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Looking Beyond COVID19 - An understanding of the impact and the new World that is being shaped by Corona Virus Pandemic from an economic and investment standpoint for African Nations

by Dr. Nicky Okoye

Apr 24, 2020



The World has for the first time in a generation shut down its economy, its businesses and its entire superstructure in an effort to tackle a deadly virus that has challenged mankind like never before in recent times. The Corona Virus pandemic has done a lot more damage than the human carnage it is leaving in its wake. And whereas for many of us the situation is looking grim and hopeless, I will like to remind us all that there will be life after COVID-19 and the purpose of writing this is paper is to look at what that life will look like after the pandemic dies down.

Shutting down the economy

I always felt that shutting down the fragile economies of African Nations was somewhat of a risky strategy. I am not so sure Africa has what it takes to get its fragile economies back up and running once this pandemic is over. It may take years for some Nations, and even decades for others, to get back to pre-COVID economic growth. Many of our leaders have argued that we didn’t have a choice but to shut down completely in Africa and they point to the deadly nature of COVID-19. Making statements like..... you have to be alive to have an economy …... but they do not realize that reverse is also true, ......

 YOU HAVE TO HAVE AN ECONOMY TO BE ALIVE . Well that decision to shut down has been taken and it’s with the benefit of hindsight that we will know for certain what did more damage to African Nations and sub nationals, the Virus or the biting hunger and dislocation of industry, induced by economic lockdown. As the battle with the virus rages, we must begin to address how to restart our economies, when it’s all over. I know even strongest hardliners and supporters of lockdown must agree with me that we cannot expect to stay on lockdown indefinitely. The scary reality for our poorest people is that whereas the informal sector depends largely on the professionals, executives and entrepreneurs operating businesses in the much larger formal economy, to buy their goods and services, that larger formal economy is going shrink significantly maybe by as much as 30%. This means that the informal economy folks are going to have a difficult time finding daily buyers for their goods and services. And unfortunately, these are Africa’s most vulnerable populations.

Managing COVID-19 pandemic

Many Nations and subnational governments have set up steering committees and Corona Virus task forces to deal with the pandemic,  however after a careful study of most of the African COVID-19 committees set up by African Governments, the committees are made up of mostly highly educated medically experienced professionals. This is great, but in my opinion, something is missing. In my opinion, we may need to take a second look at the impact of COVID-19 going forward, in order to expand the response strategies and expand the advice we are giving our leaders. COVID-19 is a health crisis we all know that, however, COVID-19 is also an economic crisis as many economies including for Nigeria, South Africa and Kenya, are losing badly needed revenue, and for Nigeria we can expect to experience monumental job losses in the coming months, once lockdown is over. COVID-19 is also an educational crisis as many schools cannot reach millions of poor children all over the continent while on lockdown, and we don’t even know when these children will be back in school. Children of the richer families are getting educated online, which requires computers, internet data connections, power, and a comfortable learning environment at home, facilities that are unavailable to the poor. COVID-19 is an investment crisis as post COVID-19 foreign direct investment is going to dry up for most countries around the world, especially for African Nations. And there will be significant pressure on portfolio investment as well, which could trigger a stock market crash in many of Africa’s capital markets. And by the way, COVID-19 is a most certainly a food crisis, as many of the farms in Nigeria for instance, responsible for food production that the population depends on, are not being attended to, due mostly to lockdown. The World Food Program predicts that Nigeria will be facing famine in the months ahead and maybe as many as 300,000 people may starve to death caused by food shortages. COVID-19 is not going to kill a fraction of the figure predicted to be killed by hunger.  Currently, COVID-19 has killed 22 Nigerians, if you compare 22 to 300,000, we may be barking up the wrong tree. But what do I know?

Oil Price Collapse

One of the most significant challenges that many oil-producing countries, including Nigeria, will have to deal with in a post-COVID World is that demand for crude oil is drying up almost everywhere and all at the same time. Prices for Texas Crude fell below zero a few days ago, and Nigeria's bonny light crude was trading at the $8 to $10 range, but no buyers. In fact Nigeria has over 60 cargoes unsold as at today, the last Friday in April 2020. Refineries around the world can no longer store any more crude oil, so cargoes are being sent back to sellers. In some cases, sellers have to pay Refineries to take the crude oil off their hands. This is unprecedented in crude oil sales history. 

Add this poor oil demand crisis, to the fact that there are alternative sources of energy that were already putting downward pressure on oil prices. And even after COVID the alternatives to oil-based hydrocarbon energy such as solar, wind and other renewables will still be there, so oil prices may not recover in a hurry. It is also noteworthy that Chinese factories are not producing at the capacity they were producing pre-COVID, so they are not demanding the energy they were projected to demand for 2020, and these production drops have led to poor demand for energy. In addition, almost all of Europe, United States, Canada etc. are staying indoors, this means that planes, cars, factories, restaurants, buses, trains and other movement that demands for fuel from hydrocarbons have been almost eliminated, at least for now. This is the same across Asia, Australia much of North America with very few exceptions. Unfortunately for Nigeria, we have depended on oil revenues for far too long, so we are about to feel REAL pain. The challenge for Nigeria is that almost 90% of our foreign earnings depend on oil sales. Once the oil prices fall, it means that the Federal Government of Nigeria will find it difficult to fund its obligations especially as it pertains to providing foreign exchange to importers, paying the salaries of its personnel, providing State Governments with a monthly income which all States, except Lagos, depend on almost exclusively or even funding any of its capital projects. Once the crude oil price stays low for a considerable period of time, which is a strong possibility in a post-COVID World, it will put significant pressure on the value of the Naira. This means that Naira may suffer a devaluation, and this, in turn, will have major implications for Nigeria’s import-dependent economy. The job loss situation will get quite challenging for Nigeria, as many industries on the front line of the economic dislocations will have to reduce their large personnel numbers, this will, in turn, trigger a chain reaction of monumental job losses in many other industries which are all interconnected by demand and supply. A sustained low oil price will be a disaster for Nigeria and its entire population. Some good can come out of it though, as this may force the Nigerian leadership to reposition and diversify Federal as well as State Government earnings and possibly remodel the entire Nigerian economy.  

Now where does all this leave Africa?

First we must understand that there will be life after COVID-19. And that life will be very different from life as we knew it before the pandemic. 

The New post-COVID-19 World

It is going to be every man and woman for himself and herself, this will be true for Nations, Sub-nationals, corporations and even individuals to some extent. So what does this all mean? First of all, foreign Investment will take a hit. The COVID-19 impact is effecting almost every nation on earth so investment going forward will have a sentimental appeal, for a change, typically investment capital is not affected by sentiments. The home land will be considered first and most Nations will be preoccupied mobilizing their own investors for investment at home. China will take a hit as many Nations will support initiatives to pull their manufacturing out of China. Value and supply chains will equally start looking at home-based supply lines as opposed to the previous strategies which were anchored on the globalization approach. In effect, as a friend of mine defines it, we will experience somewhat of reverse globalization. In addition, we will start to lose remittances that have supported our economy and which we have taken for granted. According to the World Bank that tracks foreign exchange remittances to Africa and Asia, remittances will reduce by as much as 20% maybe more. Many Diaspora Nigerians are part of the over 22 million United States citizens who have lost their jobs in the last few weeks. This will have a significant effect on many economics of Africa including Nigeria which got over $28 billion in remittances in 2019.  

The rise of Nationalism will be boosted unfortunately this may lead to much more unpredictable outcomes in the World of global politics and economics in the not too distant future. Nations will also be less accommodating of immigration and even vacation visitors to some extent. Citizens of poorer Nations in Africa will have a much harder time getting visas for schooling or holidays in the Western World. The most important mantra in a post COVID-19 World is going to be SKILLS. If you have the skills then you will be sort after by Nations, by Corporations and Ventures, if you do not have skills as an individual or even collectively as a Nation then you will be left behind PERIOD. And it will not stop at just having skills, your Nation or sub-national must be productive, in effect, you must learn to use your skills in an efficient and effective way to produce World-class results, World-class goods and services that are globally competitive, it’s going to be that simple. 

Old Businesses and Old Industries

 In the near future, the World of economics will be listing industries and businesses in terms of pre-COVID and post-COVID eras. In the pre-COVID World, one of the most lucrative industries was the travel and tourism industry. In fact, so many new hotels are under construction all over the World. Many brands such as Marriot and Hilton were opening up properties on a daily basis, and Airbnb hit valuations never imagined for a hospitality company. In Nigeria, major hotel investments abound, billions of dollars have been poured into new conference centers, new restaurants, and new airlines all over the Country. New airlines have been springing up in Nigeria’s Aviation industry and the Nigerian event industry pre-COVID has been very lucrative for a large contingent of event managers, hostesses, food caterers, stadiums, sporting events, event centers, concert organizers, night clubs, wine, and alcoholic beverage suppliers, etc. unfortunately post-COVID all that is almost all gone. In the new World of social distancing which will follow the current pandemic and post-COVID eras, many of these businesses in the travel and tourism industry will struggle. Demand for social parties, large wedding parties, conferences, and meetings will reduce to a bare minimum. And those who are innovative will have to pivot to survive, by providing new and more innovative services that are in line with the post-COVID era. Other industries that will struggle in a post-COVID era, include real estate development, home acquisition, automobile manufacturing, car sales, transportation, luxury goods, fashion, and accessories. 

New Businesses and New Industries

The World is going to see the birth of a few new industries and we will witness the exponential growth of some old industries which effectively will make them look like new industries altogether. In a post-COVID-19 era, Technology will be King. In Nigeria, the financial services industry will have to grow in the direction of supporting technology companies as against the oil industry value chain that currently accounts for over 40% of institutional consumer debt. Agriculture and the food industry is going to expand exponentially, as many people begin to focus more on the basics, which is food. Food, medical supplies, and other home stables will be offered to customers in very innovative ways in line with new social behavior that includes social distancing, so look out for innovative logistics companies to take center stage. The medical and pharmaceutical industries will also be a post-COVID winner as many leaders in most Nations begin to invest heavily in self-sufficient medical services and medical supply value chains. The medical supply industry such as manufacturing of personal protective equipment, soaps, hygiene, and sanitation chemicals will also be new industries that will grow all over the World. 

I will be discussing in more specifics on the opportunities for all stakeholders in a post-COVID era, in my future PODCASTS over this period.


Serial Entrepreneur, Global Capital Investment Strategist, Author


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