COVID-19:Weighing government’s weak intervention versus global economic realities .
Goff Iyatse interrogates the strength of federal government’s economic policies in the context of the ingenuity required to tackle the double effects of Coronvirus-triggered systemic risk and falling crude prices.
This is the year the world looked forward to with high expectations. Just a month into its second quarter, economists are no longer debating the possibility of a global recession but whether leaders can, indeed, avert a probable depression. Signs that the global economy is already plunging into a recession are around. Consumer spending is collapsing while the unemployment figures are rising.
As at end of April, over 30 million Americans had filed for unemployment benefits since Coronavirus Disease 2019 (Covid-19) hit the United States. Elsewhere, big corporations are seeking government bailouts amid Covid-19 economic devastation. For one, Richard Branson is offering his extravagant Caribbean Inland as collateral to the United Kingdom for Virgin Atlantic bailout. If the bailout does not come (which is most likely), the billionaire is hoping to get a leeway from the private sector investment market.
Most reputable organisations hard-pressed by the current crisis will be gambling with the Virgin options in the coming months. At home, companies have unilaterally discounted the April salaries to the tune of as much as over 50 percent while negotiating more slashes in the future. With effect from the end of March as millions of workers proceeded on a stay-at-home order, some companies reportedly informed some categories of employees that they can only be called back to their duty posts if and when the situation improves. If anything has changed in the past month, things have deteriorated. The afflictions troubling the economy are more daring than they were about a month ago.
For instance, the value of the local currency has continued to tumble. For some economies, this would have implied more wealth through an increase in export. But here, it translates to more pains, pains because of the country’s extremely high marginal propensity to import and narrow economic base. And the prices of oil, which constitute over 80 percent of the country’s foreign earnings and about 50 percent of its gross domestic product (GDP) have become more unstable.
And for Nigeria, the tumbling oil prices are like falling knives. They could inflict multiple injuries on its socio-economic life. This is because oil price crisis, historically as it were, implied dwindling infrastructure funding, weakening national income, reducing foreign earnings, increasing burden of taxation, rising public debts, crashing stock market, the downgrading of sovereign rating and consequently increasing cost of borrowing.
Comments