‘How #EndSARS, COVID-19 will push Nigeria’s BOP negatively’

By Tunde Shorunke

Nigeria has been an import-dependent country and industry experts have opined that the nation’s Balance of Payment (BOP) will be negatively impacted due to the adverse effect of the #EndSars protest and the COVID-19 pandemic ravaging economic activities.

Concerning different point of view from experts, Nigeria is said to be certain of experiencing balance of payment deficit due to largely dependence on oil which has consistently drop overtime, weak demand for crude oil despite economic activities gearing up, scarcity of Foreign Exchange (FOREX), and looming second wave of the pandemic, among others.

However, the balance of payment deficit means Nigeria will be unable to equalize its trade with other countries of the world; mainly due to lack of FOREX inflow to match so much that should be expended.

In an enquiry by The Daily Times, a top bank official who doesn’t want his name on print acknowledged that the impact the protest is still evolving but the knock-on effect will be on several areas, coupled with the effect of the pandemic at hand.

According to him the areas which Nigeria will experience the knock-on effect are; “Reduced Government revenue and the attendant reduction in FX available to CBN for sales on the Retail FX sales platform.

“Reduced economic activity and effects on all sectors which again will negatively impact FX availability.

This might lead to reduced demand at the parallel market leading to a reduction in rates.

“Reduced FDIs due to foreign investors not wanting to invest in volatile and highly unpredictable environments further straining the FDIs that positively impact the I & E window.”

Also, speaking with The Daily Times, the Chief Executives Officer of Mascot Consult Limited, Marcel Okeke opined that the knock-on effect of both pandemic and #EndSars protest will weight negatively on Nigerians balance of payment, adding that the federal government should prompt adequate security to restore normalcy across the sector.

“Nigeria is largely an import-dependent and looking at the Coronavirus pandemic and the #EndSars protest what these things have caused the loss of confidence from the investors.

“This is not a question of perception, it’s the reality, people are been killed, we have soldiers shooting at people who are protesting which rarely happens in many places which are mainly because of the insecurity in the country.

“And the protest is almost nationwide in Nigeria, meaning that if there’s an investor who wanted to invest in Nigeria, he’ll hold and in addition to the Coronavirus pandemic that’s worldwide.

And one of the two ways we get our FOREX inflow are remittances by diaspora Nigerians who send in money but because they’re also affected where ever they, they’re not likely to have much to send, also due to the impact on the economy caused a significant a sharp drop in global oil prices and our economy is almost a mono-product an economy which is oil, “We depend so much on oil for up to 90 per cent of our FOREX, now that oil price has been hit, bringing it down to as low as $10per barrel but as climb up to around $40per barrel and still hovering around.

Looking at the United Kingdom lockdown, who knows what might happen next together with the United States of America election which is likely to cause a further drop in oil prices or further increase.

“Another major aspect to take note is the looming second wave of lockdown where companies might shutdown again which will lead to a further decline in oil prices due to the facts that those companies might stay out of the operation for some while.

If this is happening how is Nigeria going to get his more FOREX, and the little we get, being an import-dependent economy, people keep importing all sorts of things which is what the Central Bank of Nigeria (CBN) has been grappling with, which has also led to blocking some people from free access to FOREX.

“When we have these, the balance of payment is going to be terribly against us, with facts that we are unable to get FOREX inflow to match so much that should be expended, meaning that we import much more than we export. Even if we want to export the oil, who is buying?

Even if they are buying, at what price? And so, at the end of the day how much did we get from that.

“With these translations, Nigeria will surely have a balance of payment deficit which is a serious crisis because it will still further affect our position with the rest of other global economies.

This also means that our FOREX reserve will be depleted which it was always around $50-60billion at the best of time, but now we’re around $35billion and below which shows it’s not going well.

“Whether an investor wants to invest through FDI or portfolio investment or foreign remittance, all these are affected.

As an investor, I can’t come into a country like Nigeria whereby there’s a thermal environment.

“Going forward, investors will not be coming in and even those that are within will be pulling out because there’s a lot of insecurity in the land.

“However, in other to restore normalcy across the sector, the federal government should first tackle the insecurity, once the security issues are handled where we can go to bed and sleep with both eye closed, then I think investors will now have confidence in the economy,” he added.

In an enquiry by The Daily Times, a Financial Engineer and Chief Executive Officer of Wyoming Capital & Partners, Tajudeen Olayinka, contrary to other opinions acknowledged that the protests did not last for too long as to allow colossally damage to export facilities and export businesses across the country.

“The only area I can point out is the possible demand for foreign exchange by those businesses and public utilities who lost assets to arson and looting, that is not replaceable locally; given the current scarcity of foreign exchange, and the fact that those assets had not been put to their useful or economic lives before arson or looting took place.

“Again, replacing those assets is a function of capacity and income.

The major sources of foreign exchange to a country like Nigeria are Export Proceeds, Capital Importation, Foreign Remittances, Income from Foreign Assets, Other Invisible Items, etc.

READ ALSO: CBN’s exchange rates unification alarms economists, manufacturers

“I’m not aware of significant disruptions to all the aforementioned sources of foreign exchange, other than disruptions to local sales opportunities that were immediately captured by Lagos Chambers of Commerce and Industry (LCCI) in their Report.”

“The currency crisis we are going through right now has no relationship with the riots or mass protests we suffered recently. Rather, it came as a knock-on effect from the global pandemic and resultant lockdown, coupled with poor foreign exchange management policy of Central.