The COVID-19 pandemic has created severe economic consequences for all countries around the world. Nigeria has also been very badly hit. The lockdowns have frozen economic activities, causing massive job losses and supply chain disruptions. It has also depressed the demand for crude oil and precipitated an unprecedented oil price crash. Nigeria’s dependence on oil for revenue and foreign exchange makes it particularly vulnerable in this situation.
It is expected that if oil prices average $30 over the rest of the year, oil revenues (assuming Nigerian National Petroleum Corporation reduces Joint Venture operating costs by 20%), would amount to about N88.4 billion monthly. Assuming that non-oil revenues are sustained at the lower level projected in the revised budget estimates, the total allocations to FAAC for the rest of the year would then be around N485 billion a month.
This time last year total allocations to FAAC was N669.9 bn monthly. The very steep decline in revenues available for sharing among governments of the federation will have serious implications for wages, overheads and capital expenditures at Federal, State and Local Government levels.
Unemployment rate which was 23.1% (or 20.9m people) at the end of 2018 is expected to rise to 33.6% (or 39.4 million people) at the end of 2020 if urgent steps are not taken.
The major problem with unemployment of a very large youth population is the hopelessness that gives rise to criminal activities and anti-social behaviour, which can ultimately create potential recruits into the ranks of insurgents.
Even for those able to earn a living, the situation is dire. The NBS recently released a household survey of poverty in Nigeria, a five-year study which showed that over 40% of Nigerian households earn less than N137,000 per annum. This is barely N11,000 per month.
With the COVID crisis, this poor income will drop much further.