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The International Monetary Fund (IMF)’s World Economic Outlook for 2020 and 2021 suggests that 170 countries will be vulnerable to a recession as a result of COVID-19. The Nigerian economy is expected to shrink by 3.4 per cent, compared with an expected decrease of 5.9 per cent and 7.5 per cent in the US and Euro Zone respectively. John Moran - from leading global provider of risk, payments and foreign exchange solutions Ebury - examines the position Nigeria is currently in.
The impact of COVID-19 in Nigeria (and Africa more broadly) may only just be beginning to permeate the Nigerian complex social matrix, but there are other immediate concerns.
Whilst COVID-19 has ground businesses to a halt globally, the emerging markets' ability to enforce social distancing and access the proper medical treatment may have a more damning and longer-standing impact on Nigeria’s ability to rebound. This is compounded with the fact that oil, Nigeria’s largest export, recently found the Brent crude price per barrel at the same average cost of a production barrel in Nigeria. The demand for oil globally has been crippled by the COVID-19 pandemic, but this will not just have a large impact on an economy which relies so heavily on the government’s dependence on oil production/exportation and foreign exchange earnings, but also on its geopolitical importance in the ever-growing world oil power push.
The closing of physical business locations, many of which depend on both the formal and informal segment for making liquidity available for the all-important remittance and payroll businesses clients, are at a standstill and not due to open anytime soon. The government’s attempt to infuse social funding has largely backfired, as more than 80 per cent of the people that work, making up 65 per cent of Nigeria’s GDP, have no formal government socialised identification system that may provide relief during this epidemic because they are not recognised citizens.
The ability to get money to both people who need it and who have worked for it has also proven to be elusive. With over 200 million people in Nigeria, one would expect an electronic or digital payments platform to thrive, even as the banked population is less than 40 per cent. However, this is clearly not the case. The telecom segment and the banking segment are archaic, and both the small payment traffic of retail or personal payments and the business payments are greatly impacted. The lack of a payment ecosystem, employees being told to stay home and hoarding of cash (mostly USD), has created a conundrum for both local employers trying to pay employees, but an even greater impact on foreign employers operating locally and trying to pay their employees.
Payments have already been held up by a minimum of 4 weeks and the light at the end of the tunnel may be an oncoming train. Many payment companies are not well-positioned to even offer payments to their clients in Nigeria for the time being. Experience and relationships are paramount to accomplish payments.
For help with making payments in Nigeria or other places around the world please feel free to contact our experts on:
Europe
0203 9665 573
Asia
+65 6817 5248
Americas
+1 647 694 2122
Email at:
john.moran@ebury.com
The International Monetary Fund (IMF)’s World Economic Outlook for 2020 and 2021 suggests that 170 countries will be vulnerable to a recession as a result of COVID-19. The Nigerian economy is expected to shrink by 3.4 per cent, compared with an expected decrease of 5.9 per cent and 7.5 per cent in the US and Euro Zone respectively. John Moran - from leading global provider of risk, payments and foreign exchange solutions Ebury - examines the position Nigeria is currently in.
The impact of COVID-19 in Nigeria (and Africa more broadly) may only just be beginning to permeate the Nigerian complex social matrix, but there are other immediate concerns.
Whilst COVID-19 has ground businesses to a halt globally, the emerging markets' ability to enforce social distancing and access the proper medical treatment may have a more damning and longer-standing impact on Nigeria’s ability to rebound. This is compounded with the fact that oil, Nigeria’s largest export, recently found the Brent crude price per barrel at the same average cost of a production barrel in Nigeria. The demand for oil globally has been crippled by the COVID-19 pandemic, but this will not just have a large impact on an economy which relies so heavily on the government’s dependence on oil production/exportation and foreign exchange earnings, but also on its geopolitical importance in the ever-growing world oil power push.
The closing of physical business locations, many of which depend on both the formal and informal segment for making liquidity available for the all-important remittance and payroll businesses clients, are at a standstill and not due to open anytime soon. The government’s attempt to infuse social funding has largely backfired, as more than 80 per cent of the people that work, making up 65 per cent of Nigeria’s GDP, have no formal government socialised identification system that may provide relief during this epidemic because they are not recognised citizens.
The ability to get money to both people who need it and who have worked for it has also proven to be elusive. With over 200 million people in Nigeria, one would expect an electronic or digital payments platform to thrive, even as the banked population is less than 40 per cent. However, this is clearly not the case. The telecom segment and the banking segment are archaic, and both the small payment traffic of retail or personal payments and the business payments are greatly impacted. The lack of a payment ecosystem, employees being told to stay home and hoarding of cash (mostly USD), has created a conundrum for both local employers trying to pay employees, but an even greater impact on foreign employers operating locally and trying to pay their employees.
Payments have already been held up by a minimum of 4 weeks and the light at the end of the tunnel may be an oncoming train. Many payment companies are not well-positioned to even offer payments to their clients in Nigeria for the time being. Experience and relationships are paramount to accomplish payments.
For help with making payments in Nigeria or other places around the world please feel free to contact our experts on:
Europe
0203 9665 573
Asia
+65 6817 5248
Americas
+1 647 694 2122
Email at:
john.moran@ebury.com