From Health Crisis to Recession: Impact of COVID-19 Pandemic on the Nigerian Banking Sector
Robert Schiller, a 2013 Nobel Laureate in Economics, wrote in the Guardian UK on 1st April 2020 that the world is feeling the effects of not one, but two pandemics.
First, there is the COVID-19 pandemic – the coronavirus pandemic has turned into one of the most difficult challenges for humanity in recent memory, as COVID-19 has infected millions of people across the world. The second is the economic consequences of the first. The 3-month period of worldwide lockdown has triggered an imminent global recession. The two pandemics are not unconnected; one feeds the other. Border closures, business closures, soaring unemployment and loss of income, restriction of movement of persons and supply of goods, etc. are the direct consequences of the COVID-19 pandemic.
Impact on the Global Economy
The impact of the pandemic in China cost global value chains US$50 billion in exports. According to the United Nations Conference on Trade and Development (UNCTAD) 26th March 2020 forecast, foreign direct investment could shrink by 30-40% between 2020 and 2021. The International Labour Organization (ILO) predicts that the impact of COVID-19 will lead to a rise in global unemployment. On 29th April, ILO projected that the means of livelihood of 1.6 Billion workers in the informal sector are at risk. The first month of the crisis is said to have led to an 81% drop in income for informal workers in Africa and the Americas.
Just like other economic crises in the past, the financial market is severely impacted by the pandemic. In the global stock market, about US$6 trillion in wealth was erased in one week from 24th to 28th February 2020. The S&P 500 index also lost over $5 trillion in value in the same week in the US while the S&P 500’s ten largest companies experienced a combined loss of over $1.4 trillion due to fear and uncertainty among investors about how the pandemic would affect the profit of firms. The travel restrictions imposed on the movement of people in many countries led to massive loss of business, the hardest-hit industries include the travel and tourism, hospitality, retail, construction, real estate, manufacturing, entertainment, and sports industries.