ The UK also implemented a plan to pay 80% of wages up to to provide greater access to credit for individuals and £2,500 a month for workers who are out of work as a result of businesses ▪ The chancellor of the BoE announced a £350bn the pandemic United Kingdom package for loans and grants and a £30bn injection into the economy as a means of boosting money supply. ▪ US$8.3 billion Coronavirus Preparedness and Response Supplemental Appropriations Act and ▪ Federal funds rate lowered by 150bp to 0-0.25bp ▪ US$104 billion Families First Coronavirus Response Act which ▪ The Federal Reserves is introducing a US$700 billion together provide 0.5% GDP for health care, sick leave, small quantitative easing program. The QE program is split business loans, and international assistance. between $500bn of Treasury bills and $200bn of ▪ Agreement has also been reached on a US$2 trillion stimulus bill United States agency backed mortgage securities. (around 10% of GDP) that is expected to pass Congress in the coming days ▪ The Canadian Central Bank reduced its interest ▪ About $52 billion (2.3 percent of GDP) in direct aid to rates to 0.75% to increase access to cheaper loans households, including payments to workers without sick leave for its citizens. and access to employment insurance, an increase in existing ▪ It has also lowered its Domestic Stability Buffer by GST tax credits and child care benefits 12.5% to enable its deposit banks inject $300 billion ▪ $1.125 billion (0.05% of GDP) to the health system to support into the economy to boost money supply. increased testing, vaccine development, medical supplies, Canada ▪ In addition, the government has launched an insure mitigation efforts, etc. mortgage purchase program to further boost liquidity ▪ About $85 billion (3.7% of GDP) in direct support to in the market. businesses, including tax deferrals and wage subsidies COVID-19 and the Nigerian Economy April 2020 Source: Government of Canada, CNBC, Bank of England, IMF PwC 11
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