By Naomi Uzor
The Lagos Chamber of Commerce and Industry, LCCI, has said that the outbreak of the Coronavirus disease few weeks ago has profound implications for the Nigerian economy posing a major threat to the nation’s macro-economic fundamentals, adding that the impact may be systemic and far-reaching.
The Director-General of LCCI, Dr Muda Yusuf, who expressed the view said stated: “Oil price benchmark for 2020 budget was $57 per barrel. This sharp drop in crude oil could cause significant dislocations in the 2020 budget and in the economy, especially for a country already grappling with challenges of weak revenue performance and complete erosion of fiscal buffers.
It is instructive that the Finance Minister, Zainab Ahmed, is contemplating a review of the underlying assumptions of the 2020 budget, and rightly so,” he said.
He said there is also the revenue effect of Coronavirus, which is related to the drop in oil price, adding that, oil revenue currently accounts for about 50 per cent of government revenue and about 85 per cent of foreign exchange earnings.
“With the current scenario of tumbling oil price, a drastic reduction in government’s revenue has become inevitable in the near time. This has implications for the level of fiscal deficit in the budget; budget implementation will be constrained; infrastructure financing will be affected; borrowing may increase, and the capacity to fund capital project will be severely constricted. With this scenario, the outlook for oil dependent economies looks rather gloomy,” he added.
According to him, the global supply chain has been deeply disrupted as China, which is the second-largest economy in the world, is a major supplier of inputs for manufacturing companies around the world, Nigeria inclusive.
He added that many manufacturers and service providers in the country are already experiencing acute shortage of raw materials and intermediate inputs. “This has implications for capacity utilization, employment generation and retention as well as adequacy of products’ supply to the domestic market. There is also an implication for inflation,” he said.