The Impact of COVID-19 on the Chinese, American and Nigerian Economies
Arguably, the city of Wuhan has now become the most popular city in recent time as every Nation in the world has suddenly gained connections with and inheriting from it a sad history -COVID 19. The deadly virus has since travelled far and near within a short period of time and consequently crippled both human and economic resources with no impunity. Nations of the world have been put in disarray with a two-horse race of saving lives on one hand and their economies on the other hand as the death of one will directly cause a tragic ripple effect on the other. According to the World Health Organization (WHO), the outbreak of the pandemic is described as a Public Health Emergency of International Concern and Nations have been advised to handle it with absolute diligence and concentration.
CHINA – CASE STUDY I
Prior to the outbreak of the pandemic and according to the World Bank, China was known to be the world’s second largest economy and the world’s largest exporter, as many countries depended on China for their economic productivity and trade services. From the start of the outbreak in December 2019, China in an attempt to combat the pandemic in the face of rapid increase in death rates, relied on measures such as social distancing which resulted in an eventual lockdown of cities and the country. This meant that productions of goods and services were brought into an abrupt halt, companies and restaurants ceased operations, cancellation of events and programs such as sporting activities and conferences. These cancellations directly translated to the unemployment of many since thousands of employees would have been hired for the cancelled events as is usually the norm, and for those previously employed, their employers were left with no choice other than laying them off as the books could not be balanced. Economically, all these brought about a record of high rate of losses and unemployment which have consequently put international and domestic markets into turmoil. For example, Wuhan, the epicenter of the virus at the beginning of this crises, known for the production of engines of gadgets and much more had to be sealed. Also, the popular Apple brand known for designing and selling of iPhones which relies on China for the manufacture of its components and sourcing of its parts had to be shut down. The collapse of the above and more has put the economy of China in a sharp downward turn just like other countries of the world.
UNITED STATES OF AMERICA (USA)- CASE STUDY II
Very recently, with the outbreak of COVID-19, all Nations have become equal. That is one of the humbling revelations brought by the pandemic since no Nation has been able to put up a cure to the deadly virus.
In the month of February, the USA’s stock market suffered one of its worst weeks since 2008 and has since then been a roller coaster as interest rates have been slashed by a half percentage point by the Central bank.
Also, according to the Organization for Economic Corporation and Division (OECD), global growth could be cut in half to 1.5% in this year 2020, should the virus continue to spread. Sadly, the virus has continued to spread, as there are now 501,615 confirmed cases and 18,777 deaths in the United States as at 1.12pm on April 11, 2020. Just like China, businesses have been shut down, events cancelled and the country has been in a lockdown thus redirecting the economy backwards as experts have confirmed that a recession is now inevitable. In reaction, the government has therefore activated the Emergency Financial Aid Program – U. S Stimulus Package, which entails sending cheques directly to American Citizens in order to shore-up confidence in the world’s largest economy as the efforts to contain the virus threatens a global recession. This has become necessary as it appears millions of Americans have already lost their jobs at the rate that has now surpassed job losses ever recorded. Even if jobs were not lost and economic activities were not suspended, the pandemic effect in the other parts of the world automatically reduces demand forces thereby truncating supply chains and reducing equity prices. The direct effect of this is that household wealth will be drastically and sharply condensed which as a matter of course affects the economy. The moral lesson at this time as it relates to the economy is, injury to one is injury to all.
NIGERIA – CASE STUDY III
As earlier said, an injury to one has been an injury to all in this time of global crisis. Nigeria is a major benefactor of the trading relationship with China as China receives a high influx of Nigerians coming to purchase several products. Little wonder “made in china” is easily found in our markets as much as Chinese citizens themselves. Before now, the economic exchange between Nigeria and China accounts for over eighty-five billion dollars in trade volume but that looks to quickly witness a downward turn as Nigeria appears to be one of the most badly affected by the pandemic in China as it is a known fact that Nigeria is a heavy importer of goods and service.
As a consequence on our economy, inflation on goods and services is projected to occur since the supply chain has been truncated and vendors are fast running out of stock and supply from the source. Demand for goods looks set to sky-rocket and of course the forces of demand and supply is set to come into play as prices are set to rise in the face of limited or no supply. As a result, capabilities of business units are crippled and competence levels are highly paralyzed. These bring about a damaging ripple effect on the economy as the average Nigerian finds it difficult to afford a meal and a decent standard of living.
Some of the top sectors of the Nigerian economy such as; Crop Production, Trade, Crude petroleum and Natural Gas, Financial Institutions, Road Transportation and Air Transportation etc. have greatly felt the heat and hit thereby leading to the recession of the Nigerian economy. For crop production, farm machineries and supplies can neither be imported or exported thereby declining the revenue that would have accrued considering that crop production/Agriculture takes the highest percentage in contribution towards the Nigerian economy although the highest reliance is placed on crude oil. With respect to crude oil, the pandemic has caused a decline in global prices of oil which has as a result affected negatively Nigeria’s revenue. The presumption of the price of oil under Nigeria’s budget is about $60 per barrel, as of this moment we can all imagine how much that must have fallen in the global market where saving of lives has been the most paramount objective and focus of all Nations.
Also, as expected, no country in the world is presently talking about investments as all attention is on saving lives worldwide. This definitely affects the Foreign Direct Investment and Foreign Portfolio Investment in Nigeria and other Countries at large.
The impact of COVID-19 on the global economy is such a disaster happening and even still waiting to happen. This is because if solutions are not devised in time, the margin of disaster may be well unfathomable. In the words of Kristalina Geogieva, the Managing Director on International Monetary Fund, “What we are wrestling with is uncertainty… …. how far global growth will fall and how long the impact will be is still difficult to predict”.
Babatunde Onadele is an Alumnus of Obafemi Awolowo University, Ile-Ife, Osun State. He is a practicing Legal Practitioner in Lagos State with bias for Litigation, Entertainment and Commercial areas of law. He is a certified Arbitrator, Mediator and Conciliator whose passion for excellence and client satisfaction is foremost.