Jide Akintunde, Managing Editor/CEO, Financial Nigeria International Limited
Follow Jide Akintunde
Subjects of Interest
- Financial Market
- Fiscal Policy
How long Covid-19 would remain a potent threat 06 Apr 2020
No one knows exactly how long Covid-19 coronavirus would remain a potent threat to public health and the economy. But few remain doubtful of the formidable threat posed by the novel virus. As at March 31, 2020, more than 850,000 people had tested positive for the virus worldwide. Over 42,000 deaths have been recorded from the pandemic. Indeed, the rising numbers of confirmed cases and fatalities suggested that Covid-19 remained a growing threat at the end of March.
On the economic front, the global travel and tourism sector, which contributed $8.8 trillion to the world's total output and 319 million jobs in 2018, has been severely disrupted. As China's aggressive containment measures shuttered factories and suppliers, shockwaves went through the global supply chains. The resultant cut in the demand for oil – and oversupply – have seen prices crash from their January peak of $70.20 per barrel to a floor of $25 pb. The projection of improbable recession in the global economy in 2020 has now changed to a probable depression, as the world's major cities, including New York and California, are locked down.
While many things about the virus remain unknown, it is important to work with what is known to make the determination as to how long its health and economic impacts would remain. Such a determination, informed by the containment measures, how quickly they were announced, compliance levels and the outcomes already recorded around the world, advise that the collective actions of governments and everyone will decide when the worst stage of the pandemic would be behind us.
So, here are what we already know. One, the coronavirus was able to spread out of China, as much as it did, because of the initial denial by the Chinese authorities. This gave the virus a head start, vis-à-vis the control measures. Nearly two months since the virus had become epidemic in several countries, the number of confirmed cases in the United States started to surge from mid-March. The inescapable conclusion is that, whereas official denial allowed the virus to spread in, and from, China, aggressive containment measures kicked in rather late in the U.S.
Such laxity also occurred in Nigeria. The number of confirmed cases in the country began to rise after a traveller from the United Kingdom on March 15th tested positive for the virus two days after her arrival in Nigeria. Before the country finally closed the airports to international travels, most of the newly confirmed cases involved people who had flown in from some high-incidence countries.
Two, the pandemic of fear for Covid-19 is being fuelled by the daily surge in its fatality. Aged people – and people with underlining, immuno-suppressant health conditions – who contracted the virus, have driven up the fatality numbers. However, the relative strengths of the health systems of countries have been a variable with the mortality. To underscore the problem, the health system of the U.S. – the world's largest economy – has been exposed to be grossly under-resourced and capacities are not quickly scalable. From medical gears, to face masks, and even swabs, inventories ran out quickly and the country has struggled to replenish supplies.
But Japan, which has the world's most aged population, was able to keep the number of infections relatively low. As at March 31, the total number of deaths from the virus was 59 in Japan, compared to 4,053 in the U.S. In Nigeria, the youthful population will likely reduce the repercussions of weak health system and keep the number of deaths low. Only two patients – the first of which was a 67-year-old who just returned from medical treatment in the UK – have died from the virus.
Three, compliance to the containment measures announced by governments, based on the advice of health experts and scientists, is critical. China was able to lockdown much of the Hubei province where the virus was first detected in December 2019. Chinese government's 'communist authoritarianism' helped this time, ensuring absolute compliance to control measures that Western journalists termed “draconian.” High rate of compliance was achieved in Japan as well. Japanese have a tendency to follow government's instructions during a crisis, according to Kazuhiro Tateda, President of the Japan Association of Infectious Diseases.
In Nigeria, the people have relied more on information from global experts, the federal government's team of experts and the Lagos State Government. President Muhammadu Buhari had failed in lending presidential voice to directing the people to comply, until his recorded national broadcast on March 29. In the U.S., President Trump was, at best, confusing for a society that prioritises personal liberties.
Four, the economic impact of Covid-19 has been worsened by Saudi Arabia and Russia, who disagree at the wrong time to support the resilience of oil prices. The oil price crash would be grave for countries who depend heavily on revenue from the commodity – including Nigeria with 200 million population and already high poverty rate. Oil prices also affect broader asset prices in the financial markets.
Therefore, to bolster the economic outlook, it is important that the OPEC+ agree on measures for oil price rebound without further delay. Similarly, fiscal measures to keep industries from systemic collapse, support payroll of companies, keep small businesses afloat, as well as monetary measures to support asset prices and keep the credit market functioning should be agreed and implemented around the world. The Central Bank of Nigeria has commendably been quick in announcing some monetary interventions. Ensuring those measures are transparently and effectively implemented should now be the focus of attention.
There is hope that global economic recovery from Covid-19 can accelerate once the threat to public health is contained. The 2009 global financial crisis (GFC) provides precedence for the financial fallout of the new crisis. Meanwhile, we would be dealing more with an economic crisis that has affected more fundamentally the supply side of industries and markets. Supply capacities may be quickly restored, with flexible labour market policy and because the global economy was in a better shape before the coronavirus pandemic compared to pre-2009.
Covid-19 provides four powerful lessons. One, investment in healthcare system – and education – is paramount. The lethal military arsenals of the powerful countries are useless when fighting pandemics, as is a focus on so-called infrastructures in developing countries, like Nigeria has done in recent years at the detriment of human capital development.
Two, leadership of countries, and global leadership for policy coordination, matter. Unlike during the GFC, countries have virtually been working in silos; in some countries, the state authorities have had to cover for presidential inaction. Three, ideological differences matter little when the world is confronted with global pandemics.
And, four, preparation for disease outbreaks like this should have started years, if not decades, earlier.