The Omicron Variant and the Nigerian Economy

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Tuesday November 30, 2021 / 11:44 AM / by CSL Research / Header Image Credit: NBC

 

According to reports, the province of Ontario, Canada has confirmed two cases of COVID-19 omicron variant from persons who had recently traveled from Nigeria. However, the federal government through the Nigeria Centre for Disease Control (NCDC) has said that the deadly omicron variant of the coronavirus was yet to be detected in the country. On 26 November 2021, the World Health Organization (WHO) designated the variant B.1.1.529 a variant of concern, named Omicron, on the advice of its Technical Advisory Group on Virus Evolution (TAG-VE). This decision was based on the evidence presented that Omicron has several mutations with tendencies to impact human behaviour.

 

The 2020 lockdown had severe impact on many Nigerian households and small businesses given that a very high percentage of the population are daily wage earners. Following the easing of the movement restrictions, many Nigerians have gone about their daily businesses and covid-19 precautions are generally going into oblivion. Wearing of nose masks, washing of hands and social distancing are only adhered to in a few places. Commercial buses are full, and many churches and social gatherings no longer adhere to social distancing principles. As of Monday, 29 November 2021, 3,580,510 tests have been reported in Nigeria with 214,092 confirmed cases and 2,976 deaths. Worldwide, there has been 260,867,011 confirmed COVID-19 cases with 5,200,267 deaths resulting in a case fatality rate of 2.0%


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According to the WHO, a lot remains unclear about the new omicron variant. For example, it is still not clear whether Omicron is more transmissible compared with other variants such as the Delta variant and. Also, it is not clear whether infection with Omicron causes more severe disease compared with infections with other variants. What is clear though, is that we do not expect any movement restrictions in Nigeria. The movement restrictions associated with the advent of the virus in March 2020 caused untold hardships for many households and small businesses. The current state of the economy characterized by increasing food and utility costs amidst muted growth in income also means it will be difficult for the government to adopt movement restrictions to curb the spread of the infection.

 

That said, we expect the global impact, if not nipped in the bud to adversely affect the country's fragile economy. The United States, United Kingdom, Israel, Saudi Arabia, South Korea have all issued travel limits from passengers from southern Africa where the virus is thought to have originated. Israel has also closed its borders to foreigners after it discovered the case. Many markets are already pricing in its possible risks and consequences. Already, the forecast for the international price of crude oil going into 2022 appears biased towards a decline, which becomes a major concern for Nigeria given the concentration of crude oil proceeds in its export earnings, the impact on reserves, and the management of FX supply towards exchange rate stability. Though many issues around the new variant remain unclear, we believe a fourth wave, if not nipped in the bud might be a serious concern for the overall economic outlook in 2022.


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