material damage

Coronavirus to knock $4bn from Africa’s commodity revenues

By Ruth Olurounbi

Posted on Friday, 6 March 2020 11:21
Construction workers at the Dangote Oil Refinery
Construction workers at the Dangote Oil Refinery under construction in Ibeju Lekki district, on the outskirts of Lagos. REUTERS/Akintunde Akinleye

As global cases of the virus have passed 80,000, a new report warns that sub-Saharan African economies could be badly hit, even if there were no outbreaks of the disease on the continent.

The fast-spreading virus could impact sub-Saharan Africa by as much as $4 billion in export revenue with oil and copper prices sharply down in recent months, said the Overseas Development Institute (ODI). Globally, losses from trade revenue could rise up to $360 billion, according to the institute.

Already in Nigeria, there are reports of oil traders struggling to find buyers for 55 crude oil cargoes.

The World Bank has said it will provide up to $12 billion to developing countries responding to coronavirus.

READ MORE Debt, coronavirus and locusts create a perfect storm for Africa

With the fast-spreading coronavirus wiping $5 trillion off global stocks, as the deadly virus spreads to other countries including Nigeria, Africa’s biggest economy and, most populous country, fears of a global recession are now rising, say analysts around the world.

  • “By paralyzing the world’s largest importer and second consumer of oil, this virus attacks the heart of the global economy; China accounts for more than 16% of the world economy. With China stopped, economic activities around the world are directly and indirectly affected. As if the ‘Covid-19’ hit globalization at its heart,” Mahaman Laouan Gaya, former Secretary-General of African Petroleum Producers’ Organisation (APPO), said last month.

The Organization of Petroleum Exporting Countries’ (OPEC) last month downgraded outlook for the increase in oil demand for 2020 on outbreak of coronavirus from China, saying, “Evidently, the timing of the outbreak exacerbated the impact on transportation fuel demand in China, as it coincided with the Chinese Lunar New Year holidays, as millions of Chinese return home to celebrate with family members and friends, or travel abroad.”

Until last week, global financial markets had largely ignored the spread of the Covid-19 as it swept across China to Europe and the Middle East, stoking fears of a global pandemic.

  • However, the market “reacted strongly” as “Covid-19 risks have been priced so aggressively across various asset classes” causing fear that “recession in the global economy may be a foregone conclusion,” according to analysts cited in a Harvard Business Review (HBR) article.

While a closer look may reveal that a recession “should not be seen as a foregone conclusion,” the analysts said market sentiment could be misleading, “recessionary risk is real” and that the vulnerability of major economies to the coronavirus and other shocks makes a recessionary scenario more plausible.

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