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Macroeconomic Update - Economic impact of the COVID-19 on Nigeria’s real sector

Corporates to feel margin squeeze
Over the past month, the impact of the COVID-19 public health crisis that morphed into a supply chain crisis in China has come closer to home. With the
continued rise in the number of confirmed cases and a perceived one to two week lag in testing, there is likely to be a continued increase in the number of
infected persons. This raises the odds of a nationwide lockdown over the next few weeks to contain a further spread of the virus. Currently, full lockdowns
have been enforced in a few states including Lagos, Ekiti, Ogun and the FCT while a number of other states have curfews to restrict night-time movement
and gatherings. Amid a lockdown to enforce social-distancing, consumers are staying indoors and travel is restricted, potentially driving a sharp fall in
consumer and business spending. As a result, a lot of businesses could lose revenue and lay-off workers (potentially pushing up unemployment levels) in a
bid to reduce overheads in view of declining revenues.

Knock-on effects on other key sectors
On average, we anticipate a one to three month lockdown to contain a further spread of the virus. However should the lockdown be extended, aggregate
demand will suffer as consumers and businesses will be compelled to cut spending through the rest of the year. In the most affected sectors, the number
of corporate layoffs could rise considerably, exacerbating existing food insecurity through reduced income or increased job insecurity. While the food
and agricultural sector should in-principle be less affected than others, illnessrelated labour shortages, transport interruptions, social-distancing measures
limiting access to markets and supply chain disruptions resulting in food loss and waste could affect supply. On the demand side, a loss of purchasing power
caused by the disease could change people’s eating patterns, resulting in poorer nutrition. Panic purchases of food could break the local supply chain and cause localized price hikes.