COVID-19 PANDEMIC AND ECONOMIC CRISIS: NIGERIA EXPERIENCE AND STRUCTURAL CAUSES

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CHAPTER ONE

INTRODUCTION

Background to the Study

This study analyses Convid-19 pandemic on entrepreneurship crisis: Nigeria experience and structural causes.. The COVID-19 pandemic has had far-reaching effects on the global economy (Ozili and Arun, 2020). It affected the global travel business, national health care systems, the food industry, events industry, education and global trade. Due to globalization, there are expectations of spillover effects to emerging and developing countries due to their dependence on developed countries for the importation of goods and services (Ozili and Arun, 2020). A recent literature has emerged that examine the effect of COVID-19 on economic activities (Fernandes, 2020; Atkeson, 2020; McKibbin and Fernando, 2020; Altig et al, 2020; Ozili and Arun, 2020). Yet, the recent literature has not examined the effect on COVID-19 on economic aggregates in developing countries such as Nigeria. The impact of COVID-19 on the Nigerian economy has not been explored in the recent literature. This study fills this gap in the literature.

Economic crises or recessions are often caused by market corrections (Hart and Tindall, 2009; Jones, 2016), market failure (Stiglitz, 2008; Chauffour and Farole, 2009; Petrakos, 2014), external trade and price shocks (Ros, 1987; Mendis, 2002; Gomulka and Lane, 1997; Francois and Woerz, 2009), political instability (Aisen and Veiga, 2013; Gasiorowski, 1995; Lagravinese, 2015), and civil unrest through protests (Bermeo and Bartels, 2014; Giugni and Grasso, 2016; Grasso and Giugni, 2016; Bernburg, 2016), amongst others.

Economic crises are not new in Nigeria. During the 2016 economic crisis, the monetary authority in Nigeria defended the local currency from forced devaluation against the dollar and adopted a managed-float foreign exchange system, which worked well from 2016 to 2019. After the 2016 economic crisis or recession, it was widely believed that the unexpected and sustained decline in oil price was the most important cause of economic crises in Nigeria. But in 2020, nobody thought that a public health crisis could trigger an economic crisis in the country. What made the 2020 economic crisis different from other economic crises or recessions in Nigeria was that most economic agents, who could have helped to revive the economy were unable to engage in economic activities due to fear of contracting the COVID-19 disease. Also, economic agents did not engage in economic activities when the government imposed and enforced its social distancing rules and movement lockdown in Abuja, Lagos and Ogun states on the 30th March of 2020.

Although the coronavirus outbreak which started in the Wuhan province of China had spillover problems in Nigeria, the reason why the outbreak was severe in Nigeria and caused suffering to poor citizens was because of weak institutions that were ineffective in responding to the pandemic and the lack of adequate social welfare programs that would have catered for majority of the poor citizens and vulnerable citizens who were affected by the crisis. The fear of financial and economic collapse led to panic buying, hoarding of foreign currency by individuals and businesses mostly for speculative reasons, flight to safety in investment and consumption, households stocking up on essential food and commodity items, businesses asking workers to work from home to reduce operating costs.

The analysis in this paper contributes to the literature that examine the cause of economic crises in developing and transition countries. This literature shows that the level of development in a country plays an important role in prolonging economic crises or in facilitating economic recovery. This study also contributes to the recent literature that investigate the impact of coronavirus in society (see., Chinazzi et al, 2020; Haleem et al, 2020; Chen et al, 2020; Fornaro and Wolf, 2020). This study contributes to this literature by exploring the factors that worsen the COVID-19 pandemic and the economic crisis in Nigeria.

Statement of the Problem

The world has been shocked by the outbreak of the Covid-19 pandemic. The World Health Organization (WHO) announced the outbreak of a new coronavirus (SARS-CoV-2) at the beginning of the year 2020 (Adhikari et al., 2020; Congressional Research Service., 2020; Harapan, Itoh, Yufika, Winardi, Keam, Te, et al., 2020).  According to WHO, the disease was first reported in the city of Wuhan, China, in December 2019 (Adhikari et al., 2020; Adnan, Khan, Kazmi, Bashir, & Siddique, 2020; Unhale, Ansar, Sanap, Thakhre, & Wadatkar, 2020) and has since then spread like a wildfire to more than 190 countries (Congressional Research Service., 2020; Harapan, Itoh, Yufika, Winardi, Keam, Te, et al., 2020). In other words, the disease has become a global pandemic. The pandemic has caused massive economic disruptions across the globe. Economic experts have predicted that the pandemic could plunge the world into a global recession (Ozili, 2020). Also, the pandemic has claimed a significant number of lives across the globe.

 

Objectives of the study

The broad objectives of this study are to investigate Convid-19 pandemic and economic crisis: Nigeria experience and structural causes.

The study has the following specific objectives of the study;

  1. To Analyze the economic factors associated with Covid-19 pandemic
  2. Analyze the structural causes of Covid-19 in Nigeria economy
  3. To investigate the impact of COVID-19 on the Nigerian business environment

Research Questions

  1. What are the economic factors associated with Covid-19 pandemic?
  2. What are the structural causes of Covid-19 in Nigeria economy?
  3. What are the impact of  COVID-19 on the Nigerian business environment?

Scope of the Study

This study is on the Convid-19 pandemic economic crisis: Nigeria experience and structural causes , the researcher limited the scope to Covid-19 because it is the only recent pandemic that is currently ravaging the world as at the time of the study.

Significance of the Study

This study contributes to the recent literature that investigate the impact of pandemic in society (see., Chinazzi et al, 2020; Haleem et al, 2020; Chen et al, 2020; Fornaro and Wolf, 2020). This study contributes to this literature by exploring the factors that contributes to economic hardship during a pandemic

Limitations of the Study

Financial Constraints: The researcher was with limited funds, she cannot visit all the areas to get responses from respondents but she was able to get good information concerning the research topic.

Time Constraints: The researcher was involved in other departmental activities like seminars, attendance of lectures et.c which limited her time for the research but the researcher was able to meet up with the time assigned for the completion of the research work

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