Since February 28 when Nigeria recorded its first coronavirus case, investors in the capital market have lost about N2.51tn. Certain features of the Nigerian economy make the country to be vulnerable to the impact of the coronavirus pandemic. For instance, the economy is highly open and strongly connected to the rest of the global economy through trade and financial flows. The economy is not fully diversified as it relies largely on crude oil production and export for the bulk of its domestic revenue and foreign exchange earnings.
Figures from the Central Bank of Nigeria show that oil revenue propels over 50 per cent of the nation’s economy. In other countries experiencing lockdowns and economic shutdowns, the coronavirus has had both macro and microeconomic impact. So far, in Nigeria, the visible impact has been huge, especially in relation to government finances, capital flow reversal and loss of income to businesses and households.
An analysis of figures from the Nigerian Stock Exchange showed that as of February 28, the market capitalisation was N13.65tn. However, with the outbreak of the pandemic, the capitalisation had dropped by N2.51tn to N11.14tn as of April 16. This implies that within a period of seven weeks, the Nigerian capital market has lost about 18.39 per cent of market capitalisation. The Deputy Governor, Economic Policy at the CBN, Dr. Kingsley Obiora, described the pandemic as a setback for the promising signs of progress in the economy, particularly in the fourth quarter of 2019.
In his personal statement made at the Monetary Policy Committee meeting, he said growth was gradually picking up from 1.6 per cent contraction in 2016 to 2.1 per cent expansion over the next three years. He said, “This impact has also been drastic on the domestic front, with the most immediate spillover reflecting in the price of crude oil.
“Given that oil contributes a large share of both revenues for the government and reserves for the Central Bank, I cannot exaggerate the effect of this slump. “Furthermore, many foreign investors have, as usual, settled their fears on the side of caution and withdrawn investments from the Nigerian Stock Exchange, with about N2.3tn wiped off in losses in the three weeks following the first confirmed case of the virus in the country.”