The Economic Commission for Africa (ECA) has warned that the unfolding COVID-19 crisis could reduce Nigeria’s total exports of crude oil in 2020 by between US$ 14 billion and US$ 19 billion.
It estimates that COVID-19 could lead to Africa’s export revenues from fuels falling at around US$ 101 billion in 2020 seriously denting Africa’s already stagnant growth with oil exporting nations losing up to US $65 billion in revenues as crude oil prices continue to tumble.
In addition, it said a decline in commodity prices could lead to fiscal pressures for Africa’s economic power houses such as South Africa, Nigeria, Algeria, Egypt, and Angola.
The ECA said fiscal stimulus packages are also crucial if the continent is to weather the COVID-19 storm which has now claimed over 5,000 lives globally and infected 139,637 people.
Speaking at a Press Conference in Addis Ababa, ECA Executive Secretary, Vera Songwe, said having already strongly hit Africa’s major trading partner, China, COVID-19 was inevitably impacting Africa’s trade.
She said although a few COVID-19 cases have been reported in some 15 countries so far, the crisis was set to deal African economies a severe blow.
“Africa may lose half of its GDP with growth falling from 3.2% to about 2 % due to a number of reasons which include the disruption of global supply chains,” said Ms, Songwe, adding that the Continent’s inter-connectedness to affected economies of the European Union, China and the United States was causing ripple effects.
She said the continent would need up to US$ 10.6 billion in unanticipated increases in health spending to curtail the virus from spreading, while on the other hand revenue losses could lead to unsustainable debt.
Ms. Songwe said, “COVID-19 could reduce Nigeria’s total exports of crude oil in 2020 by between US$ 14 billion and US$ 19 billion.
“Remittances and tourism are also being affected as the virus continues to spread worldwide, resulting in a decline in FDI flows; capital flight; domestic financial market tightening; and a slow-down in investments – hence job losses.
“Pharmaceuticals, imported largely from Europe and other COVID-19 affected partners from outside the continent, could see their prices increasing and availability reduced for Africans.
“With nearly two-thirds of African countries being net importers of basic food, shortages are feared to severely impact food availability and food security.
“Furthermore, negative consequences are expected to worsen, if COVID-19 develops into an outbreak in Africa.”
Speaking at the same Press Conference, Stephen Karingi, Director of the ECA’s Regional Integration and Trade Division, said there, however, was an opportunity the Continent could take advantage of as trading within the African Continental Free Trade Area (AfCFTA) is set to commence this July.
“The intra-African market could help mitigate some of the negative effects of COVID-19 through limiting dependence on external partners, especially in pharmaceuticals and basic food,” said Mr. Karingi, adding diversifying economies away from fuel-driven was vital beyond COVID-19.
He emphasized the need for the continent to urgently implement the AfCFTA as he urged African countries who export drugs to prioritize selling on the African market.
The ECA, in a presentation on the economic effects of the COVID-19 on Africa, suggests African governments could review and revise their budgets to reprioritize spending towards mitigating expected negative impacts from COVID-19 on their economies.
As a safety net, the think tank is urging governments to provide incentives for food importers to quickly forward purchases to ensure sufficient food reserves in key basic food items.