Before COVID-19, the government was having difficulty financing the 2020 budget and was relying on borrowing to fund the entire capital programme and some elements of the recurrent expenditure… the government will be looking to fund over 60 per cent of the original budget from new debt. This is besides the urgent funding required to deal with the health and social impacts of the coronavirus pandemic. The chickens have finally come home to roost! The day of reckoning is here.


As the rate of COVID-19 infection begins to decline in most of Europe and the United States, there are real fears that the epicentre of the virus could shift to Africa, with devasting consequences, if the spread is not curbed, because of the poor state of the health care infrastructure in the continent. The phrase ‘nipping a problem in the bud’ has never been more appropriate than at present. The consequences for Nigeria would be unimaginable if this pandemic is not controlled.

Whilst stronger and more resilient economies are better able to cope with this pandemic and its aftermath, the economic and social impact of COVID-19 on a mono-economy like Nigeria will be horrendous. This would be unlike any other economic downturn Nigeria has ever seen and it will test the country’s resolve to the core. In April, for the first time in history, oil was sold at below zero dollar, with oil producers hiring tankers, not to transport oil, but to store the oil no one wants. This is unprecedented in history. With oil prices at historic lows, Nigeria is barely getting any revenue from this commodity, after taking into account the cost of production, estimated at between $22 and $28 a barrel. This situation is unlikely to change in the short to medium term due to a glut in world oil supply.

Before COVID-19, the government was having difficulty financing the 2020 budget and was relying on borrowing to fund the entire capital programme and some elements of the recurrent expenditure. With COVID-19, Nigeria’s finances have become even more dire with the steep fall in revenue from oil and non-oil sources, due to the slump in economic activity. It is estimated that Nigeria would need over $15 billion (N6 trillion) to close the 2020 budget gap. So, in effect, the government will be looking to fund over 60 per cent of the original budget from new debt. This is besides the urgent funding required to deal with the health and social impacts of the coronavirus pandemic. The chickens have finally come home to roost! The day of reckoning is here.

Apart from, perhaps, Lagos State, most states and ministries, departments and agencies of government (MDAs) will have some difficulty in paying salaries. For decades, the nation’s wealth has been literally shared amongst politicians and public office holders, across all tiers of government, in the form of salaries and allowances, at the expense of investment in health services, education, roads and other public infrastructure. This plunder has continued under the gaze of successive Nigerian presidents, who have either been part of this fraud against the people or acquiesced to it by their silence or inaction. A poor State like Zamfara, with no health infrastructure, until a few months ago, was paying an ex-governor an ‘upkeep allowance’ of N10 million a month. This governor was earning more money in retirement than the leaders of the world’s richest economies, in a country with the world’s third lowest life expectancy. Some have described Nigerian politicians as scoundrels who callously prey on the nation’s resources. It is only in Nigeria that a president and state governors earn a ‘hardship allowance’, despite the immense privileges of their office.

We have as leaders, individuals who seem to work against the best interest of the people and the country. The decision, for instance, by the National Assembly to purchase 400 exotic cars from an overseas dealer, instead of an indigenous Nigerian car manufacturer, was disgraceful. By their action, they showed where their interests actually lie and their contempt for the millions of unemployed Nigerians. This order would have given Nigeria’s car manufacturing industry a huge boost, creating thousands of direct and indirect jobs.

For decades, bad policy decisions have bedevilled development in Nigeria. One of these is the exchange rate policy of the Central Bank. Some have described the arbitrage opportunity it presents as the biggest fraud ever perpetrated against the Nigerian people. The policy actively encourages capital flight…


There are some indications, however, that the threat from this pandemic is finally forcing the government to address the waste and huge cost of governance in the public sector. The decision by the president to implement the Oronsaye Report that has been gathering dust since 2012 is welcome. Nigeria does not need over 700 parastatals and agencies; most, allegedly conduits for corruption and money laundering.

With oil prices at historic lows, there is no better time than now to ditch fuel subsidy, once and for all. Recent reports estimate that fuel subsidy cost Nigeria $3.7 billion (N1.149 trillion) in 2019; more than the combined budgets for education, health, transport, works and housing. The billions of dollars Nigeria has wasted on fuel subsidy over the years would have rebuilt the entire rail network and created millions of jobs for the masses of unemployed Nigerians.

For decades, bad policy decisions have bedevilled development in Nigeria. One of these is the exchange rate policy of the Central Bank. Some have described the arbitrage opportunity it presents as the biggest fraud ever perpetrated against the Nigerian people. The policy actively encourages capital flight by subsidising foreign school fees and medical treatment abroad for politicians and the privileged elites, at a time when the country desperately needs forex to prop up our industries. The Senate Committee on tertiary education revealed in 2016 that Nigeria spends over $2 billion annually on education abroad. We spend more of our resources funding foreign universities than our own educational institutions. The same is true for health. We have virtually outsourced our health services to the U.K. and India, for the benefit of a few, at the expense of investment in hospitals at home. Nigeria’s scarce dollars should be funding local industries, SMEs, and those manufacturing hubs in Lagos, Nnewi and other places across the land.

With oil accounting for about 90 per cent of Nigeria’s foreign exchange, it would be nigh impossible to maintain the naira at its current value. Devaluation is inevitable, if oil prices remain depressed.

As liquidity and economic activity contracts, 2020 will prove a very difficult year for Nigeria, especially the poor. The hospitality industry and banking will particularly feel the brunt of the downturn, but this is not the time for CEOs to rush to lay off those low paid staff, cleaners and security personnel that have been there for the business in good times.


As a country, we must take the opportunity that this pandemic provides to begin to look inwards for solutions to our challenges. We do not need the Chinese to lay train tracks for us – a two hundred years old technology; in a country with over 300 universities and polytechnics, with professors everywhere. Industrialisation and investment in human capital remain Nigeria’s best route to solving our economic and social challenges; not fossil fuel.

With far richer Western economies teetering on the brink of collapse, despite massive injection of government funding, economists agree that the world is heading towards the deepest recession since the Great Depression of the 1930s.

As liquidity and economic activity contracts, 2020 will prove a very difficult year for Nigeria, especially the poor. The hospitality industry and banking will particularly feel the brunt of the downturn, but this is not the time for CEOs to rush to lay off those low paid staff, cleaners and security personnel that have been there for the business in good times. This is the time to show loyalty, compassion, and humanity.

With the prospects of a vaccine for COVID-19 still many months ahead and the rate of infection increasing by the day in Nigeria, we pray that Almighty God may yet spare our dear country the worse of this pandemic.

Emmanuel Nwachukwu is a London based business consultant. Email: emmanuel@pssolutions-ltd.com; Twitter: @emmanwach17