23, 2020 / 2:27PM / by CSL Research / Header Image Credit: SUN News Nigeria
According to media reports, the Federal Government says it may impose a travel ban to and from certain parts of the world as a new strain of covid-19 is manifesting itself in various countries including the United kingdom. A member of the Presidential Task Force (PTF) on COVID-19, said while the government appreciates the negative economic impact of another lockdown, it would not rule out restriction on movement to and from certain parts of the world. The new strain is said to spread faster and is more fatal. Many Nigerians live, work and study in the UK and would be coming back home for the Christmas festivities, putting the country at risk.
The aviation sector has been one of the worst hit sectors by the pandemic derailing the interesting prospects posed by the sector. In 2019, the sector was the fastest growing sector in the country, surging higher by 13.2% y/y. However, in the last Q3 2020 GDP report, the sector contracted by a staggering 38.9%. Noteworthy to mention that the sector also dipped by 57.4% in Q2 2020. Surprisingly, monetary and fiscal policy makers appear not to be overly concerned with the struggles of the sector despite its systemic importance to economic activities in the country. However, following pressures from stakeholders as well as the legislative arm, the Federal Government finally approved a N4.0bn bail-out fund for airlines at the beginning of November 2020.
In our opinion, while the aviation sector does not contribute a huge percentage to overall GDP, we note that it has systemic importance for the conduct of trade and other economic activities in the country. As Nigeria considers another travel ban, there is need for more government stimulus intervention in the aviation sector to save the industry from bankruptcy. Thus, we think the FG may need to support the sector more as it gets out of the deep recession. That said, even without another travel ban in place, the growth in the sector may remain depressed in the short to medium term as passengers remain travel averse in light of the still rampaging pandemic while holiday trips also remain limited given many restrictions in major holiday hubs across the globe.
Related News - Health
Related News - Travel and Tour